Safely build your cash and other smart cash strategies

After more than a year of difficult financial markets and an overall sour economy, many investors are seeking the safety of cash. Even though interest rates are low and you won't earn a high return, it's still important that you have enough cash on hand for emergencies and for funding goals you want to reach within the next five years. Here are five smart cash management strategies to discuss with a professional financial advisor:

1. Invest your cash based on how you'll use it.
The type of accounts you choose should be based on how your cash will be used. It's helpful to think about your cash in three categories:

• Everyday cash — This pays your daily expenses. Consider checking or savings accounts, which are easy to access and are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 for accounts held by an individual, and higher for jointly held or trust accounts. Some brokerage accounts also offer FDIC-insured accounts from which you can pay your everyday expenses.
• Emergency reserves — These are really important, because they are your back-up in case of a job loss or unexpected emergency. Conventional wisdom is to set aside three to six months of living expenses, but in today's economy you might want to save even more. A portion should be invested in guaranteed accounts that you can get at easily, but the rest should be directed to potentially higher-yielding accounts, like FDIC-insured Certificates of Deposit¹ (CDs) or money market deposit accounts.
• Savings and investments — These dollars fund near- and long-term goals and may be held in FDIC-insured CDs or IRA retirement accounts. Other options to consider are guaranteed fixed annuities, and Treasury securities which — while not covered by federal deposit insurance — are backed by the U.S. government.

2. Explore refinancing options to improve your cash flow.
Interest rates are at historical lows, so now may be a good time to secure a low, fixed-rate loan and reduce your mortgage expense. Refinancing might leave you with more money to invest or add to your cash reserve.

3. Take out a Home Equity Line of Credit² (HELOC).
A HELOC can help you consolidate debt and offer a back-up credit line in case of emergencies. Look for offers where the lender pays closing costs and offers low introductory APR. There is also a potential tax benefit associated with a HELOC.

4. Reduce or eliminate "bad" debt.
Pay down or eliminate high-interest credit cards. If you can't pay them off right away, transfer your balances to a card offering low interest rates and a fee-free balance transfer. Also consider a HELOC, which offers low rates and a potential tax benefit.

5. Don't become too conservative as you save for retirement.
It makes sense to add some guaranteed investments to your retirement plan. But, depending on when you plan to retire, it's important that you keep a portion of your retirement savings invested in the markets. Learn more about how you can start rebuilding your retirement plan.

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Today's economy calls for a new conversation about your finances. Request a complimentary New Perspective review with an Ameriprise financial advisor and you'll receive a complimentary review of your financial situation plus practical steps you can take now to move ahead with confidence. There's no obligation to purchase any products or services.

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