Cash flow. Wouldn’t you like to have more of it around tax time? Well then, it may be time to delay or reconsider that new cell phone purchase.
Recently this “sticker shock” issue came to the forefront for me when I forked over $1,100 for my new Samsung Galaxy Note cell phone. OK, you may say, “Why didn’t you go with the zero-interest payment plan?” or, “Where have you been, Kerrie?” To which I would respond,
- I did not go with the payment plan despite it being zero interest because I am all about having as much free cash flow as possible (therefore minimizing annoying monthly payments) and as little debt (except a mortgage) as possible.
- I realize that back in 2017 the $969 iPhone 7 Plus came into being. So, I delayed purchasing a new phone and eeked out as much as I could with the old phone until it essentially ran out of memory and could no longer function as needed.
The reason this issue got me thinking on a deeper level about savings and cash management is because…. it is tax time. By this April, although 65% of American taxpayers will have paid less taxes than in the previous year, a good number of the people reading this note are part of the 6% of tax payers who will pay more taxes for 2018. And over our lifetimes, the people reading this will also likely pay higher and higher taxes (as a percentage of income) in the years to come.Yes, it is Friday, and my goal is to leave you with an uplifting message or at least a few pieces of valuable information! Please stay with me here.
The $1,100 cell phone for which I promptly paid in-full (which can be compared to the possibly alarming or surprising amount of tax payment due by April 15th of this year and in future years) brings up the concepts of:
- Keeping “an intelligent amount” of cash on hand,
- Teaching our kids, grand kids, nieces and nephews about “free cash flow,”
- Understanding that cash savings, rainy day and emergency funds are critical.
As for determining what “an intelligent amount of cash” means, please ask me. This number greatly, greatly varies by lifestyle, spending, risk tolerance, income, needs, health, age and other factors. The amount is not always easily determined – no matter your income.
When it comes to teaching our children, the most important factor is to start early! Elementary and high schools have just started to scratch the surface of introducing the topic of money and saving. However, too many schools (in my opinion) make the conversation more about buying stocks and minding a portfolio of stocks than about the basics of cash management. The real basics involve Spending, Saving — EARNING — and, yes, Paying Taxes.
Finally, “Cash is King.” Having in place a stash of cash savings, “rainy day” fund, or emergency fund is one of the first things I bring up with all of my clients, no matter their income. Heck, CD rates have even become minimally respectable again! That cash will either be truly needed at some point soon… or simply allow you substantial peace of mind.