Thinking back on your employment choices, would you have done things differently? Any “do-overs” with regards to where you worked as your career got started? Maybe joining a startup, or selecting a more established company, or perhaps pursuing another degree?
Today’s financial decisions are often tied to where we work. The early habits we adopted managing our cash flows tend to stick with us as the years go by. As incomes increase and careers advance, how may we make better decisions?
We can’t go back in time, but we can reflect on our choices and learn from our experiences. The best lessons are often discovered firsthand. We can read and think out loud, but until we’re at a crossroad, until it’s our decision, it’s hard to predict how we’ll respond. Assessing a problem, answering a question, or evaluating an opportunity takes time. Time can be created by holding the right amount of cash.
Having cash that’s accessible at a moment’s notice can provide options when making decisions. Cash supplies peace of mind, calmness, and clarity. Not having to respond at once allows for all possibilities to be considered.
It can be difficult to accept the boring role cash plays. There are continuous messages targeting investors, tempting us to seek more returns with our cash. Squeezing yield from dollars that just sit there seems attractive but rarely is the answer.
Life becomes full of options when you hold cash. Not tied up in complex products or leveraged, just cash you can get your hands on when needed. Holding cash allows investors to better understand today while investing for tomorrow.
The difficulty investors face has never been where to invest. Company stock, employer retirement plans, and after-tax portfolios are all available to receive automated contributions. Wealth builds and compounds as decades pass. This is followed by years of spending, with an eye on sustainability. The challenge is not investing but simply being content (and happy) holding cash.
The allure of more and seeking strong returns is hard to resist. Rising prices on everyday purchases spotlight the need for growing incomes from your portfolio. Investors can easily fixate on results which may lead to skipping reserves and investing more heavily than they should. This works right up to the point that it doesn’t, and cash is needed. That’s when the lights go out.
In the darkness without a safety net in place, few choices remain. Often selling investments once held with purpose so cash may be generated. This may translate to losses and reacting to tax considerations. All of this may be avoidable by holding the right amount of cash.
The right level depends on job security, short term spending, and discretionary purchases. These evolve overtime with your career and are worth reflecting on. Doing so helps avoid surprises and may create more time which may lead to better decisions.
Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Flowerstone Financial are not affiliated.