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Take a Moment to Tally Your Cash

With gas prices and inflation threatening the price of a Big Gulp, a dollar just doesn't seem like, well, a dollar anymore. No need to look for part-time work or switch to generic soda pop. Here are some painless ways to make the money you already have go further.

Find your loose change: Review your current investments, including your work retirement plan, IRAs, and that change jar sitting on top of the dresser.

Start a scorecard: Note interest rates you're earning on your savings. If you own stocks or mutual funds, how do they stack up against the plain old vanilla S&P 500 Index Mutual Fund? Lastly, what are you paying to park your cash? Scrutinize any fees you pay (to your bank, brokerage, fund family). Your goal is to keep all fees below 2% of the value of your holdings.

Don't let your cash crash: Is your savings languishing in an account earning a pittance in interest? If you know you're not going to touch the money for the next six months or longer, stash it in an account that's worth your while. There are several savings options for your short-term cash, including money market accounts, money market funds, Certificates of Deposit, inflation-indexed savings bonds. Not worth your bother? Remember, even just a few fractions of a percentage point can make a difference (use these online calculators to see how much), particularly on savings in the five-figure range and above.

Give your long-term investments a chance: Use the power of the stock market to make your money multiply faster. During the past century the market has returned an annual average of around 10% to investors. Feeling daunted? An easy entre into the market is an index mutual fund. If you've got five years or longer before you need your investment reserves, an index mutual fund may be the first, last, and even only investment you need.

Supersize it: The path to market-beating returns is paved with great company stocks. Once you have a sense of the basics, start evaluating businesses to see if you have the Buffett touch.  And remember, your goal when investing is to keep fees in check by not overpaying to trade or trading in and out of stocks too often.

Re-evaluate: Take stock of your savings on a regular basis -- at least once a quarter if not once a month.

Foolish personal finance expert Dayana Yochim is the author of The Motley Fool's Guide to Couples & Cash.


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  • Report this Comment On June 18, 2008, at 10:24 AM, pondee619 wrote:

    "If you know you're not going to touch the money for the next six months or longer..."

    This would be cash over and above our emergency fund cash stash? Would have to be. How will I know I won't have an emergency within 6 months? How much cash should one have?

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