Cash Management

When it comes to assets, liquidity is important to many individuals for the simple fact that financial obligations arise monthly that require a certain amount of money to pay off debts. After dealing with these obligations, including mortgage payments and car loans, the process of putting money away to plan for the years ahead can become more feasible.

Unfortunately, many people view their short-term cash, which rests in their checking accounts, as a means to alleviate short-term debt only. Leftover funds that rest in the accounts are often left unattended, waiting for another financial obligation to pop up that requires the use of the remaining money.

Instead of letting this money sit idle in an account, it could be more beneficial to invest in short-term T-bills (supported fully by the government), money market mutual funds, and certificates of deposit (insured at a maximum of $100,000). These outlets, because they are liquid, allow you to draw from them in the case that a financial obligation arises. In the meantime, you are gaining interest on the investment, which could be better than leaving remaining funds in a checking account.

By focusing on how you can make your money work for the future, such as by choosing to move your unused funds into short-term investment instruments, you have consciously made a commitment to save for the future.

It is important to note that money market mutual funds are neither guaranteed nor insured, and a financial gain is not always the result of your investment.

Please ensure that you diligently read the prospectus, which accompanies mutual funds. This gives you a clear idea of the factors (objectives, expenses, and risks) involved with the funds themselves. A financial professional may better explain the details.

This information is presented to educate the reader and does not constitute professional tax and legal advice.

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