The Risk of Holding Too Much Cash & What to Do About It

The risk of holding too much cash

Too Much Cash?!

Yes, it’s possible.

Much like any time I sit down with a spoon and a pint of Ben & Jerry’s, the same holds true with cash… You can, in fact, have too much of a good thing. When it comes to the ice cream, I always do. When it comes to your cash, we want to help you avoid “overindulging”. 

Of course, cash has its benefits:

  • Security
  • Financial flexibility
  • Easy access to your money

Even so, there’s a very real tradeoff. What you gain in safety, you give up in potential growth and progress toward longer-term goals.

Risk #1: Inflation

As we all know too well, stuff gets more expensive over time – except, of course, for the Costco hot dog. One dollar today doesn’t buy what it did 20 years ago. This is the handiwork of inflation. It erodes the real value of money through the years, reducing your “purchasing power”.

The graph below shows year-over-year inflation during the last decade.

12-month percent change in CPI-U over the last 10 years

Source: https://www.bls.gov/ 

Even now, with inflation cooling, prices were 2.4% higher in February of this year relative to February 2025. 

If your dollars aren’t growing at a rate that outpaces inflation, you are losing money in terms of actual spending capacity. An account balance of $100k 30 years from now won’t do nearly as much for you as it would today.

In fact, going off inflation data for the last 30 years, it would do about HALF as much! To buy the equivalent amount of goods and services with $100k in 1996, you’d need $211k today (based on this CPI calculator).

Thanks, largely in part, to the post-COVID spike, the average annual inflation rate over the 10-year period between the start of 2016 and end of 2025 was 3.2%. The Federal Reserve has a target inflation rate of 2%. So even in “the best of times” prices are still expected to go up.

Cash vs. Inflation, an Example

Let’s take a look at what inflation would have done to even a relatively favorable cash position over the last 10 years.

The State Street SPDR Bloomberg 1-3 Month T-Bill ETF (BIL), as the name indicates, invests in Treasury bills with maturities of 1-3 months. Because T-bills are issued by the US government, they’re considered to be nearly risk-free and are a “cash alternative”. 

We’ll match that up to the overall US stock market, using the Vanguard Total Stock Market Index ETF (VTI). Specifically, we’ll view the performance of these two funds for the 10-year period from 1/1/2016 to 12/31/2025.

Assuming that dividends were reinvested, the overall return for each of these funds during the stated period was:

  • BIL: 2.04%
  • VTI: 14.25%

Here’s what that looked like:

VTI vs. BIL Nominal

Source: https://totalrealreturns.com/

If you were in search of safety for your money, BIL would have done well preserving your capital while earning some interest. $10,000 would have grown to $12,236.59. This is roughly what your cash would have done had it been sitting in a high-yield savings account during that stretch.

However, there’s one (now hopefully obvious) flaw here. The 2.04% overall return is before accounting for inflation. The returns above are what we call “nominal”. When we adjust for inflation, we work with what’s called the “real” return. 

So here’s how those funds compare over the last 10 years with inflation (CPI-U) baked in…

Real Return

  • BIL: -1.12%
  • VTI: 10.71% 
VTI vs. BIL Real Return

Source: https://totalrealreturns.com/

In terms of what your money could actually do for you, it would have lost value if left in BIL for 10 years.

If that same $10,000 was collecting dust in a checking account or traditional savings account, earning 0% to 0.05%?? Forget about it.

Risk #2: Longevity

At this juncture, some people out there may wonder, “What’s so bad about losing just ~1% over 10 years? At least my money wasn’t subject to big swings in the market. In the end, I barely lost any purchasing power.”

Well, sure. But it’s a simple fact: the longer you want (or need) your money to support your lifestyle, the more of it you need to have. So the growth rate of your assets over time directly contributes to the length of the runway you build up for yourself.

This isn’t to say you should go full throttle on the most aggressive investments you can get your hands on. There’s a wonderful world that exists between the extremes. But it underscores the importance of taking a risk-appropriate approach to growing your wealth so that you set yourself up for the best chance of success in realizing your ideal future state. 

What is the RIGHT Amount of Cash to Hold?

To determine the “right” amount of cash…

  1. Calculate your Emergency Fund need
  2. Evaluate any short-term goals (new car, vacation, home project, etc.)
  3. Add these together and voila!

We recommend keeping these funds tucked away in a high-yield savings account. To take it one step further, we favor using an option like Ally that allows you to create “buckets” within a single account. That way, you can easily categorize the savings and always know exactly what each dollar is set aside for.

And bear in mind, the point of this cash is NOT to be a growth engine in your plan. Rather, it DOES…

  • Cover you when something inconvenient inevitably occurs
  • Help prevent the need for taking on higher-interest debts (credit card balances)
  • Allow for quick and easy access
  • Avoid market losses

OK, Now What?

Once you’ve established the optimal cash balance to keep on hand, it’s time to create a plan for the rest. One benefit of getting clear on your cash need is that it frees you up to take on more risk (appropriately) with other resources, creating more efficiency all around. Having adequate cash set aside increases your plan’s risk capacity. In other words, with your bases covered, you are in a position to handle greater risk in the accounts geared toward your long-term goals.

In short, that “extra” cash is ready to be invested. 

Similar to what you did above, ask yourself: What is the purpose of these surplus funds? What will they ideally do for you? Additionally, consider the anticipated timeline before you expect to access them.

Addressing these points will guide what type of investment account those resources go into and how much risk you can reasonably take on when they get to work. For example, money tagged to help support your retirement at age 60 makes sense going into a Roth IRA, where it might be allocated to 100% equities. Funds that will be used to help with a down payment 6 years from now are not as well-suited in an IRA, nor should they be invested so aggressively. Those will serve you better in a taxable brokerage account, with a more conservative approach.

Cash plays a critical role in your financial plan. Yet, it pays to understand its limits and what to do if you can identify any excess. 

Frequently Asked Questions for Cash

Q1: How much cash is too much to keep in savings?

You may be holding too much cash if you’ve already set aside enough for your emergency fund and any short-term goals, but still have a large amount sitting in checking or savings with no clear purpose. Cash is useful for flexibility and protection, but too much of it can quietly slow your long-term progress if it isn’t keeping up with inflation.

Q2: Why is holding too much cash a problem?

The biggest issue is that cash often loses purchasing power over time because of inflation. Even if your account balance stays the same, or grows a little, the real value of that money can decline if prices rise faster than your interest rate. Over long periods, that can create a meaningful drag on your financial plan.

Q3: Is cash losing value because of inflation?

Yes. Inflation reduces what your dollars can buy over time. That means money sitting in cash may feel “safe,” but if it isn’t earning enough to outpace rising prices, it is losing real value in the background. This is one of the main reasons excess cash can become costly over the long run.

Q4: Where should I keep my emergency fund?

Your emergency fund should usually stay somewhere safe, liquid, and easy to access—typically a high-yield savings account. The goal is not maximizing return. The goal is making sure the money is available when you need it, without taking market risk.

Q5: Should I invest money instead of leaving it in cash?

If the money is not needed for emergencies or short-term goals, investing may make more sense than leaving it idle in cash. The best place for that money depends on its purpose and timeline. Money needed soon should generally stay conservative, while money for long-term goals like retirement can usually tolerate more investment risk.

Q6: Is a high-yield savings account enough to beat inflation?

Not likely. A high-yield savings account can help reduce inflation drag compared with a traditional checking or savings account, but it won’t consistently outpace inflation over long periods. It can be a great tool for cash reserves, but it usually shouldn’t be your primary strategy for long-term wealth building.

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Fiduciary, fee-only, Certified Financial Planner, Eddy Jurgielewicz

Eddy Jurgielewicz, CFP® is a Partner and Lead Financial Planner at Upbeat Wealth, a fee-only firm based in New Orleans and serving clients virtually across the country. He specializes in providing straightforward financial guidance to ambitious young families as they navigate life’s many milestones.

Do you have questions about what we shared in this post, or anything else in general? Feel free to schedule a free consultation or drop us a line!

Sign up for our newsletter (at the bottom of this page) to stay up to speed on our Upbeat Insight.

Disclaimer: All content in this article is provided for educational, general information, and illustration purposes only. None of the information is intended as investment, tax, accounting, or legal advice. Nor is it a recommendation for purchase or sale of any security, or investment advisory services. We encourage you to consult with a financial planner, accountant, and/or legal professional for advice on your specific situation. Read our full disclaimer here.

What is Enough?

What is enough?

What is "enough"?

There’s nothing like a major life milestone to bring on a spell of deep reflection. Since having our daughter a few months ago, I’ve really been chewing on the question of, “What is enough?”

I’ve been asking myself questions such as:

  • What do I need in order to feel fulfilled in my day-to-day life?
  • What are the experiences that fill my cup?
  • How do I want to allocate my time?
  • What is it that I value most?
  • What does this look like today? Next year? 20 years from now?

Sorry, folks, but this one might leave you with more questions than answers (not that I claim to have all that many to start with). Maybe that’s the point?

Enough is elusive

It’s at the core of any real financial planning endeavor. Yet it has a way of eluding many of us. If we are fortunate enough to fully wrap our minds around the concept one day, it’s likely to shapeshift and escape our grasp not long thereafter, leaving us searching once again for an accurate description of what breeds true contentment in our lives.

It’s almost never a simple question to answer. It makes sense, though. Life is far from linear. People evolve. Circumstances change. 

Then there’s the fact that it’s different for everyone. No one can tell me what enough is in my life, just as I can’t tell anyone else what enough is in theirs. Though, as a financial planner, I get to have a lot of fun with gently nudging people to find their answer.

Is enough a number?

I think not.

At least, it’s not the best place to start. Sure, a number is necessary to punch into a financial plan. We need to have that data point as a goal to shoot for, so we know how to build our resources up to it. But what is it that the dollar figure represents? What does it do? What is the significance? What will that money be in service of?

Because the reality is this: a number, alone, is void of any meaning. 

A common “enough” question revolves around the idea of retirement. Most people we work with ask some version of the question, “How much money do I need to stop working for a paycheck one day?” 

I just typed into Google, “How much money do I need to retire?”, and the AI Overview told me:

“A common benchmark is to save 10–12 times your final annual salary or aim for a portfolio that allows you to withdraw 4% annually. For many, this means a total nest egg between $1 million and $1.5 million, though this varies heavily based on location (e.g., $700k–$2.2M+ in the US) and lifestyle.”

Great! In reality, this largely tells me nothing. Obviously, blanket guidance is rarely all that helpful in specific scenarios. But this is a stark example of that. Sure, it’s better to build up $1 million than $0. Nonetheless, the numbers provided are empty. As would be my response if I attempted to answer a person’s “how much do I need” question before doing the real work of learning what truly matters to them.

The point is, I can’t begin to tell someone how much money they need if I don’t yet know what that money is meant to be in service of. Life is not purely numbers. 

This is why, at Upbeat Wealth, our initial planning process includes an entire meeting dedicated to learning about the values of the family we’re working with before we begin offering recommendations.

How do you know when you have enough?

You don’t usually get in the car without knowing where you’re driving to. Unless, of course, you’re an angsty 17-year old Eddy in his ‘96 Crown Vic, blasting The Eagles, windows down, going wherever the road would take him, finding peace in nothing more than the warm southern summer wind and that freedom that only a few bucks of gas can buy… Ok, digression done. You can’t make it to a destination unless you have one to begin with.

Here’s the thing, though: money, on its own, makes a terrible goal. Winning the lottery, getting a big inheritance, landing that promotion, finishing first in your high-stakes fantasy football league… None of those are sufficient if you haven’t done the real work first. You have to first understand what purpose the money will serve in your life.

Ok, now you might be thinking something like, “I’d sure feel like it was enough if I was making triple my current income!” (and not gonna lie, that does sound nice). Still there’s a ton of research out there that remains generally mixed. 

An older study from 2010 by Daniel Kahneman indicated that emotional well-being increased as income rose to $75,000 and then basically flatlined from there. In 2021, Matthew Killngsworth refuted this and determined that well-being did rise with income even as it exceeded the $75k mark. Interestingly, hold the phone, the adversarial dynamic duo later teamed up in 2023 and found a more nuanced result. They saw that, generally, higher incomes were associated with higher levels of well-being for many people. However, for people classified as “unhappy”, higher incomes did little to improve their overall level of happiness.

My takeaway is probably overly simple, but I can’t see a way around it: “Happy” people have figured out how to align their resources with what’s important in their lives. If you’re “unhappy”, more money, alone, is not a magic bullet. And if you’re “happy”, having more money increases your ability to fill your life with even more of what brings you satisfaction.

Someone might earn what’s considered a “good” salary. At the same time, if that income isn’t used intentionally to align with the person’s values, it is essentially worthless. It comes and goes. 

You could have millions set aside. Yet, what is that money really worth if you don’t have a clear definition of what enough is in your life? 

Don’t skip the critical first step: Get clear on what’s important to you and your life. Find your destination.

To answer the question, my best guess for how you really know when you have enough… I wager it’s more of a feeling than anything you can put your finger on.

If your money could talk, what story would you want it to tell?

Here’s a thought exercise I’ve been toying with… I personify money and ask the question: “At the end of my life, what will you have done for me over the years?”

What story would I want Money to tell me in response?

Immediately, I know I wouldn’t want Money’s first words to be anything like: 

  • “I grew to such-and-such balance across all of your accounts”… 
  • Or, “I compounded at an average annual rate of x% over your lifetime”…
  • Or, “Y% of me was allocated to tax-advantaged and tax-free accounts”… 

There’s no emotion in any of that. It sounds a little empty.

Because it’s not about Money. Money is simply a facilitator. It’s the outcome that matters, the life that’s lived.

I would hope to hear something raw. Something with teeth to it. Something that moves me. I’d want Money to tell me a tale that makes me smile. The kind of smile that grows deep inside and extends to every corner of my heart. It’s a story I’d yearn to hear time and time again. That story is beyond the scope of this post…

If you put Money in the hot seat, what would you hope to hear?

So what is enough for me now?

My current version looks something like:

  • Spending time with my wife and daughter
  • Seeing a smile on their faces
  • Supporting my wife’s dreams and ambitions
  • Raising my daughter to see the best in herself and be a positive force in the world
  • Sharing time with our loved ones and friends
  • Experiencing new places, cultures, and ways of life
  • Getting outside into nature on a regular basis
  • Prioritizing my physical and mental health through an active lifestyle
  • Having flexibility in how I distribute energy between my family and my business
  • Serving client families that inspire me
  • Being generous with my time and resources so that I can have a positive impact on others in my community

That list right there. That’s my north star. Or as we call it here at Upbeat Wealth, my Statement of Financial Purpose. It’s an ever-changing work in progress, and that’s ok with me because I want it to always represent what’s most important to me in the moment.

If I’m doing it right, my money – my financial plan – will only ever be enough if it facilitates those things above.

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Fiduciary, fee-only, Certified Financial Planner, Eddy Jurgielewicz

Eddy Jurgielewicz, CFP® is a Partner and Lead Financial Planner at Upbeat Wealth, a fee-only firm based in New Orleans and serving clients virtually across the country. He specializes in providing straightforward financial guidance to ambitious young families as they navigate life’s many milestones.

Do you have questions about what we shared in this post, or anything else in general? Feel free to schedule a free consultation or drop us a line!

Sign up for our newsletter (at the bottom of this page) to stay up to speed on our Upbeat Insight.

Disclaimer: All content in this article is provided for educational, general information, and illustration purposes only. None of the information is intended as investment, tax, accounting, or legal advice. Nor is it a recommendation for purchase or sale of any security, or investment advisory services. We encourage you to consult with a financial planner, accountant, and/or legal professional for advice on your specific situation. Read our full disclaimer here.

Comparison: The Thief of Joy & a Monster Without Context

Comparison: The Thief of Joy and a Monster Without Context

Two of the most helpful financial tools out there might just be:

  • A pair of earplugs
  • A set of blinders

Hear me out… 

The Thief of Financial Joy

The idea that “comparison is the thief of joy” deeply resonates when it comes to how a lot of us think about money and wealth, especially in a world that grows more connected by the minute. All we have to do is open our phone, and almost instantly we’re likely to be reading about or looking at someone else’s beautiful life, thinking “wow, they have got it made in the shade”. 

We all do it to some degree. I like to think I’ve gotten better at recognizing and limiting it with age. Nevertheless, it’s dangerously easy to stack ourselves up against everyone else we encounter. There must be something evolutionary about mentally calculating whether we have the leg up on another person or vice versa. And we come to all sorts of conclusions based on a long list of information we subconsciously gather… What car does she drive? Where does he shop? What kind of house do they live in? How do they travel? And on and on… 

There’s a Lot of Bull💩 Out There

But the truth we all know, and simply need to be regularly reminded of, is that things are not always what they seem. The grass is, in fact, NOT always greener on the other person’s side of the fence. Maybe now more than ever, in our influencer age, there’s a lot of B.S. and heavy smoke screens out there. Virtually everyone is trying to present themselves in a very curated way.

Comparison + a Lack of Context = Monster

Sometimes we might have the whole picture and can make a fair assessment of what’s being presented. Where comparison can really send the mind spiralling, though, is when we don’t have the full story. Lack of context can unfortunately open the door for one’s imagination to fill in the blanks.

A client recently shared a story with me that highlighted just how this can play out…

An Unimaginable Loss

During our meeting, she told me about a conversation she’d had with an acquaintance a while back, in which he disclosed that he’d “LOST $250,000 in an investment account”. While the guy revealed this information rather calmly, my client was floored by the thought of this staggering and sudden loss in wealth.

And she brought this up with me because it was influencing how she felt about her own investment strategy… Fueling a growing nervousness about the stock market. In her mind, there’s NO WAY she could stomach losing $250,000. The idea left her terrified.

So I asked two questions:

➡️ How much total money did this other person have?

➡️ What was he invested in?

(There was also a 3rd question: How do you know he was even telling the truth?)

Of course, her conversation partner didn’t fill her in on any additional information… She didn’t have the full picture. So her mind defaulted to filling in the blanks with her personal financial situation – a perfectly natural thing to do. She thought, “Given my own financial circumstances, how could I deal with losing $250,000???”

We don’t know the reality. But it could very well be that his liquid net worth was north of $12.5M, and he was referring to a time he lost 2% or less (an objectively minimal drop). Or maybe he experienced that decline purely in a highly volatile stock (whereas this client is only invested in well-diversified portfolios). In any case, he doesn’t share all the same data points and goals as our client. 

There are a couple lessons here:

1️⃣ CONTEXT is KEY… One small detail can be misleading. But if you have the whole picture, it might be a different story altogether. Don’t take everything you hear at face value.

2️⃣ FOCUS on YOUR plan… Your situation is highly unique. Don’t apply someone else’s experience (alleged or true) to yours. Tune out the noise. Put blinders on.

There’s enough emotion that comes with watching the movements in the market – though there are things you can do to prepare for and handle them. Avoid making it even more challenging by taking these two lessons to heart.

Real Wealth is Not Usually Loud – It’s Quiet and Boring

The bite of comparison can hurt us in several different ways. The example above made it difficult for our client to view her investment strategy through the appropriate lens – one that made sense specifically in her case. 

Another way we may succumb to the challenges of comparison is when we have all these influencers flaunting their supposed riches and sharing the “secrets” of how they amassed their fortunes. It can look enticing and make us feel like we’ve really missed the boat. But in many of those instances, they’re saying what they think will get clicks and followers, not necessarily the truth. So don’t let it get to you.

The Millionaire Next Door paints a detailed portrait of what many people with wealth actually look like. The book tells us that, for the most part, they’re hidden in plain sight. Generally, people who do have money aren’t the ones trying to prove it to the world. Instead, they wear normal clothes, drive older cars, and live lives that mostly seem outwardly modest. While it was originally published almost 30 years ago now, I believe the theme of the book tends to hold true today. Those who are living loud, flashy, extravagant lifestyles very well may be rolling in more debt than dough.

Today, the more modern term might be the “Stealthy Wealthy”. 

Remember this if you start to fall into the financial comparison trap…

  • Just because someone seems to have money, or presents themselves a certain way – it doesn’t make it the case.
  • No, you’re likely not missing out on a “secret strategy to build wealth fast!”
  • Those who do have meaningful wealth are probably pretty boring about how they deal with it, and built it in the first place.
  • The only person worth judging yourself against is… you.
  • Keep your mental energy strictly on your own goals and situation.
  • Don’t listen to the limited information you may gather about someone else’s financial situation and try applying it to your life.
  • Do listen to a professional who understands your entire picture (AKA a trusted, fiduciary financial planner).

Don’t let comparison rob you of your joy, especially if you don’t have all the context. Keep that monster at bay and turn away. 

With that, I’m out – gotta go talk to Mike about Upbeat Wealth branded earplugs…

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Fiduciary, fee-only, Certified Financial Planner, Eddy Jurgielewicz

Eddy Jurgielewicz, CFP® is a Partner and Lead Financial Planner at Upbeat Wealth, a fee-only firm based in New Orleans and serving clients virtually across the country. He specializes in providing straightforward financial guidance to ambitious young families as they navigate life’s many milestones.

Do you have questions about what we shared in this post, or anything else in general? Feel free to schedule a free consultation or drop us a line!

Sign up for our newsletter (at the bottom of this page) to stay up to speed on our Upbeat Insight.

Disclaimer: All content in this article is provided for educational, general information, and illustration purposes only. None of the information is intended as investment, tax, accounting, or legal advice. Nor is it a recommendation for purchase or sale of any security, or investment advisory services. We encourage you to consult with a financial planner, accountant, and/or legal professional for advice on your specific situation. Read our full disclaimer here.