Build Cash Reserve To Pay Off Debt

Building a cash reserve is slightly different than putting money away in a savings account. When you start saving money initially you will find more important uses to utilize it such as to get out of debt. You should not touch the money that you put away in your savings account unless you are ready to meet one of your long-term financial goals such as pay off a credit debt or pay of a Mortgage.

Another difference between saving money and building a cash reserve is at a cash reserve has the nature of liquid cash. It is money that is easily accessible and is not tied up into any kind of investment that is not easily convertible into ready cash.

Building a cash reserve is about having a source of income to fall back upon should you fall on hard financial times. Hopefully and God willing you will not have the need to utilize your cash reserve but it is better to have it in order to be prepared for life’s uncertainties. A perfect example of what we mean by saying this is the recent downturn of economy that has pretty much affected everyone at a certain level. The ideal situation of having a cash reserve is that you should have enough money put away in order to sustain your daily expenses and lifestyle for six months when no other income is forthcoming. This way you will not need to burden your credit accounts during the time of need and find yourself under debt. This does not mean that you should use your cash reserve when you have a credit card. It means that you can and should continue to use your credit card as long as you know that you have the cash reserve to pay off your bills.

During the recent receding state of economic affairs in the country people have found themselves jobless and have had to look for other jobs. Finding a job to replace your current level of income may take time. It is said that for every $10,000 that you earn it takes an additional month to replace it with a new job. Having a cash reserve is meant exactly to such a purpose. It is meant to sustain you during that time that you look for another job. Having a cash reserve means that you will not need to compromise and can take your time and effort in finding a job that matches your qualifications and experience.

Saving money takes time. Whether you are saving it in other to accomplish a long-term financial goal or you are saving it to build a cash reserve, do not get disheartened at the thought of how long it might take you. Start slowly but steadily. Saving money is more of a habit and a state of mind than anything else. Once you develop this mindset you will find that it only gets easier with time.