You know what you deserve?
You deserve cash reserves.
How’s that for an introduction? I know, I’ve probably captivated you right away. I could just tell from how engaged you are at this very moment. Back straight, eyes locked on the page, posture on point…or if you’re reading this from your phone you’re thumb just prepared to scroll through the post with intent…
Wait, before we go any further…tell me about cash reserves?
According to Investopedia, here is the definition of cash reserves in terms of personal finance:
“…cash reserves primarily refers to two things. One is a type of short-term, highly liquid investment that earns a low rate of return…This is where some individuals keep money that they want to have quick access to. The other type of cash reserves refers to the money [an]…individual keeps on hand to meet its short-term and emergency funding needs” (Investopedia.com).
That’s great. But wait, what does liquid mean & what does that have to do with cash reserves?
When you hear the term liquid in finance, this relates to how feasible something you own can turn into straight cash money $$$. What’s one of the most liquid assets you can own? No…you’re absolutely right, don’t doubt yourself young grasshopper…it’s CASH! Cash on hand to save as you choose, spend as you may, and save as you so desire. Other highly liquid investments could be places you may park your money (to invest, save, and/or grow) that gain a small amount of interest that you have easy access to. Examples would include (but are not limited to): savings accounts, checking accounts, CD’s (Certificate of Deposit), stocks, etc. (for more on this visit here). These are places where you put your hard earned money to work that creates a nice cash reserve that you can have speedy access to. Essentially, anything that you can turn into cash rather quickly is highly liquid (not the hot magma kind). On the contrary for something that is not liquid, this is anything that does
NOT turn into cash quickly (i.e. houses, goods/commodities that take more time consumption to sell, etc.).
Let’s go back to what the other type of cash reserves can be…
EMERGENCY FUND. That two word gig that you probably hear about quite often. That stock pile of cash you sock away for that rainy day. We all know that sometimes when it rains, it absolutely pours (and not always cute cats & dogs – though that would be pretty incredible). I’m talking an absolute storm. I would highly recommend that you have at the very least 3 months of expenses saved up in an emergency fund (what’s a month worth of expenses? think about every bill & financial obligation you have to pay in a month such as rent/mortgage, utilities, food costs, debt repayments, etc.). Beyond that is even better, but I don’t want to go too extraneous if nailing down setting aside for a month worth of expenses is what you can do right now (any type of saving is GREAT)!
So why do I deserve this again?
Because you deserve to be free from worry. Free from relying on plastic and credit to remove yourself from a situation that’s already causing enough anxiety. You deserve to have the peace of mind that money in CASH is readily available to pull you from the trenches of a not-so-pleasing situation.
I hate to break it to you, but spending all your money to exhaustion and depletion allows no wiggle room for life to happen. Take these certain situations: you blow a tire on the freeway only to discover more than just the one needs to be replaced, you have an emergency visit to the doctor that requires more than what your insurance covered, your pet suddenly needs last minute surgery, you must buy a last minute flight to visit family members…
What if you had the cash reserves to take care of these spur of the moment life events without feeling completely thrown off track financially? What if you had the liquid assets and cash available to not have to spend months digging yourself out of debt? You deserve cash reserves.