Tuesday, July 28, 2009

Sit On Cash But Declutter Your Bank Accounts

Say goodbye to the gloom and doom. The sun is shining warmly, stocks are rising, Dow Jones crossed 9000 points and home price index is up for the 1st time in 3 years. Heck, President Obama might as well declare the recession is over.

Despite all the optimism, I am highly skeptical that this generational economic malaise has been swept away so quickly. I believe the stock market is in the throes of speculative fervour and we may yet see another drastic correction in the fall.

In this moment of exuberance, it is easy to get tempted by heady profits and join the herd. Fortunately, the cool wisdom of Warren Buffett comes in handy when our rationality is tested: "Be fearful when others are greedy and be greedy when others are fearful."

While investors are getting ahead of themselves and raking in the profits, my mantra remains that cash is king. The recession has transformed many Americans into squirrels (which is a good thing) and I hate to see our national resolve in saving money and eliminating debts washed away.

Saving money and bolstering our retirement nest is like tending a flower garden. You cannot be enthusiatic about the flowers for a few weeks and then neglecting them months later.

The flowers require vigilant care to survive, not to mention, thrive. There is so much to do consistently, from watering the plants, ensuring sufficient sunlight, getting rid of weeds and worms, etc. Our finances need similar attention to blossom and we will do well by sticking to the basics.

Declutter Your Bank Accounts

If you are like me, cash (or near cash items) will take up at least 50% of your portfolio. And with so much cash at stake, it is necessary to be orgainised.

The first step for easy organization and tracking of your cash is to evaluate your bank accounts. If you have multiple savings and checking accounts, money market fund, etc, you may find it easier and more manageable to consolidate these accounts.

In addition, there are cost savings if you combine accounts and reduce the fees charged by the banks. You can compare what fees each bank is charging and the benefits associated with having the account before you begin consoliating.

Before closing any account, make sure you have switched any automatic payments for bills to the accounts which you intend to keep, else you may be slapped with penalties for late payments.

You can further declutter your financial situation by setting up online automatic bill payments for recurring bills (except to mail checks to companies that don't accept online payments), and eliminating the need to receive bill statements in the mail.

When you go online, you reduce the need to use paper and stamps (which cost money), and you can balance your accounts easily too. online as well.

Taking the time to work out details and declutter our finances is a major step in keeping us on track for long term financial success. Lastly, whether the sun is shining outside or a storm is brewing, never forget to tend to our financial plan with the same discipline as a gardener.


Tricia said...

Great tips. I have 3 savings accounts. I known for a long time I need to close the one or two. There is no point to have my money so many places. Thank you.

Little Dough Girl said...

I just did this! I not only consolidated but I moved to a local bank instead of a big box national chain bank with horrible customer service and questionable ethics. Off my soapbox now...

It's nice having less to look after.