Are there simple guidelines used by sizeable organisations that we may adopt to reduce our stress and increase our stability?

You should know banks around the world are required by their respective national regulators — Bank Negara Malaysia, in our case — to hold specified minimum reserves at all times to ensure the financial health of the entire banking system.

Not surprisingly, well-run companies also maintain sufficient cash reserves in their bank accounts or equally liquid money market positions within their investment portfolios to tide them over tough times such as bouts of decelerating GDP growth, moderate recessions or — rarely — deep economic depressions.

You and I would be wise to emulate those large organisations’ prudent establishment of appropriate cash reserves. If you’re employed, chances are high that you are conditioned to receive your salary on the same day each month. If so, how stressed you would be if your pay were delayed by a day or two?

Just slightly, right?

But what if that salary delay stretched to a week or two? Or a whole month? Would you be irritated but still financially solvent? Or would you grow angry, anxious and apprehensive with each passing day because you know you would soon have to take out a pricey personal loan or a more expensive credit card cash advance to tide you over? If you’re even contemplating a visit to your unfriendly neighbourhood loan shark (ah long), let me tell you point-blank and in triplicate: Don’t! Don’t! Don’t!

If you disregard my professional advice, your family may regret your misstep for decades to come. So don’t! My advice stands not only for employees but for everyone: Avoid those vampiric parasites that suck the economic lifeblood out of their victims.

Moving on, what if you are not employed but rather run your own business? What then might happen if your customers or clients decelerated their purchases because of tough times or due to a change in tastes or trends? Or what if they keep buying from you at the same pace as before but take longer and longer to pay you?

You don’t need to be a qualified accountant to predict you’ll soon face severe cash flow constraints. In my case, about 20 years ago during the Asian Financial Crisis, a national magazine publisher that kindly kept accepting my regular writing began s-t-r-e-t-c-h-i-n-g out my payments! At its worst I had to wait 11 months to be paid for a column published the preceding year.

Thankfully, I was never cheated out of a rightful payment, for which I’m grateful; I merely had to develop extraordinary patience during that terrifying crisis.

These things happen because of occasionally weakening currencies, constantly rising prices, and unpredictably depressing natural or national calamities. So, in a world where we can control some things but can’t control others, what should we do?

Delayed gratification

As I said at the start, if individuals were to emulate banks and solid companies by establishing adequate but NOT excessive cash reserves, they would be acting wisely.

Note: As with all other aspects of life, too much of a good thing (like, say, sugar, holidays and physical exertion) can be bad. Setting aside too big a cash reserve stunts your future investment returns because cash, being the least volatile, safest asset class yields the lowest long-term returns, often under the official inflation rate (as measured by the CPI or the Consumer Price Index) and almost always way below your personal inflation rate!

So ensure you have enough cash in reserve but not too much! You see, your goal should be personal stress reduction; your tool the self-control required for delayed gratification.

Delayed gratification is the single most important personal discipline separating life’s winners from its losers. It means giving up good things today in anticipation of affording better, greater things tomorrow.

Most people can’t do it. But if we steel ourselves to exercise sufficient delayed gratification, we will spend less than we earn each month. The irrefutable laws of arithmetic then generate for us consistent monthly cash flow surpluses.

Importance of cash reserves

In last week’s column I elaborated on three different personal reserves that I believe will go a long way towards reducing stress, fear, and anxiety. They are our:

1. EBF — Emergency Buffer Fund

2. EMF — Emergency Medical Fund

3. EW or EP Reserve — Emergency Wallet Reserve or Emergency Purse reserve

In case you missed it, you may read Rational Reserve Rules at

Please understand that no one is likely to come and rescue us when things get tough. (Confession: I believe in the power of prayer; but expecting God to bail us out endlessly because of systemic and systematic mismanagement on our part is, I suspect, foolish.) So use this final week of the calendar to decide on actions you can take to make the coming year a better one for you.

To all celebrating Christmas, remember the Reason for this Season as you articulate your love for others and give presents that genuinely resonate with them. As one possible gift idea, why not teach your friends and family members the absolute importance of reserving cash even as the tattered remnants of 2017 fade away, and the pristine billowing sails of 2018 beckon us onward to fabulous, exciting new adventures?

© 2017 Rajen Devadason

Read his free articles at Connect on,, and Twitter @RajenDevadason

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