I’d like to continue this video series which is a Summer Financial To-Do List.
And today, I want to discuss Putting excess cash to work:
Inertia is one of the biggest obstacles to financial success. The inability to make decisions, and act, when necessary, can impact various aspects of personal finance. One example of imprudent inertia is sitting on excessive cash instead of investing it. Holding too much cash ensures that you are losing money due to inflation.
You should invest any excess cash not needed to pay your expenses or emergency fund. This will more effectively grow your nest egg. Automating the process of contributing to your investment accounts will remove emotion and procrastination from your investment process.
If you have extra cash that you will need in several years and are not comfortable investing it in the market, it should also be moved out of your checking account and into a money market account. As of today, money market funds are still paying around 4%. That’s a pretty attractive return for effectively sitting in cash.
If your funds are for the longer-term, having a heavy allocation to equities makes since so you can outpace inflation and maintain your buying power.