Ok, so with all the economic indicators out there I see two reasons to start accumulating cash. One in a few years when the housing market begins to turn around there are going to be extremely excellent opportunities to get into a house you probably couldn't even begin to afford a few years ago. On this same line, why not start your real estate investment business and pick up a few rental houses at a greatly reduced rate in an environment where rents are still strong. I think the demand for rental units will rise over the near and long term. One because of the foreclosure market people are going to be looking for places to live, second hopefully banks won't make the mistake of lending to people with extreme debt to income ratios maintaining the rental demand. I don't think I am alone in this since several banks and funds are buys beginning to buy billions of dollars in property over the next 3-years in recessed housing value areas.
Second, the employment outlook isn't that great so ensuring your emergency savings is ready to carry you through any unforeseen emergencies would be a wise decision. 3-6 months of take home pay in a high-yield savings account is a smart way to do this. You won't feel like you have a good chunk of change sitting somewhere not making you any money. At 5-6% safe returns, on-line savings accounts aren't a bad thing. Even if you have a great job, let's say your a high-paid contractor type. There is nothing preventing your contract from expiring without the need for your "option" years and not knowing that until a day before the contract ends. Having a few months take-home pay on hand will help alleviate the stress and give you the necessary time to find that next contract. Also, always contribute at least what your company is matching to your 401K. Don't ever turn down a 100% return on investment. Finally if you are able to contribute to a Roth IRA do so. In the case you need more cash you can withdraw your contributions without penalty, not the interest earned, but your yearly contribution amount. See your accountant for more details.
Plus having some cash on-hand sets you up to be able to buy when that next VM Ware comes along!
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