Do You Often Have Personal Cash Management Issues?

There are times when you have money and times when you don’t. Sometimes you have actual cash, perhaps in the bank, but shouldn’t spend it. Sometimes you have excess cash that you should do something with.

In this article I am going to discuss cash management issues that could pop up that you may want to be aware of.

Stock Market Is Too High

If you believe the stock market is pretty high, you may want to develop some rational fear and raise some cash. I have talked this to death but here it is again. The cash you raise should be in your investment account and be ready to invest when the time is right. Generally I say 30% when the market is at the top.

Stock Market Is Very Low

After a big market drop, it is time to go bargain shopping. Buy some more of your 10 companies, a little bit at a time. Reduce your cash position in your brokerage account(s) to 5 to 10%. You do this by buying shares.

You’re Having A Hard Time Not Tapping Your Brokerage Account

There are times that you may need cash, perhaps desperately. You lost your job, have a big car repair, furnace died, you know. The object of this game is to problem solve… find a way to deal with your problem without withdrawing cash from your brokerage account. Easier said than done, I know. Just be aware that, especially if we are talking about retirement assets, almost anything is better than using this money.

As a side note, what happened to your emergency fund? Remember that 3 to 6 months worth of cash to set aside in a savings account before you invest? This is the time to revisit, that is after you deal with the immediate emergency.

An Emergency Happens Every Other Day

Ok, first, emergencies happen almost never. If you do have an “emergency” every other day, it’s time to figure out how to deal without making it an emergency. Again, work the problem. Find something that works without tapping the emergency fund or charging on the credit card.

For instance, is it an unforeseen expense or just a cash flow issue? A cash flow issue means that if you could pay the bill on the 21st instead of the 20th, there would be no problem. Cash flow issues often have fairly easy solutions if you just dig a little. Anyhoo, if it’s just one day off like this example, you could probably just pay a day late. Just check to see what the consequences of doing this are.

Well what if you actually have an unforeseen expense? If you do, is it a regular expense or is it out of the blue? If it’s a regular expenses that happens every 6 months, perhaps it should be part of the budget (i.e. spending plan if you don’t like the word budget).

Dig Through The Plan, Find Some Space

We have now dealt with our problem, whatever it is, and now we need to find a way to prevent it from happening again. Beef up the emergency savings. Find some space in the savings plan to put away money quicker, or to have ready cash for the unexpected.

Should I Invest Or….

You might have some unexpected (or even expected) cash and you are thinking: Should I invest, pay down some debt, or what? How are you on your emergency savings? Are you concerned about your job? Do you have an expense coming up? Perhaps you should add to your emergency savings.

If you feel pretty comfortable with everything, it doesn’t hurt to add cash to your brokerage account and invest in one or more of your 10 companies. Proceed with caution though.

As far as debt… yes if you have debt and you are pretty comfortable with everything, do pay down what you can. My opinion is to shoot for debt that is unsecured and has higher interest rates. Mortgage rates are so low now that you may want to invest before you pay down your house. Just saying.

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