Recently, while I was reading over J$'s monthly updates on his net worth I noticed a category for a large cash hoard, which he calls “Monster Cash.” As any typical man, my jealousy immediately spiked, and I said to myself, “I want a large sum of cash too!” :) (sounds like my kids do when one gets something and the other doesn't.)
In all seriousness it's really got me thinking…it sure would be nice to have this security blanket….this option…this opportunity. As the sole breadwinner for our family of five it really appealed to me. I struggle from time to time with worry (insecurity) of being without work to provide for my family. In thinking of J$'s large cash hoard, I thought there are a lot of benefits. Here are five reasons I came up with for having a large sum of cash.
As shaky as the economy has felt since 2008 it constantly feels like everyone's job is being looked at. “Is it needed or not“? For myself, I often struggle with the fear of being laid off, and having this “security blanket” of cash would help with that insecurity. It also provides my family with additional security if I were to suddenly pass away (heaven forbid), which would help supplement my life insurance policy. All in all, the large sum of cash will help provide a buffer against any unforeseen events (granted they aren't unforeseen to our Heavenly Father).
When I think of a large sum of cash I immediately think of the Oracle of Omaha, Warren Buffett. Berkshire Hathaway, is constantly sitting on a large sum of cash ($49 billion as of June 2011) looking for excellent companies that they can buy out. With this cash they are able to be in a better position when hard times come and gobble them up for pennies on the dollar. Is your investment philosophy similar? Are you saving up cash in search of the right opportunity? Personally, I always hate the feeling I have when I'm presented with a good business opportunity, and can't pull the trigger, because I don't have the cash. Every good portfolio starts with a large sum of cash!
Opportunities to Take Greater Risks
Have you ever heard of the phrase, “The rich keep getting richer“? A big reason the rich keep getting richer is that their cash reserves give them opportunities to take greater risks. Take for example the show, “Shark Tank”. Tons of inventors are coming to wealthy venture capitalists to pitch an idea that they hope to sell. The sharks are the ones with all the money. They hold all the cards and are able to take the risks because of their cash position. For me, one of the greatest sharks that comes to mind is Mr. Potter (richest man in Bedford Falls) in the 1946 movie, It's a Wonderful Life. When everyone was making runs on the bank, Mr. Potter, was patiently waiting. Offering 50 cents on the dollar for everyone's bank account. Start building your large cash sum, and you just might have the opportunity to take a few more risks.
Saving Money on Interest Debt or Credit Card
I hate debt! I hate it so much that I make it a priority to have an emergency fund to weather bad financial storms. Using a large sum of cash to avoid debt is very noble. It fits in line with my avoidance of being a slave to any lender. When my dad went through bankruptcy in 2008, I had the revelation that “No one can foreclose on you if you owe no one nothing.” As simple that truth may seem to many people it's something we often forget. Signing up for debt is an agreement to servitude. In bondage until payment is received in full. Use your large sum of cash to avoid debt, and save tons of money on interest charges!
Survive a Layoff
I write an awful lot about preparing for a layoff, and contingency plans if you are ever laid off. I don't know if it's my own insecurity or what, but this topic is one I feel very passionate about. To battle this I actively do three things. First, I work on developing my multiple streams of income. If you're every out of work, then this extra income with help out more then you'd ever know. Secondly, I'm constantly looking at ways of reducing my fixed expenses (deadweight). Finally, I actively work every paycheck to build up our family's cash reserves. These cash reserves all play into answer the question, “How long can I survive being laid off?” Previously, financial planners and TV hosts were recommending 3-6 months in reserves, but with the condition of the economy, many people have shifted to as much as 12 months. Do you know how long your cash reserves could last you?
Well, TTG readers, these are just a few of my ideas. I'd love to hear why you have a large cash reserve or want too? What is your reason?