Cash Buffers

Hmmm......actually the title may not be 100% correct, but I was curious to what degree others kept 'cash buffers' to cover life's unexpected moments.

I guess 'reducing risk' is undertaken in a multitude of ways such as carrying various insurances, levels of Margin Loans, care taken in property purchase prices etc., but to what scale/degree do others keep 'cash' or extemely liquid assets as a percentage of their portfolio?

This will probably depend on where you think we are in certain cycles, your age and what other financial outlays you think you may have in the near future, but after doing a couple of figures, I think I would like to slightly increase my 'cash buffer' over the coming months.

What are some of the general 'yardsticks' others use?

For example, I was talking to someone the other day and they keep a fixed percentage of their total borrowings in an offset account as cash. Others use other 'yardsticks'.

If indeed you have 'cash buffers', what do you use?

 

I have no significant cash at any time, but always have something liquid. I don't have set formula, but enough to make me feel comfortable. Doing some quick maths right now and that seems to be about 5-10% of net assets, or about 5% of debt, or about 1 years income (rent + PAYE). Hey, maybe I do have a formula just didn't know !

Liquid for me is re-draw on loans, non-deductable then deductable. Having some assets available in a few days (like Navra Units) is sort of liquid, but I don't rely of this as do not want to be in position to be forced to redeem.

 

I always have a buffer in an LOC specifically set up in case of a deal that falls across my lap that's too good to be true (or else I've worked damn hard to find!), to use as a deposit. Also useful to be able to access cash at short notice, for any number of scenarios. Amount depends on which property I've drawn down on

 

I keep app. $30k in an Offset account as a buffer.
Wouldn't want to be put in a position where I'd have to sell assets, such as NI units, at a bad time.
It's enough to cover any minor hickup like no tenenats in a property for a couple of months, which has happened or unexpected bills ect.

 

What I generally aim for is about 12 months of expenses (living and investment related) for clients. Mine is significantly smaller, but I don't have too many borrowings at the moment. But yeah, when I get there, I plan to have at least 12 months worth sitting aside. That's on top of insurance. But then I'm a fairly conservative person who doesn't like a bumpy ride when it comes to finances.

Mark

 

Yep.......I think the 'buffer' is a important component.

Let's face it.......if we've spent a lot of time learning more about investments..........we've been through various cycles.........we begin to accumulate some assets........I for one would like to keep a reasonable proportion of them as it hasn't necessarily been all clear sailing and without certain risk/effort!