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The Safety King “Cash is King!” A dozen years later, I can still hear Professor Timmons declaring at the front of our Babson classroom. And then, for emphasis he asked the class to repeat these key words again. And again. He made a believer out of me. Cash is King. In business, and in personal life. Today’s savings rate in this country is one of the worst in the world. Cash is not only that green paper that resides in your wallet, cookie jar or under the mattress, it is also the money sitting in a savings account earning interest. It is insured by the federal government and will not go anywhere whether the stock market is up or down. Cash is called a secure investment vehicle. We all need cash. Having cash is a statement to the universe about how you value yourself. You build a cushion to help you maintain stability in this world. You are not dependent on the credit card company, your parents or your bank funding your home equity to bail you out of the rough patches. You are worth the effort to maintain cash and are doing what it takes to create financial security. I am talking about building a safety net. A safety net is keeping a supply of ready cash in the bank to pay for the unexpected and unanticipated events in life. Some call it an emergency account. I prefer the more positive language and approach. To me it is simply a preventative step on the way to financial security. Everyone needs a safety account. One of the first questions I always ask a client is if they have a cash reserve. Creating clarity and stability in your financial picture begins with this safety net. You have this money set aside to use when the going gets rough, the truly unexpected happens, or the world sends you a huge curve ball that you missed. Having a safety reserve of cash to take care of yourself is basic number one in creating your positive financial plan. A safety account builds emotional security for now and the future. By creating and maintaining a safety account, you are acting responsibly as an adult who can take care of yourself. Having cash is practical. It is building in a reserve much like New Englanders keep a stockpile of can goods for that inevitable winter storm. Or Californians have their stash of fresh water and know where to go during an earthquake. This foresight is not considered disaster planning, rather getting ready for the inevitable. Not something to focus on, but an active awareness so that we are not caught in a worse situation than we need to be. So remember,
Safety accounts are for everyone. Your one Month Plan to Savings: Creating your own safety net. Week One: Set a Goal. What is it that you need in a safety account? The financial planning rule of thumb is three to six months of living expenses. Think, groceries, rent or mortgage, insurance, utilities, and gasoline not clothes, eating out, or cable. With this in mind, the larger your household, the more cash you need to plan to have in your safety account. Week Two: Create a plan for saving. First, decide how much money will be put aside in a safety account. Start small and set a goal for savings that is easy to reach - $5, $10 or $20 a week. It is better to start small and be consistent and then increase your savings later with every raise or change in spending. Decide when and how the money will be put into a safety account. Will it be deducted from your paycheck and automatically deposited into the account (most payroll companies can do this)? Will it be the first check written every month? Make a plan. Week Three: Open a safety account. This is a savings account not attached to your checking account. Do not have an ATM card accessing this account. This account will always be accessible when the bank is open. In any true emergency, you will be able to make the time to go to the bank during the six days a week it is open. The idea is to have this money available but not easily accessible. For this reason, you may chose to keep it at a different bank from where you do your routine banking. Week Four: Enact the plan. Write your first deposit. Talk to your payroll person about the automatic deposit – they will need your account number. This plan works. It is a slow and steady process. If you have a financial partner, discuss with them the above steps and make the plan with them. To create success as a team, you both need to create the plan. Remember, Cash is King! September Speaking Schedule: Vermont Women & Money Conference, September 17th at the Wyndham Hotel in Burlington. I will address the entire conference in the morning. The day is free and opened to all. For Registration and Information: www.vermonttreasurer.go To Subscribe: If you received this email from someone else and would like to sign up simply go to http://www.moneypeace.com/contact.shtml Then, enter your email on our Contact Us page and click on subscribe. To Unsubscribe: Go to http://www.moneypeace.com/contact.shtml, enter your email address (exactly as it was entered when you subscribed), select unsubscribe from the pull down menu (Action line), and hit the Sign Me Up button to submit. Your email will instantly be removed from our list. www.moneypeace.com "My Peace on Money" is a free e-newsletter from Moneypeace.com (copyright 2004). |
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