When I hear people say money is not everything, I don’t bother to argue. I will reply by telling you that money is not everything, but money is significant. Without money, your life goals and other needs can not be fulfilled. You need money to have fun, and you need cash to make an investment, you need money to study; now tell me what you can do without money?
Hello viewers and welcome to another blog edition of my YouTube channel. Here I am once again to discuss another interesting topic with you. But before we continue, have you subscribed to my channel? You need to subscribe to be able to enjoy more exciting topics of this kind. You may have an interest in checking other related blogs like, “Easy Way To Become An Entrepreneur.” amongst all others. I promise you will be glad you did watch it. Now, let’s get into the topic.
This year came to shake us off financially; some people’s finances were turned upside down. Some people’s income was cut-back, the pandemic that happened didn’t leave our spending habits untouched, those with retirement savings accounts also have the experience to tell. This year, a great lesson was learned from all aspects of our lives. This year taught us never to expect from life because we don’t know what life will throw at us. The best lesson learned was for us always to be prepared for any life situation. This brings us closer to the subject of discussion.
Why do you need cash?
It would be best if you had cash to perform your economic duties. Your immediate wants and needs have to be satisfied. Your cash is your liquid asset, and you can exchange your cash for goods or services. Let’s take this year; for example, cash was needed to take care of medical bills. Did you think of what happens when an emergency occurs and you have no money to meet it? But let’s assume you had money saved up somewhere for an emergency; there is no way you will be stranded.
There is a savings account where you can put in your money, and you will be able to withdraw at any time without any problem. Having no money has led some families to struggle financially during the pandemic. There was also a social security shortfall, and this is because the pandemic leads to the loss of jobs for many. The question I want to ask is that after your family struggled financially, what lesson did you learn, and what plans are you making to avoid such an emergency of life from catching up with you again.
You will agree with me that there is a need to be prepared even though we are not praying for another pandemic to happen. It would be best if we are still prepared. The best part of all this is that making a withdrawal from a savings account is not a difficult task to achieve, and there is no penalty attached to the withdrawal. Depending on the bank you are making use of, you can easily walk into a bank and fill out a withdrawal slip. Your cash will be given to you, you can now go ahead and take care of your emergency, but withdrawal depends on the type of savings account you are using.
How much should you keep on hand?
An emergency fund keeps you safe from life unexpected happenings. The stock market is highly volatile, and anything can happen; you need to keep some extra cash for yourself for safety purposes. You need to keep in mind that if your Investment should lose value, you tend to lose all your Invested money. It is best if you can save your money for a down payment in a savings account. It is essential to keep some of your cash from the stock exchange market. Don’t get me wrong, Investment is good and highly encouraged, but you need to keep some extra cash for yourself. It would be best if you can save yourself from stress and heartaches.
If you check out on some investors, you will realize that they have cash on hand to help cover their expenses for years. I call them smart individuals. You need an emergency fund to help you scale through surprises and disasters. The reason you see some individuals always struggling to sell all their assets is that they have no cash on hand.
You should be able to keep cash that can cover your expenses for six months or more, yes! It would be best if you held that much cash at hand for your emergency bills. It would help if you kept in mind that you will be attending to your basic needs and that of your family. Depending on the country, one household needs around 3000 USD or 5000 USD to keep at hand if an emergency should occur, it would be best if you save for rainy days.
It is not wrong to stash your money at home, but how about considering the idea of having your cash in savings or checking account? Have you considered this? Checking accounts are designed to handle many transactions such as paying bills or performing other daily transactions. Your checking account will allow you to make a deposit and withdraw your money quickly.
An example of a savings account is the Money market account, and it gives you easier access to your cash should in case an emergency occurs.
Think about it; when you have your money saved up in the bank, if inflation should set in, the bank will increase the interest rate, but this is to offset the effect of inflation. This is to say that the interest rate earned is to balance out inflation because there is a reduction in the purchasing power of your cash.
The role of cash in your portfolio
The goal of cash is not always to generate revenue for you, and it is to keep you safe sometimes. Let’s say you opened a brokerage account, and you can take the bold of choosing a money market. You can still be getting up to 6% on your money without necessarily making any Investment. The role of cash in your portfolio is to help you to get through unexpected disasters or surprises without having to sell your life assets.
Keeping cash on hand is very important for you to take action when financial opportunities arise. The stock market can hit a low at any given time, and you may need to take advantage of stock prices because those prices will rise again when the market becomes stable. Keeping cash in your portfolio plays an essential role in your investment strategy. It helps you to make financial choices.
To gain financial freedom is more about being smart, especially in the decision-making process. You will still be getting dividends and interest as a reward for yourself for keeping liquidity, which is your cash at hand. It may sound quite impressive to throw out all you have to an index fund, securities, or blue-chip stocks. You may be thinking, after all, something is coming in for you as return; there is more to this; refuse to be tempted. If you study Investment patiently and adequately, you will realize that it is best to keep some cash on hand for yourself.
Refuse to take a risk with your emergency fund, do not go about investing all you have on hand unless it will be managed with preservation of your capital, you getting revenue should be a secondary consideration, or you can use an asset protection strategy. Learn the wisdom behind Investing and protecting your cash; by all means, keep your emergency fund in cash.
So, if you enjoy this blog, do well to like and share. I am also expecting you to share your views and ask questions as well. Do not forget to subscribe to my channel to avoid being left out of all the great discussion topics. It would be best if you kept learning more about your finances.
Recommended for further reading:
- The Business Book: Big Ideas Simply Explained
- The Lean Startup: How Constant Innovation Creates Radically Successful Businesses
- Crushing It!: How Great Entrepreneurs Build Their Business and Influence-and How You Can
- Big Ideas… For Small Businesses: Simple, Practical Tools and Tactics to Help Your Small Business Grow
- The Simple Path to Wealth: Your road map to financial independence and a rich