Today is the last day on the contract gig. This placement was something different for me. Not only was it in a not-for-profit but it was in Treasury (my usual strength is new business development).
What did I learn over these past 6 months?
1. Cash Flow Is King.
The first thing I did every morning was check the cash balances in all the accounts. I’d look at the transactions for the day, compare them to the same day last year, ensure we had cash for the outstanding checks, and invest any excess money.
Application To Personal: I now also check my personal bank accounts every day. I look at upcoming expenses and make sure we have enough cash to cover them.
2. There Is No Lazy Money.
Any excess money the company had would be invested, even if it was in a high interest yielding account for a single day. That single day’s income was immaterial but added up over the year, it came to millions of dollars.
Application To Personal: High yield interest accounts are available to personal investors. Although we need to be more aware of fees, we can use them to take advantage of the timing of cash flows. Our emergency funds should be relatively safe but still invested.
3. The Past Predicts The Future.
One of the “cheats” to predicting future cash flow was to look at the past. I did this by overwriting the previous year’s daily tracking with this year’s numbers. That way, I could see the revenues and expenses for up to a year ahead.
Application To Personal: I keep my bank statements from year to year. Why? So I can scan them for any upcoming expenses (or less likely revenue) that I might have forgotten about. I can see that December is a big spend month. I can see that we have a big insurance payment in June.
4. Investments Are Matched To Timeframes.
I had a few vehicles available to invest excess money (this was set by the Board). I had the high yield savings account for the very short term, bonds and T-Bills for the medium term and money market funds (due to risk and fees) for the long term. Where I invested depended on how soon the company would need the money.
Application To Personal: Personal investors can use the same three buckets with the addition of stocks to the long term, matching risk to timeframes.
5. Rebalance Regularly.
In the funds, the Board had a set allocation between local, global and other money market funds. It was monitored daily and reported on monthly. When global exceeded the allowed range, money was re-allocated to local.
Application to Personal: Although I don’t reco this being locked in (as the corporate allocation was), having a goal allocation between different asset classes reminds investors to sell high and buy low.