I’m Holding on to Too Much Cash – Will I Regret it?

Too Much Cash

 

I’ve reached the point with my finances where I have options. While I can’t have everything, I can have anything if I set my mind to it. And while I lean to be more conservative with my spending habits, I do love nice things. I always have. Even while I was growing up in a house-poor household with maxed out credit cards, I wanted a Louis Vuitton. Now, I had no idea how money worked, and the important difference between saving and investing.

Where My Savings/Investments Go

Currently, I contribute $1,211/ every two weeks (or 26 times a year) to my brokerage/Roth and $500 to my HYSA. Meaning every paycheck I’m saving almost 30% as cash. This doesn’t include money I fully intend to spend, like for the holidays, my cat, or a vacation.

Right now, cash is sitting at 21% of my NW. With my current rate of contribution, cash will ultimately reach 24.4% of my NW before decreasing- assuming I don’t spend any of it.

But that’s just it, I do plan on spending this money. Just not at Sephora. hah.

Big Life Events

I call this my “Big Life Events” Fund. The general rule of thumb is if an event is >5 years away, don’t put it in the stock market. And, while I don’t plan on buying a house in less than 5 years, I do if the market retracts. And if the market goes down and my savings for a house is in the market, well, there goes my savings until the market recovers.

I want to be prepared for if/when the market takes a nose dive.

I also want to be prepared for:

  • An Emergency (duh, some of this money is my emergency fund)
  • My annual max out of pocket
  • A new-to-me car in ~2 years
  • A potential down payment on a house
  • Replacing my laptop (even though I’m kind of saving elsewhere)
  • A pet emergency
  • I have really bad teeth, over my life I’ll need ~$40k in dental work
  • A Loss of job
  • Taking time off of work if I burn out
  • etc.

For me, there is no Plan B if I lose my job. There is no safety net other than the one I create to catch me if I fall.  I was very poor once upon a time, but I won’t let it happen again.

What Cash Makes me Lose Out On

I save $13,000 in cash a year (if everything go according to plan [it doesn’t]). On this $13,000 I make 1.085% currently.

Over a decade, if I were to invest it I would come out with $192,000 at 7% return. By saving it, I would come out with $144,000, or a difference of $52,000.

$52,000 is a lot to lose out on over a decade. $52,000 could be one year earlier of committing to FIRE.

But one year earlier doesn’t compensate for a cash security net right now. Perhaps once I get to a certain number and have a more reliable care I’ll invest more of it. But for now, I’ll stay a little cash rich.

How much cash do you hold on to?

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