The Critical Cash Reserve

Whether you are just starting out in life, rebuilding from financial failure, or building on success nothing is more important than maintaining a cash reserve. Here are the main reasons everyone should save a cash reserve:

1. You never know when a financial emergency will arise. It may be auto repairs, dental work, medical bills, a broken window, or losing your job. There is no certainly as to which emergency will befall you, there is only certainty that one or more will befall you. A cash reserve allows you to pay for that emergency without stress.

2. Emergencies also tempt you to incur debt, especially high interest credit card debt. By having a cash reserve you avoid the temptation of going into debt. Consumer debt is a major impediment for most people in their efforts to build wealth. It should be avoided like the plague.

3. A cash reserve builds a psychological framework of self sufficiency for you. This is important. The more you can rely on yourself to meet your needs, the less likely you will be to resort to debt or foolish financial decisions.

4. The discipline required to save for a cash reserve is critical – it will then allow you to save to pay off debt and to invest for the future.

Set aside as much as you can afford to set aside each month for your cash reserve. For most people your reserve should equal at least your living expenses for six months in a strong economy and one year in a weak economy.

Ideally set aside 10% of your income for your reserve. If you cannot possibly meet your financial obligations and genuine needs on 90% of your income then save whatever you can each month – even if it is only $20. Over time you will save enough to have the peace of mind to know that an emergency or even loss of your job will not plunge you into debt or lead to imminent foreclosure. It will allow you to survive without additional debt for six months to a year whether you have a paycheck or not.

How is that for peace of mind?

Wishing you success and prosperity,

Daniel R. Murphy
Helping People Learn to Build Wealth

Wishing you Success and Prosperity,

Daniel R. Murphy

Wishing you well,

Daniel R. Murphy
Educating people for building wealth, adapting to a changing future and personal development.