Cash can be easy to overlook.
When markets are moving or interest rates are changing, it’s common to wonder whether holding a larger cash balance still makes sense.
I had a conversation recently with someone who was holding a significant amount in cash and wasn’t sure if it was still appropriate.
The question wasn’t simply:
“Should this money be invested?”
It was:
“What job should this cash be doing?”
That distinction matters.
Cash is not always idle money.
Used intentionally, it can be a strategic part of a financial plan.
It can support emergency reserves, near term spending needs,upcoming purchases, and retirement income planning.
The challenge is finding the right balance.
Too little cash can create stress when unexpected expenses arise.
Too much cash can create opportunity cost if money that could be working toward long term goals remains on the sidelines.
A good cash strategy usually starts with purpose.
What money is needed in the next 6 to 24 months?
What should be available for emergencies?
What should remain invested for longer term goals?
The answer is different for everyone.
A retiree drawing income from a portfolio may need a different cash strategy than someone still working and saving aggressively.
A business owner may need more liquidity than someone with predictable income.
Someone uncomfortable with market volatility may also benefit from a larger cushion, as long as it fits within the broader plan.
Cash can also play an important role during market downturns.
Having a defined reserve may reduce the need to sell investments at an unfavorable time.
That does not mean avoiding market risk entirely.
It means creating flexibility so short term needs are not overly dependent on short term market performance.
For individuals and families, the right level of cash should be based on goals, time horizon, spending needs, and comfort with volatility.
The goal is not to hold as much cash as possible.
And it is not to invest every available dollar.
The goal is to make sure each dollar has a purpose.
Because when cash is tied to a clear strategy, it can provide more than liquidity.
It can provide confidence.
Together, we can work to keep you on-track toward your financial goals.
Request a consultation to learn more.
Read more articles by Ryan Johnson