In today’s busy world, you might often feel like you’re drowning in responsibilities to your family, coworkers, clients, and even your neighbors. There’s always someone or something saying you ought to be doing something.
Some people are concerned about spending their extra cash, while others are concerned that they’re not investing it. In either case, this situation can easily be avoided through a simple process that makes your cash work for you.
Having more income than you spend feels good, yet it’s crucial for us to recognize that this is, in fact, necessary. If you ever want to spend any time without income in your life – whether it’s retirement, a sabbatical, or whatever – then you must earn more than you spend.
There are three important factors when it comes to holding cash: Liquidity, Risk of Loss, and Yield. If you are comparing alternatives and are only looking at yield, you will be giving up something in the other two areas of Liquidity and Risk of Loss.
Every dollar you have should have a job. If you aren’t giving a job to every dollar then your dollars are working against you.
If your goal is to do everything you want in life and die with at least a dollar in your bank account, or whatever amount you want to leave to your kids, then there is a simple equation that will tell you if you are on the right track.
A lot of people like to use rules of thumb with their finances. Don’t fall for that. You are not average. No one is.