strategic consultant to:  

~ serial CEOs & CTOs in software, Internet, technology & digital media
~ experienced consultants in all fields to maximize their practices

I was thinking about money and freedom when I heard an NPR interview with Merle Haggard, the country music legend, now 72, talking to NPR’s Steve Inskeep about hopping freight trains in his youth.

“I rode a freight from Oregon back to Bakersfield — that’s over a bunch of mountains,” Haggard says. “It was wintertime — there was snow and there was ice and two others hobos and me crammed down into an ice compartment of an old refrigerator car, looking at each other with nothing to say.”

Inskeep asks, “What did you learn from that?”

“Take enough money to ride a bus,” Haggard says, laughing.

I laughed out loud too. When I was 16, I headed out of the house one day to run an errand on my motorcycle. My father looked up and asked, “Do you have money?”

“Sure,” I said, “what do you mean?”

“Always carry at least $100 in cash in your pocket.” Back then that was a lot of cash.

“O.k.” I said. “But why?”

“You can’t bribe a policeman with a credit card,” he winked.

I have never left my house without at least $100 in cash since that day.

This got me thinking about the freedom a little cash can bring. My Daddy wanted me to be able to get out of trouble on my own. And I applied this going forward into my business. One of the ways to survive economic upheavals we cannot predict or control, is to have enough money for the bus. Merle Haggard would have been warmer, even if he had lost that story. My flexibility to choose my clients (and work only with the most promising entrepreneurs) would be restricted if I didn’t have savings to smooth the regular tech downturns and general recessions.

Since my Daddy taught me this lesson, I have always maintained a cash buffer against trouble. Of course, the only way to build a cash buffer is to build it – to begin the discipline of putting some cash out of your own hands where it can work for you, whether you are young and not thinking about such things, or rebuilding your retirement account or business that just got eaten by the current economic crash. Certain savings (retirement, profit sharing, educational savings) give you significant tax breaks.

So here are some resources about savings, cost of debt, and compounding interest that might get you on your way.

Put an initial $100 into a savings account that compounds monthly at only 3.5% (a rate that will go up in time, again), add $100 each month for 10 years, and you will create more than $14,000 in savings in 10 years. In 20 years, that ongoing deposit will create nearly $35,000.  As interest rates rise again, so will these savings.

Use this calculator for understanding interest on simple savings, and other parts of this site for learning about mortgage interest, home equity, refinance, and auto loans.

Of course, there are more sophisticated methods for growing your buffer money, using advisors and money managers and brokers, but that is a long discussion for another time.

Finally, call your business accountant for a meeting to review all the ways you can save on taxes while creating a cash buffer. If your accountant is simply a tax preparer or bookkeeper, find a CPA who is specializes in small business planning as well as taxes.

The time to start is now.