A Reminder: Cash is King

Feb 21

It wasn’t too long ago when I set my primary financial goal to increase my liquidity (with the help of my opportunity fund). The purpose of my goal is to be able to survive at my current expense level for over a year without an employer. My employer has had relatively poor financial results several quarters in a row which impacted how I determined my 2015 liquidity goal. Ideally, I would have liked to pay off my loans as fast as possible, but being cash poor can cause even more stress than a significant debt burden. If I pay off an extra $10,000 toward my student loans and only have $1,000 in my bank account, losing my job could be disastrous compared to losing my job and having $11,000 in the bank. Even though I’d have much less of a debt burden, my minimum expenses would remain similar, and I may have to take on a job I’m overqualified for and be underpaid until I can find a new employer more in line with my career path. The goal to increase my emergency fund to over a year’s worth of expenses is directly related to overcoming a situation where I lose my full-time employment. Additionally, I wanted to increase my opportunities as well. If I ever am offered a great employment opportunityin another city, I want to be able to take it and not worry about unremimbursed moving costs and/or a potential loss on selling my house. A large emergency fund also gives you leverage in employment negotiations. If you are unemployed with no emergency fund, you will likely have a sense of haste in your interviews/negotiations. Employers can use this to their advantage knowing you need income as soon as possible. On the flip side, if you are already employed, you may have to accept whatever your employer gives you as a raise because you can’t walk away from the table. Even worse, if your employer freezes your wages or reduces your wages, are you willing to walk away? If you are able to walk away (or the appearance of walking away), you will likely be able to negotiate a better raise than the rest of your coworkers. Cash is King – Reinforcement This past...

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The Opportunity Fund: The First Purchase! 

Jan 15

Woo hoo! That’s excitement pouring through my fingers after making my first stock purchase for the Opportunity Fund! I bought 45 shares of General Electric stock at $24.35 per share. GE pays a $0.23 per share dividend quarterly, creating an additional $41.40 per year of cash flow. Yes, it is peanuts, but everyone has to start somewhere. At RedtoRiches.com, you get to see wealth build from scratch. It’s a great feeling to me because I’ve been obsessed with the financial markets since I was 15 years old. I helped manage my college’s endowment fund and even landed an internship in New York City at an asset management firm when I was 21. Yet, I’ve never had the financial means to continuously invest on a monthly basis. And whenever I did get more than a few thousand dollars in my investment account, something happened such as car replacement or the down payment on a home. I’m finally in a position where it is realistic to continue to build this passive income on a regular basis and it feels great! My primary 2015 financial goal addresses not only my need for an emergency fund, but also my hobby of analyzing publicly traded companies. It’s exciting to know I am finally beginning on a journey that will produce passive income (dividends) that can support my expenses in the future. Buying GE shares not only is my first contribution to the Opportunity Fund, but it also satisfied one more of my principles: Make yourself feel poor! After my purchase of GE, I had less than $500 in my checking account. Even though I know I have money elsewhere, psychologically it still impacts my spending decisions in a positive way. It’s similar to removing junk food from your home! If it’s not there, the temptation is greatly reduced!...

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Introduction to the Opportunity Fund! Cash is King

Jan 10

Introduction to the Opportunity Fund! Cash is King

Cash is King As a young professional, cash is king. It took me a while to realize this because I signed an acceptance for a full-time position prior to my last semester of college. It was a relatively stable position and the company was growing. Initially, I enjoyed the work and was a top performer. The thought of losing my job did not exist. Although I earn more at my new position, my current employer is a manufacturing company. It is not in immediate danger of insolvency, but is not growing either. Internal reports and internal discussions have reminded me that cash is king.   How many months could you survive financially if you lost your job today? This question is intense and you should run the numbers (cash and liquid investments / estimated monthly expenses). If you lost your job, how long could you continue to pay for food, shelter, water, electricity, etc. I did not ask myself this question until a few months ago when one of our quarterly financial results was announced well below target and the future wasn’t looking brighter. When I accepted the new position due to the more active responsibilities, the better pay and less hours, I did not give adequate consideration to the financial health of the organization. Young, and even proven professionals need a reminder that they (we) are disposable. I’ve seen managers at public accounting firms leave and never replaced. Somehow, 2,000+ hours were absorbed by the remaining employees. I’ve seen reorganizations in manufacturing companies where senior executives were let go and most people did not even notice the difference (probably why the company wasn’t performing well). To me, my position is considered a “luxury” position. It is a position that is NOT essential to the IMMEDIATE survival of the business. I source materials, negotiate contracts, sell off-quality products, analyze various markets related to our raw materials, analyze the validity of cost plus contracts, and perform many other activities. It sounds like some serious business, but guess what, my manager and other team members performed these tasks prior to me being hired. Yes, I have proven useful to my team, but they already proved they could function without me and complete...

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