good insights
Scott
4/5/2011 5:31:13 PM
But then again if you're bleeding cash, how are you gonna put aside a year's salary as a rainy day fund? LOL
#7 is so very integral at a time when a potential government shutdown is looming, we are coming out of a recession and unemployment is skyrocketing. It is extremely important to put something aside for a "rainy day." Please people, take 5-10% of that paycheck and save it...you never know when you'll need it.
Potential Risks Can Slash Investments
Street Smart
4/5/2011 7:08:45 PM
Whenever there is an adverse change to one's lifestyle--a period of unemployment, a new job that doesn't pay as much, one spouse out of the workforce, etc., I think it's important to keep saving and investing SOMEHOW--maybe just not as aggressively or as much. Instead of panicking, this is EXACTLY the time to stick to a budget, and as part of that, to put SOMETHING into savings, a 401(k), or a Sharebuilder account each month come Hell or high water.
Heaven knows, these days it isn't even about "the miracle of compound interest." It's about the psychology of staying focused, sticking to a plan and not going completely off the rails when the temptation is the greatest just to throw up your hands.
Its all about the Emergency Cash
back2basicz
4/6/2011 7:51:32 AM
Edward,
In today's uncertainty riddled sceanario;I liked what you said here the best
"Not having emergency cash: One of the biggest lessons you can learn from the recent market meltdown is that you have to be prepared for the unexpected. That means having an emergency account. While it's tempting to tap this account for the latest flat-screen TV or a relaxing vacation, it's more important to have a fund you can use to pay your bills if you lose your job or investments. “In the past, people recommended setting aside six months of living expenses, but that’s really not enough today,” Sanders says. “You should have enough to provide for your family for a year."
Having enough cash as well an alternative income stream that helps you to last you for a year is a very powerful and comforting (pscyhologically) cushion.
Today the Job market is extremely uncertain ;just because you have a well paying job today does'nt mean you will have one 3 months from now.
But that also does'nt mean that you should put in 24 hours at work everyday for 7 days a week,either(or sit up late at night worrying about what happens if you lose your Job).
Planning for your future is key.Absolutely the key here.And that takes time,patience and an honest appreciation about your Skills and what your worth in the marketplace is.
Regards
Ashish.
Emergency Cash
AskAsa
4/6/2011 4:06:26 PM
Having Emergency Cash is nice - but only the beginning. Careers Experts now say you should have 3 sources of income. Not jobs - but income sources. Should one fail you can continue your lifestyle without draining the emergency cash.
Its good to see so many agreeing with what I had to say earlier...
back2basicz
4/6/2011 4:53:09 PM
Hi,
Its good to see so many readers understanding and agreeing with what I had said here
http://www.investoruprising.com/messages.asp?piddl_msgthreadid=237803&piddl_msgid=364080#msg_364080
We need Emergency cash as well as Alternative Streams of Income.Anyone who thinks and believes that holding only one Job alone is enough [Especially as the US Federal Reserve continues to do everything in its power to destroy our Savings]is clearly deluded.
Hopefully,this website and the esteemed contributors here can help all of us readers identify and get to that level of Financial stability and success.
Regards
Ashish.
Good to see
tokyogai
4/7/2011 7:38:14 PM
It is good to se someone focusing on what profit is actually realized. papaer gains do not buy the milk! All these factors need to be taken into account as you figure what your real gain is. There is no substitute for good planning and understanding what the real gain is.
why shall investor hoard cash and remain liquid
Value Hiker
4/8/2011 4:09:31 PM
I think the #7 can be extended to portfolio management. I always keep a healthy portion of cash asset (about 10%-20%) in my portfolio. There are several reasons to do it, and some of them I learned in a hard way:
1. Cash keeps investor sleep well, you may lose a few points of extra return in short run, but the peace of mind alone will be worth it. As Kenyes once said "Market can keep irrational longer than you can keep solvent". Without a healthy cash reserve, it is much easier to be panic during the downturn.
2. Cash provides investors the opportunity to react quickly to great but short-living investing opportunity. It is hard to jump into the market when market is tanking, it is even harder when you need to sell asset at a loss to raise cash.
3. A Cash position will push investors to look harder for investing opportunity. If you are 100% invested, there are fewer incentives to search hard in the market.
As Buffett pointed out in his latest letter to shareholder, the best palce to keep cash is the US Treasury bills. Investors shall avoid other short term securities, which can be fragile in market like September 2008
Cost of Health Care
PAW
4/12/2011 11:33:25 PM
The first point about Health Care cost is very important to consider, especially if you are laid-off or "down-sized. My employer generously paid for my health insurance for one month after being laid-off last summer. COBRA for me and my family was $485/month and increased to over $500 after the first of this year. I had emergency cash and I am living way below my means (which is not much these days!), but the health care costs continues to blow my budget every month. To pay for it, I have drawn from my investment account. Fortunately for me, my Apple stock continued to soar and I was able to use some gains to pay the health premiums. Still, that can't last forever and I am uncomfortable betting on the market to pay health care.
Re : Potential Risks Can Slash Investments
yalanand
4/17/2011 3:05:08 PM
Edward,
Thanks for the post. I totally agree with your point that "it’s not just the amount of money you make in the market, it’s how much of that money stays in your account". Investing in pension/insurance plans is as important as investing in stock markets.
Do you think money set aside for emergency cash is more susceptible for Inflation? What all different methods do we have to save emergency cash ?
Potential Risks Can Slash Investments
PAW
4/30/2011 3:27:48 PM
I agree (and speak from experience) that #7, “Not having emergency cash” is critically important.
When the job is going well, it is easy to spend what you are making and forget about saving and putting cash away for a rainy day. As soon as you feel that way – stop yourself and get a reality check. Stuff happens! If it has not yet, it will. Be prepared by saving. If you do not think you can “afford” to save, then do it by cutting current expenses. After a recent lay-off (and thankfully, I had an emergency fund – although growing smaller as I write this) I continued to “save” by examining expenses that I used to pay without even thinking about. I did not need a gym membership so I dropped it. I shopped around for new car, homeowners and life insurance as well. I cut my monthly expenses by over $300 (if I did this when I was working my emergency fund could have been that much larger!). Anyways, I am saving by not spending and when I do find a new job, I plan to put aside this amount plus more!
Thanks for joining the discussion, everyone! There are some great comments here. The idea of finding a way to incorporate multiple income streams is sound advice and worth considering. Even a large cash emergency fund can rapidly be depleted.
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