The March 4, 2008, New York Times ran a great article called Unlike Consumers, Companies are Piling Up Cash. Apparently, corporate balance sheets are the brightest spot in the economy right now. Some companies have enough cash on hand to pay off all of their debt. They don’t have to, because they bought the debt cheap. Cheap debt and large cash reserves give the companies tremendous flexibility.

Among other reasons, companies are saving their money as a protection against rising risks. Competition is tougher than ever before, and the economy itself is either in a recession or teetering on the brink of one. Cash makes a company more agile, better able to adapt to changing conditions.

But look at the headline again – specifically the words “Unlike Consumers.” With our negative savings rate, the American people have decided to emulate our government instead of our employers; we borrow against presumed future income rather than save money to build wealth for a rainy day. But rainy days do come. If I could get one idea across to people young and old, it would be this: SAVE YOUR MONEY!

I don’t recommend stuffing cash into a mattress; I’m a big believer in putting one’s money to work, with a goal of personal solvency. Personal solvency creates choices; the ability to start a business or get your existing business through tough times, or to leave a job you hate to try something new.

For those who decry the accumulation of wealth as inherently immoral, I recommend a fascinating New York Times article called The Moral Instinct, which asks why society tends to revere Mother Theresa but revile Bill Gates, when he has already done so much more to alleviate suffering. 

Perhaps Gates’ smugness does not fit our stereotype of a moral individual? There are few things that better build confidence – and protect one’s integrity – than money in the bank. Solvency gives you more power to live in accordance with your principles – that’s justified smugness.

Need strategies for saving money? Here’s an amusing article by photographer/blogger Ken Rockwell, called How to Afford Anything. Some people are put off by Ken’s style, and I don’t agree with everything he opines here, but the gist of his article, that frugality is the key to wealth, liberty and happiness, is dead on. Benjamin Franklin said that when you borrow money, you give power over your life to someone else. American companies are accumulating cash to preserve their freedom. How about you?