Thursday, August 16, 2012

Cash Reserves: Build it Up

By Renee Hanson, Private Wealth Advisor
As a general rule of thumb, your cash reserves — the amount you put aside in case of an emergency or a job loss — should equal six months of your living expenses. Having adequate cash reserves will not only give you greater financial stability if something goes wrong, it will also give you added peace of mind.
If you don’t have enough discretionary income to build up your cash reserves, you may have other opportunities to free up extra dollars. Here are a few ideas to consider:
·         Refinance your mortgage. With mortgage rates remaining at historically low levels, now may be a good time for you to refinance your home loan. If you qualify and can lock in at a lower interest rate, you can use the savings to build up your cash reserves. To determine if refinancing makes sense for your financial situation, use an online calculator or consult a reputable mortgage professional.
·         Set aside your raise or bonus. The next time you receive a salary increase or a bonus, don’t spend it. Save it. Put the additional dollars from your paycheck into a money market account until you’ve reached your savings goal. Afterward, consider investing those dollars in the market to help you save for retirement or other future goals.
·         Take the bus or carpool. If you typically make the daily commute alone in your own vehicle, price out the public transportation options in your area. Typically, public transportation is significantly less expensive than driving, fueling and maintaining your own vehicle. Or consider starting a carpool so that you can share expenses.
·         Review your federal income-tax withholding. Make sure that your federal withholding is appropriate for your income and family size. Having too much money withheld from every paycheck means that Uncle Sam gets to use your money throughout the year instead of you.
·         Shop around for lower insurance rates. The next time your auto and home insurance policies are up for renewal, shop around for better rates. The savings could be substantial, giving you another way to increase your cash reserves.

Renée A. Hanson, CFP®, CEP®, CDFA™, CFS, is a private wealth advisor with Hanson, Ayala & Associates, a private wealth advisory practice of Ameriprise Financial Services, Inc. Her passion is in helping women achieve their dreams and financial goals, regardless of life’s many obstacles. Renée is licensed/registered to do business with U.S. residents only in the states of AZ, CA, CO, GA, IA, IL, MI, MN, MT, NH, NJ, NM, NY, OH, PA, SC, TX, VA, WA, WI. Please visit: to learn more.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients.

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