Cash and Liquidity
Cash and liquidity are very important considering our current uncertain economic situation. Heck, the financial conglomerates horded cash that was given to them via Wall Street bailout and TARP and remained very liquid during this economic crisis. We should take a page from the financial conglomerates’ play book and do the same thing.
The key to cash and liquidity is cash management. Cash management is the management of cash, liquid assets and outflows (dont’ forget this). We know what cash is but what are liquid assets. Liquid assets include cash and other investments that can be quickly and easily converted to cash with no loss. Liquid assets include money market deposit accounts, certificates of deposit (CDs), money market mutual funds, U.S. Treasury Bills (T-Bills) and U.S. Series EE Bonds (Savings Bonds). We need liquidity to address any future unplanned events such as unemployment or unanticipated medical issues.
But don’t forget the cash outflows. Good cash management requires the management of our money “going out the door.” We manage cash outflows by (broken record time) setting written: goals, priorities, monthly budget (in line with goals and priorities) and managing that monthly budget.
Ultimately we want:
Cash Inflows (salary, wages, investment/interest income) > Cash Outflows
If we can do this and sock away that monthly cash surplus into some long-term investments we will be much better off in the future. More on this topic later
Good luck.
P.S. Here is a Monthly Budget Form
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Personal Finance Feed
Enough fault to go around
Posted by: Escortrider on 2010 01 27
Can’t argue with anything in the article. However, if more people had been following its good advice (not to over-extend themselves) before the economic meltdown, more people would be suffering less right now. Despite the tremendous blame to be shouldered by the greed of big corporations (banks, etc.) for our current mess, we as individuals, collectively, do bear a part also. We used our houses as ATM machines and got upside down on mortgages. We didn’t get in the habit of saving and had no cushion to fall back on. And so forth. The causes of the mess are multi-faceted.
Agreed
Posted by: Mr_Blue on 2010 01 27
We also are partially to blame for this mess. No one was holding a gun to our heads forcing us to make the loans or use credit cards. Personal responsibility in this case meant understanding personal finance, understanding financial situation and understanding the impact and effects of more debt.