From the Archives of TGIF 2 Minutes… read on for 2021 updates. Originally sent, April 2019.
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 [in 2019] this “sticker shock” issue came to the forefront 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 zero-interest payment plan because my priority is having as much free cash flow as possible, therefore minimizing annoying monthly payments, and as little debt as possible except a mortgage.
- I realize that back in 2017 the $969 iPhone 7 Plus came into being. So, I delayed purchasing a new phone and eked 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. A good number of those reading this post are part of the population paying the highest rates of taxes. In fact, over our lifetimes, these same people will likely pay even higher and higher taxes (as a percentage of income) in the years to come.
Yes, it is Friday, and my goal is to communicate 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 brings up the concepts of:
- keeping “an intelligent amount” of cash on hand,
- teaching our kids, grandkids, nieces, and nephews about “free cash flow”,
- understanding that cash savings, rainy day and emergency funds are essential.
As for determining what “an intelligent amount of cash” means, please ask me. This number 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.
AND – the $1,100 Cell Phone strikes again! Apparently, the “life” of the average cell phone (iPhones may last longer) is about 3 years*, according to my I.T. department, and my cell phone (paid for personally) has nearly stopped working after only two years. Here I go again, forking over another $1,100! The out-of-pocket cost for these devices must be accounted for in budgeted savings.
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 discuss with all of my clients, no matter their income. That cash will either be truly needed at some point soon… or simply allow substantial peace of mind.
*Especially for cell phones that are heavily used running multiple work-related applications.