Personal Finance Advice

When I was younger I had a co-worker pull me aside and in hushed tones gave me his secret for financial security.

“Here is what you do,” he instructed me.  “Take some envelopes and mark them for every recurring bill you have, like your mortgage, car payment, utility bills, groceries, and everything else you pay.  Then put enough cash in those envelopes to cover you for an entire month.  Stash the money in a safe and never, ever touch it unless you need to.”

He was always terrified that a bank error might occur and wipe out his savings or that he would unexpectedly lose his job, but as long as he had enough money in his safe to pay everything for one month he felt much more at ease. 

It’s a great idea to always have some cash on hand, although some people may argue that a full month’s worth of expenses would be much more productive sitting in a savings account earning some interest.  Even if you don’t have a couple thousand dollars collecting dust in your lockbox, you should still have a little bit of cash on hand in case you need it. 

Here are a couple of personal examples when having some cash on hand was of great benefit:

1.  After the Northridge, CA earthquake my grandfather had to go scouring through all the convenience stores in an attempt to buy some bottled water.  No credit card terminals were functioning at the time because of the earthquake, but luckily my grandfather had enough cash on hand to purchase water at the ridiculously inflated prices.

2.  A friend was visiting one day and broke down crying about how she didn’t have enough money to purchase groceries for the rest of the week due to her husband’s unexpected job loss.  I had enough cash to give her to tide her over until the month’s end.

There are plenty of other instances when having some accessible cash comes in quite handy.  You never know when a citywide blackout will cause all the ATMs to shut down or when your bank will hiccup and temporarily lose some of the money in your account. 

This is certainly not to say that you should stock your safe with piles of cash.  Money should earn interest if at all possible, so your life savings should not be stuffed into your mattress.  On the other hand, having some cash on hand is a good idea because you can never be quite sure when you might need to get your hands on enough money to buy some food or medicine in the midst of a crisis.

Keep a little cash in your home - not a lot - but enough so that you know you’re covered in case an emergency does arise.