Friday, April 19, 2024

LOUISE FAIRSAVE: Handling cash


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The richest asset any person has is their mind. That is because the mind is the best agent for creating cash – not by manufacturing actual money, but rather by mentally planning and developing successful strategies for earning more cash.

​Perennial problems with pay day loans, overdraft protection and lines of credit are signs of poor cash planning which effectively erodes one’s wealth.

A person in search of wealth needs to spend time planning and reviewing their finances. The wealth-seeker needs to take investment risks, and get experience, carefully considering each investment and keeping a keen eye out for opportunities. But most of all, the wealth-seeker must work on acquiring and building up cash-generating assets.

Real wealth can be achieved through striving to increase your monthly cash flow to the point that it well exceeds your monthly expenses. Then you will be able to get out of the “rat race” and on to the fast track. When you are in the rat race, the dependence on a salaried income limits your options. Furthermore, the propensity to acquire “toys” impedes your ability
to become self-sufficient.

“Toys” are cash-eating liabilities such as boats, expensive vehicles, indulgent vacations and heavily mortgaged homes. The financially illiterate buy “toys” mainly to impress others about what they can afford. However, “toys” are really liabilities when they require large sums of cash continually to service them.

For example, it makes more financial sense to acquire a home well within your means and invest any excess cash in order to generate additional income. Exploring investment opportunities will build your knowledge of the risks involved and hopefully your experience with pushing on the risk/return bar.

In these days of high unemployment, it is important to find ways to make healthy returns from investing what little money you have. The more and more you see returns from your investing attempts, the greater and greater will be your understanding of how to handle cash to your advantage.

Where it may take a salaried employee about five years to save $20 000 by just keeping the savings as a bank deposit, by exploring your investment options wisely, you may be able to generate the same amount over a two-year period or less with the same level of savings. Then, the more success you have, the more highly motivated you will become to hold on to your cash for investment purposes.

Mind power can overcome that self-doubt and the fear of failure as an investor. It is natural to be apprehensive in trying a new way; with perseverance, you will build confidence as an investor. In the beginning, it is recommended to seek the advice of a financial expert. Ultimately, you need to understand the numbers and have the courage to pursue an interesting opportunity when it presents itself.

Making an investment all depends on your disposition to risk and how well you understand the fundamentals of the opportunity. Just be warned that it does not make sense just waiting for the right opportunity. Many investors fail mainly because they cannot or do not see the opportunity when it arrives. Worse still, they may wait around for the better and surer investment that never comes.

Start investing boldly today. Handle your cash astutely and it will build your wealth.

• Louise Fairsave is a personal financial management adviser, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances. This column is sponsored by the Barbados Workers’ Union Co-op Credit Union Ltd.


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