Access to capital is the most underappreciated factor in personal finance. Having ready cash available to deal with life’s obstacles and opportunities is key to a successful result. Cash represents protection, opportunity and most importantly, freedom.
Cash is protection. Money in the bank protects your monthly cash flow from the unexpected. It protects your balance sheet from debt.
Cash allows you to take advantage of opportunities, especially when assets like stocks and real estate are undervalued.
Cash represents confidence. When I speak to groups, I sometimes ask my audience to close their eyes and imagine having one year’s income in the bank. Could they handle unexpected car repair? Could they deal with a medical expense? Of course. Could they afford to leave a job that made them miserable? Absolutely. Available cash is freedom.