Seizing Opportunities: The Power of Cash.
In a world where opportunities knock unexpectedly, having a stash of cash may be the key to unlocking doors you never knew existed. Imagine the satisfaction of saying yes to that once-in-a-lifetime investment, starting a business and being a boss, a dream project in your home, or an unexpected adventure with a friend. This newsletter explores the importance of having liquid assets and strategies to build and leverage cash for growth.
The power of liquidity:
Cash is your financial lifeline, providing the flexibility to seize opportunities that may come your way. Whether it's a sudden investment opportunity in the market or a chance to buy a rental home for another income stream, having readily available cash allows you to act swiftly and decisively. Ultimately it gives you more financial choices.
Sarah, a friend of mine, was a determined woman with a passion for turning her culinary dream into reality. She had a detailed business plan and a vision for a unique bakery, she faced the inevitable challenge- securing startup funds. Sarah knew the importance of having a cash reserve, so she had diligently saved over the years. When the perfect location for her bakery became available unexpectedly, Sarah's cash reserve played a pivotal role. She seized the opportunity by immediately securing the lease. Her preparedness gave her a head start in transforming her dream into a flourishing business and allowed her to keep her retirement accounts untouched. Sarah's story exemplifies how having cash can empower individuals to turn their dreams into reality, navigate unforeseen challenges, and ultimately achieve success on their terms.
Strategies to build cash:
Emergency fund: Start by building an emergency fund to cover three to six months (or more depending upon what money means to you, if money means security, you may want to have more than six months). This safety net ensures you can weather unexpected storms without derailing your financial goals or worse having to borrow against your retirement assets, such as a 401k account.
Smart budgeting: Analyze your spending habits and identify areas where you can cut back. Redirect the saved funds into a dedicated sinking fund or cash-building account. Consider using a bucket account approach for budgeting. One account for near-term expenses that are due in the upcoming month. A second account for expenses arising several months out. A third account for expenses you know will occur, however, are unsure of when they will occur. Think of tires on your vehicle. Each time you go in for a service visit, the mechanic tells you how much tread is left, depending upon how many miles and the conditions in which you drive, you have an idea when you will need to replace the tires, yet, you don't have a specific date. This is an example of an expense that with the proper planning money should be set aside and saved for, this is often referred to as a sinking fund for these expected yet unexpected expenses.
Side hustles: Explore opportunities to generate additional income through side hustles. Whether it's consulting or a passion project, the extra cash can contribute significantly to your liquidity.
Growing the cash you have:
Invest wisely: Consider low-risk, high-liquidity investments to grow your cash over time. The shorter the time you need the cash, the lower the risk, and higher the liquidity. Consider a savings account, money market fund, or possibly short-term bonds if it is your emergency fund. If the time is longer until you need the cash or you are using a bucket account approach, money market funds, diversified bond allocation between varying maturities and issuers of the funds can strike a balance between growth and accessibility.
Automate savings: Set up automatic transfers to a savings account or investment account to ensure a consistent flow of funds. This disciplined approach gradually builds your cash reserves without requiring constant attention.
Negotiate better rates: Periodically review your bank accounts and credit cards. Search for better interest rates or reach out to your Ecos Wealth Advisors for guidance.
A study by Bankrate found that more than one in five have no cash reserve emergency fund. The ability to cover living expenses for several months without income is a hallmark of financial independence. Liquid assets provide the freedom to pursue personal or professional goals without constant financial worry.
Remember, building and maintaining cash reserves is not about hoarding money but about creating financial freedom (or security) and positioning yourself to seize opportunities as they arise, and have more financial choices. While having a balanced approach to building and leveraging cash and having liquid assets is important, it's also important to have a diversified portfolio of investments to ensure long-term financial stability.
Investment advisory services are offered through Ecos Wealth Advisors, LLC, a registered investment advisory firm. Securities cannot be purchased, sold, or traded via email or voice messages. The information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk. Be sure to first consult with an Ecos Wealth Advisor and /or a tax professional before implementing any strategy discussed herein.