Image Courtesy: Dan4th
If you haven't realized it yet by reading this blog, I hang onto a large amount of cash. I've also been called a "cash hoarder" by some of my close friends.
My current goal is to save $50,000 in cold, hard, cash. I'm about $18,000 away from my goal as of the last checkup. I'm fairly confident that I will be able to meet this goal by the end of this year or early 2010 instead of December 2010 as I'd originally planned. If I hit my goal within the next six months, I will then increase the goal amount to $75,000.
You may ask, why so much cash? There are several reasons that I hang onto a large amount of cash.
Low Risk Tolerance
I'm not a big fan of the stock market. I have a low tolerance for risk when it comes to my money. I don't like the wild swings of the stock market. I sleep better knowing that if I put $1 in the bank today, that $1 will be there tomorrow along with a couple of cents in interest.
Outside of my 401k, I don't do any additional investing. The recent number of scandals involving ponzi schemes (think Bernie Madoff) and people losing large amounts of money in bogus investments does not help my view of investing.
Cash Gives You Options
If you've ever applied for a loan or credit card, you know how the process goes. You have to submit all of your financial information and hope that you are worthy enough that the bank will loan you money.
If you have cash in the bank, you don't have to worry about that. Do you need to replace your vehicle and you find a nice one for $5,000? You can simply go to the bank and withdraw the money from your account without the headache and hassle of applying for a loan. If you water heater breaks and you need a new one or you need emergency auto repairs, don't let trying to find the money to pay for the repairs add to your worry.
Right now, we are in a "credit crunch". Due to the amount of money banks have lost due to bad loans, they are being very, very picky about who they give money to (and I can't say that I blame them). If you are like me, you aren't as worried about the credit crunch as much as others. I've had the credit limit on several of my credit cards cut because the bank is trying to minimize the risk of loss and it really didn't affect me that much.
Large Expenses Ahead
I have a 16 year old sister that will be headed to college in a couple of years. I know my mother can't afford to pay for any of her education so I plan to help her out as much as I can. I had to work two jobs in college in addition to my student loans, just to make ends meet. I want her to work but just not as much as I had to. In college, you should be focusing on getting your education; not trying to figure out how to pay the bills. Due to my mother's low income, she will be able to get grants and qualify for loans but I don't want her to come out of college with the amount of student loan debt I had/have. Having cash in savings will allow me to help her without wreaking havoc on my own finances.
You always hear about the great returns people have earned in the stock market. Yeah, that may be true but there are also people that have lost their shirts. It's generally only in economic environments like we are in now that people seem to remember that "cash is king".
What about you? Do you hoard cash? Has the recent economic environment changed the amount of cash you save?
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