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.

Traditional vs Roth 401(k): How to Choose the Right Contribution Strategy

The Simple Framework for 401(k) Contributions

Not to sandbag our version of this question right out of the gate, but this blog/article/education exists on every personal finance resource on the interwebs. Yet, it’s still one of the most common questions that people standing around at a bar, looking for free financial advice clients ask us. 

The math is really quite simple. If you’re in a lower tax bracket when making withdrawals in retirement, you’d want to make Pre-Tax Contributions now. If your funds are subject to a higher tax rate later, you’d be thankful you made Roth contributions now. But that’s where the simplicity ends. You might not even know what you’re having for dinner, let alone what life might look like in 40 years. And even if you had that crystal ball, there’s no telling what federal and state tax rates might be. If you’re an actual wizard and do know what the tax brackets will be, there are still scenarios where having access to both Traditional (Pre-Tax) and Roth buckets would be beneficial. 

And I won’t bury the lede any further: Here’s a simple way to view the timing of Traditional and Roth contributions. 

  • Early Career: Roth 

  • Mid Career: 50/50 Split

  • Peak Earning Years: Traditional

But if you want some additional guidance on the full considerations between the two, keep reading!
Because, as mentioned, you are probably somewhat uncertain about:

  • Retirement Age
  • Reduced Income Prior to Retirement (Back to School, Sabbatical) 
  • State of Residence
  • Expected Federal Tax Brackets
  • If You’ll Need a Large Sum of Money Suddenly (Home, Health, Grandkid’s Education)
  • Tax Brackets for Your Kids Upon Inheriting Money
  • If You’ll Inherit Money and If That Will Be Pre-Tax or Roth
  • Needing Health Insurance Before Medicare-eligibility

Explain 401(k) Contributions To Me Like I’m Five

401(k) plans are employer-sponsored retirement accounts that enable employees to contribute through automatic payroll deductions. You might hear a 401(k) called a “Traditional 401(k)” or a “Roth 401(k),” but they are the same employer-sponsored plan. It’s a single 401(k) that accepts two different contribution types. Also, “Traditional” Contributions refer to Pre-Tax Contributions, and these terms can be used interchangeably. Some 401(k) plans even offer a third type of 401(k) contribution known as After-Tax Contributions, which should not be confused with Roth contributions. We’ll skip the After-Tax Contribution bucket for the purposes of this blog.

Understanding How 401(k) Contributions Are Taxed

The key difference between Traditional and Roth contributions is the timing of taxation.

  • Traditional 401(k) Contributions: Defer tax now, pay taxes later

  • Roth 401(k) Contributions: Pay tax now, withdraw tax-free later

A popular metaphor is “the seed vs. the harvest.” The seed is taxed when you make Roth Contributions. The harvest is taxed when you make Traditional or Pre-Tax Contributions. Mathematically, if you’re subject to the same tax rate on contributions and withdrawals, it doesn’t matter whether you’re taxed today (the seed) or in the future (the harvest). 

An example:

When the tax rate is flat, the math – maths. Even though you paid more in cumulative taxes by deferring them, your net distribution remains unchanged.

Won’t My Tax Rate Always Be Lower In Retirement?

“I’m not making any money, so why would I be paying more in taxes?” right? RIGHT!? It certainly makes sense, but it’s not that straightforward. Here are some reasons you might end up subject to a higher tax rate or face higher costs later on, even without any earnings. 

Future Federal Marginal Tax Rates and Brackets

When it comes to future tax rates, we are purely speculating. Here is a chart of the historical highest and lowest marginal tax rates since its inception. 

And this chart doesn’t even fully capture how difficult it is to predict how future rates may move across different income levels. The highest marginal rate may apply to only a small number of taxpayers. More specifically, it will come down to how each income threshold is taxed at what rate and where you will fall in comparison. However, if you were to speculate that our low maximum marginal tax rate, combined with increasing national debt, might result in higher future tax rates, I certainly wouldn’t stop you! But note that’s been a popular thesis for decades, and current tax rates have actually decreased relative to certain periods.  

State Tax Rates

The next biggest reason your tax rate may increase is a change in your state of residence. See how your state or desired home in retirement stacks up!

Thinking about retiring in California after working in Louisiana? That’s a big jump in state taxes paid on distributions. Therefore, you might think twice about making traditional contributions today, since you’ll pay a good bit extra at the state level later. But then you might hit your 50s, and your entire personality could be honoring the late, great Jimmy Buffett. So now you’re riding motorcycles and drinking pina coladas (not at the same time, of course!) and eyeing a move to Florida. Well, then you might be kicking yourself a little for not saving pre-tax in Louisiana, since Florida has no income tax. 

Obscure Taxes, Penalties, and Costs

Based on current tax rules, there are additional financial *consequences* such as the Net Investment Income Tax (NIIT), the Medicare Income-Related Monthly Adjustment Amount (IRMAA), and how health insurance premiums are determined if you go through the Healthcare.gov exchange without access to an employer-sponsored plan or Medicare and have too much income to qualify for Medicaid. Being forced to make a large amount of pre-tax distributions within a calendar year could result in additional money owed, even if it’s not directly tied to the tax rate on the retirement income itself. 

Required Minimum Distributions (RMDs)

Some people are naturally great savers. And if you’re great at saving, you might have a hard time spending money, too. Therefore, you may build a substantial pre-tax nest egg. Based on your birthdate, the government says you must start taking withdrawals from this money between the ages of 70.5 and 75. These mandatory Required Minimum Distributions could exceed what you were earning while working. 

You Inherit Money, or Your Kids Inherit Your Money

If you are around my age or most of our clients’ ages, you have boomer parents. And if you have boomer parents, you know they just don’t talk about money. It’s not in their DNA. You’ll get what you get when you get it. But if you are fortunate enough to get *something* and it’s pre-tax money, you’ll have ten (10) years to empty the account to $0. It’s a GOOD problem to have, but it still affects how much you get to keep. There’s a lot of tax planning involved. And if your money is already tied up in 100% pre-tax accounts and the government is forcing you to take distributions, you might find yourself with very little flexibility on what tax rate it’s subject to. You’ll just owe what you owe. 

Or, if you are the one saving now and building a 100% pre-tax allocation with the goal of passing money to your own kids, they might actually be fulfilling the American dream of doing better than you! And now you have deferred taxes on money your kids will realize at a higher rate. 

That’s A Lot of *Stuff*

That’s not even an all-encompassing list. But it’s worth listing some of the main reasons it’s never as simple as anyone wants to make it. A lot of these things, we just don’t know. And that’s okay! A financial planner can certainly help you address some of these blind spots and make educated guesses/assumptions around tax planning. But if you’re doing it yourself, I’d suggest focusing on what seems best now rather than overthinking every future multiverse scenario. 

Emotional Benefits of Roth vs Traditional Contributions

Traditional (Pre-Tax) Contributions Provide CONTROL

I’ll start with pre-tax contributions because I just spent the last couple of minutes of your time making you second-guess whether you should even make pre-tax contributions at all. While we’ll give further financial guidance on when you should consider making pre-tax contributions later in this article, here’s a softer reason. For the most part, you maintain control over your tax consequences. By deferring taxes now, you have control over when you make distributions based on your tax rate at that time. While the government tries to force your hand with RMDs, that may be decades away. 

But aren’t there rules and penalties that prevent you from making distributions before Age 59.5? Yes, but you could do what’s known as Roth Conversions. As the name suggests, Roth Conversions allow you to convert Pre-Tax funds to Roth funds beforehand and avoid the 10% early withdrawal penalty. There are a few other considerations and *gotchas* that I won’t go into here, but you should definitely look into them if you’re considering making Roth Conversions. Here’s an educational piece from Schwab that outlines them. I mention Roth Conversions because they are a great tax-planning tool for those who are going back to school, taking a sabbatical, on track for early retirement, or have an opportunity to fill lower tax-rate thresholds before RMDs.

Roth Contributions Provide Peace of Mind

While you lose control over how your money is taxed, the good news is you don’t have to worry about it anymore! Assuming certain holding periods and age thresholds are met, the money in this bucket is 100% unequivocally yours! Taxes have already been paid at the time of contribution, and distributions are not included in your gross income. Therefore, you don’t have to worry about obscure tax laws or rules that tax you more, reduce certain credits, or penalize you as your Adjusted Gross Income or Modified Adjusted Gross Income increases.

Even if you don’t end up with the highest tax-adjusted balance, understanding how much money truly belongs to you can make retirement planning easier.

How Life Events Can Influence Contribution Strategy

There isn’t a better graphic to illustrate this than the one in this Kitces.com article, which I’ve included below.

Above, you’ll see reasons you may contribute to a Traditional IRA, split contributions 50/50, or contribute to a Roth IRA, based on life events that affect your tax rate. Here’s the synopsis:

Contributions by Tax Rate

  • 12% or Lower: Roth Contributions

  • 22% – 24%: 50/50 Split

  • 32%+: Pre-Tax Contributions

While the future is important, it’s often more practical to concentrate on today’s events and adjust accordingly. As your life changes, so should your 401(k) contribution method. This approach helps you systematically build your allocations across different tax buckets, offering you maximum control and flexibility when taking distributions before retirement, during retirement, or passing on an inheritance to your family. 

Ultimately, a balanced approach to your 401(k) contributions will help you make the most of your funds as you near or enter retirement.

Frequently Asked Questions About 401(k) Contributions

Q1: Should I choose Roth or Traditional 401(k) contributions?
Choose Roth contributions if you expect your tax rate to be higher in retirement. Choose Traditional contributions if you expect your tax rate to be lower later. Many investors benefit from using both to create tax flexibility.
Q2: Is it better to pay taxes now or in retirement?
It depends on your future tax bracket. Paying taxes now (Roth) is better if tax rates rise or your income increases later. Deferring taxes (Traditional) is better if you expect lower income in retirement.
Q3: Can I make both Roth and Traditional 401(k) contributions?
Yes. Most employer plans allow you to split contributions between both types, helping create tax diversification for retirement withdrawals.
Q4: Why should I have both Roth and Traditional retirement savings?
Having both creates flexibility. You can withdraw from different accounts strategically to manage taxes, avoid Medicare premium increases, and reduce required minimum distribution impacts.
Q5: Can Roth conversions help later?
Yes. Roth conversions allow you to move Traditional savings into Roth accounts during low-income years, helping manage taxes before retirement or RMD age.

Great Day Louisiana: Setting Up Your 401k For Your Retirement (originally aired on February 19th, 2026)

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Fiduciary, fee-only, Certified Financial Planner, Mike Turi

Mike Turi, CFP® APMA™ is the Founder and a 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.

Upsizing Your Home

The Benefits of Upgrading Your Home

Is this not your first rodeo when it comes to buying a home, and you’re ready to get back on the horse? This blog is for you. It’s natural for young families to want to upsize their homes at some point. Common reasons for upgrading include:

  • More Space

  • Better School District

  • Higher Paying Job

  • Closer to Free Childcare, I mean, Family

Sometimes it’s fashion over function. You just want a bigger or more expensive place to live. For many Americans, a home symbolizes a level of wealth. Ironically, it can also become the greatest barrier to a family living a truly wealthy life.

Weighing the Pros and Cons

Some trade-offs, such as increased income, public schooling, or free childcare, may result in a net neutral or positive cash flow outcome, thereby avoiding the need for lifestyle adjustments. Others may result in a diminished ability to cover current expenditures and lifestyle goals. Examples of expenses and goals that could be negatively affected by a larger mortgage and escrow:

  • Education Funding

  • Retirement

  • Travel

  • Everyday Pleasures

  • Work-Life Balance

As a financial planner, it isn’t our job to plansplain what your values should be! Yes, I did just invent the word planspain. Our role is to help you clarify your priorities, establish boundaries, and evaluate trade-offs, enabling you to make the most informed decision based on your specific situation. So, what are some healthy boundaries when deciding what a reasonable amount to spend on a new home is? There are several handfuls of rules of thumb from asset-based and income-based approaches for determining maximum home affordability. I will focus on our preferred guideline, which has been adjusted to be more conservative than the lender’s standard.

Enter the 25/33 Rule, Adjusted Down from the 28/36 Rule

We recommend the 25/33 Rule, which states you shouldn’t spend more than 25% of your pre-tax monthly income on housing and no more than 33% on all debts. Other factors, such as family wealth, lifestyle, schooling costs, and overall assets, also influence your financial flexibility beyond this rule. Still, everything else being equal, going over the 25/33 Rule often causes families earning less than $200,000 to feel financially strained in other areas. 

Let’s examine sample cash flows from families whose housing costs are 10%, 20%, and 30% of their pre-tax income.

Case Scenario 1: Millennial Family with 10% Total Housing Cost

Case Scenario 2: Millennial Family with 20% Total Housing Cost

Case Scenario 3: Millennial Family with 30% Total Housing Cost

In the above scenarios, the total housing cost includes not only your mortgage (principal + interest), but also property tax, homeowners insurance, and maintenance costs. For maintenance, we always use the 1% rule, which recommends setting aside 1% of your house value annually for upkeep. As your total housing costs progress from 10% to 20% to 30% of your salary, watch that cash flow dry up. Your ability to save for your future or your children’s becomes increasingly difficult. Travel, Gift, and Education budgets could all find themselves on the chopping block. Depending on your liquid assets, you might have limited options to act or respond during times of uncertainty or when your life becomes more complicated. 

The Risk of Your Primary Residence Equaling Your Net Worth

You also wouldn’t be alone if you considered your primary home your most valuable asset and the key to building wealth. Here are the risks:

  • Lack of Diversification. While it CAN work out, putting all your eggs in one basket is a risky approach. 

  • Illiquidity and Inconvenience. If you need to take money out of the home, it could be expensive in the form of a loan. Or, you might need to sell the home and move entirely.

  • Surprise Maintenance Costs. It’s important to remember that your Principal, Interest, Tax, and Insurance is the MINIMUM amount you’ll pay. 

  • Mortgage Amortization: If you are forced to sell, you may not have built a meaningful amount of equity in the home. Depending on your interest rate, a significant portion of your mortgage payment goes to the lender as interest during the first 5 years. The payments typically don’t shift to mainly principal until 10 to 15 years into the repayment period.

The Danger in Upsizing Your Home Before Milestones, Specifically KIDS

The times when upsizing your home presents the biggest hurdles: 

  • Before you have kids, if that’s the path you’re choosing. 
  • As you are paying for childcare. 

The cost of raising children alters not just your cash flow but your outlook on life. Locking yourself into a bigger home too early, especially one at the upper edge of what you can reasonably afford, can cause financial problems if it’s not part of your long-term plan. And while you might believe you’re preparing for that moment, it’s hard to understand the unknown. It’s worth thinking about how long you stayed in your *starter* home before life changed and you began reviewing options to upgrade. Milestones tend to prompt us to reassess our lifestyles.

Renting vs. Selling Your Previous Home

If you are relocating or upsizing and wondering whether to keep your previous home as a rental, you’re not alone. We get this question often. As of the published date of this blog, mortgage rates are approximately double what they were 3 years ago. 

Here are the two questions you need to ask yourself. 

  1. Will the rental income you receive actually cover not only your minimum financial costs like principal, interest, taxes, and insurance, but also generate a surplus for unexpected expenses such as vacancies and maintenance? 

  2. Do you actually have any desire to be a landlord? If you used to worry about spending evenings and weekends on home maintenance projects and repairs for your family, now imagine doing that for complete strangers on their schedule, while you’re commuting. And oh, by the way, you’re likely moving into a bigger home, which will also require a greater time commitment for maintenance. 

If you’re answer is “no” to either of these questions, you should highly consider selling your previous home. Otherwise, you’re really just speculating that you’ll get a better price in 1 – 3 years. That’s a complete dice roll. And if you don’t sell within 3 years, you miss out on a significant tax exclusion where your primary residence is exempt from capital gains tax. The Capital Gains Exclusion for Primary Homes allows you to exclude the first $250,000 of gain for an individual and $500,000 for a married couple filing jointly from being subject to capital gains tax. 

Run. Those. Numbers. Then Actually Implement It!

When analyzing upgrading your home, the same principles apply as when you purchased your first home. And now, you’re a seasoned homeowner. You know that the cost of property tax and insurance only go in one direction, up! You understand that maintenance and upkeep costs are not zero, and they are generally expensive and a hassle. You will not mistake your approved borrowing amount with how much home you can afford. 

But until you lay out your cash flow and see the trade-offs firsthand, you are blindfolding yourself when it comes to making this decision. My recommendation is to live within the confines of your new projected budget for several months to ensure it’s a worthwhile tradeoff. Are you willing to make the sacrifices necessary to your current lifestyle when it comes to upsizing to a more expensive home? Otherwise, you risk falling into the biggest wealth trap: becoming house poor.

Need a refresher on what total housing costs look like? Last month (May 2025), Lead Planner Eddy Jurgielewicz shared some helpful advice on how much money you need to buy a home. He also included one of our in-house home purchase calculators to help prospective buyers understand the total cost of homeownership. While the calculator was an exclusive offering for our newsletter subscribers, you can view the excerpt about approaching homeownership from Eddy in this LinkedIn post. Want to avoid missing out on future exclusive content? Sign up for our newsletter using this link: subscribepage.io/eXkcnF

Great Day Louisiana: Weighing Your Home Buying Options (originally aired on April 28th, 2025)

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Fiduciary, fee-only, Certified Financial Planner, Mike Turi

Mike Turi, CFP® APMA™ is the Founder and a 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.

How to Take Control of Your Cash Flow

How to take control of your cash flow

I believe the venerable Wu-Tang Clan hit the target when they posited that “cash rules everything around me”. It’s a simple yet profound fact of the modern world we live in, largely applicable to those in all walks of life. Equally important, in my mind (though not as likely to serve as the foundation of an iconic hip-hop track), is that ruling your cash flow is one of the single most impactful steps to making progress towards financial goals.

Having the right system in place delivers real peace of mind and points you more directly towards what you hope to accomplish. Meanwhile, if no effort is made to intentionally manage the flow of dollars through your day-to-day life, you’re likely feeling the stress and holding yourself back.

So that’s what we’ll work through here: some strategies on how to take – and maintain – control of your cash flow. Because once you get that money, you still gotta know what to do with the dollar, dollar bills, y’all.

Who Needs to Take Control of Their Cash Flow?

Well, everyone!

The needs and reasons may be different person-to-person, but everyone stands to benefit from being in greater command of their cash flow.

It is not just for those who…

  • Are running a deficit each month
  • Are working to get out of debt
  • Need to build up their savings
  • Feel stressed when thinking about their income vs. expenses

It is also valuable for those who…

  • Have a high income
  • Are already saving at a strong rate
  • Are on pace to meet their financial goals

By the way, controlling your cash flow doesn’t have to mean meticulously tracking every single dollar that passes through your accounts – though that might be the right move for certain people. And it’s also not strictly synonymous with saving or investing more. In some cases, it may even entail spending more in certain areas of your life. It really boils down being in tune with how money is generally moving and directing your available resources in a way that aligns with your intentions.

Where to Begin

Awareness is always the first step.

You have to run a thorough diagnostic to understand if there are any issues, and what exactly they are, before you start considering how to fix them. Don’t think there’s anything wrong? There might not be! But even highly profitable companies conduct financial audits. Regardless of how you feel about your current situation, this is a must.

To get the best picture of what your current cash flow looks like, I recommend reviewing at least the last three months. The most accurate approach is to pull up the statements for all your credit cards and bank accounts. Once you have them:

  1. Go through each one line by line, categorizing every expense and savings contribution (a simple spreadsheet can make this easy). Examples of these categories might be:
    • Utilities
    • Restaurants
    • Gas (vehicle)
    • Subscritptions
    • Hobbies
    • Emergency Fund Contributions
    • etc…
  2. Add up the total amount in each category per month and then average them out. 

This will give you a usable figure for how much you’re currently spending and saving on a monthly basis in different areas. Of course, spending on certain things (such as eating out or gas for your car) will fluctuate. But getting a working average is perfectly fine. 

When people take the time to go through this exercise, I almost always notice the same results:

  • They find the awareness gained from this process very powerful, often learning things they didn’t know or finally facing head on something they tried to ignore.
    • “Ok, I didn’t realize I was spending that much on Amazon.”
  • It becomes immediately clear where adjustments can be made.
    • “I know I can definitely rely on Uber Eats less and still be ok.”
  • If needed, people are generally more prepared to act on any changes.
    • “Let’s go!”

Find a System to Manage and Track Your Cash Flow

Having a reliable framework and a continuous feedback loop (that works for you) helps you get more organized and then stay in control.

If your financial status quo has some cracks in it, it’s worth looking for tools to make your life easier. There is no shortage of apps out there designed for tracking your cash flow. A couple that I regularly hear success stories about are:

Additionally, a variety of different budgeting “approaches” exist. The right one for you depends on your needs and your style. A few of them include:

At Upbeat Wealth, we like to steer the households we work with into a “Flow-Based Budgeting” system. We first learned about this method from a presentation given by Natalie Taylor and have incorporated our own flavor. At a very high level, here’s how it works:

  • To start, all income gets deposited into a single primary checking account (a “source” account, if you will).
  • Then, you break down your spending into three categories: 
    • Fixed Expenses are anything that does not change (or stay about the same) month-to-month, such as mortgage, insurances, gym membership, phone bill, monthly investing/saving, etc.
    • Flex Expenses are those that do vary on a monthly basis, including things like groceries, self care, entertainment, etc.
    • Non-Monthly Expenses are things that might get paid quarterly, every six months, or simply come up irregularly. Examples include travel, insurances, property taxes, etc.
  • After you lay out all of the “fixed” and “non-monthly” expenses + savings, it becomes clear how much is available to go towards the “flex” category of spending. This creates a natural guardrail in your budget. Whatever that leftover amount is, that’s what is free to go to these expenses each month. You can even break it up into a weekly figure to monitor it more closely.
  • The “source” checking account feeds everything:
    • All “fixed expenses” are pulled out of here, ideally via auto-pay. 
    • Automated transfers are established to fund the “non-monthly” account. If you total the annual expense for all the non-monthlies, divide that by 12 and transfer that here each month.
    • Finally, you can set up weekly transfers to the “flex” account to cover those. For some this is likely a category of spending that goes on a credit card. If so, you’ll want to keep that weekly card balance within the set limit and pay it off at the end of each week.

Free up Some Cash Flow by Targeting the Low-Hanging Fruit

There are almost always some easy places to win back cash flow.

Did you watch the Severance season 2 finale and know you won’t be opening Apple TV again until the 3rd one comes out? Cut that bill. If there are any subscriptions or memberships that you’re not actually using (or can easily live without), maybe it’s time to unsubscribe. A few bucks here and there add up. Mike writes more about our 3-step guide to evaluating your memberships and subscriptions in another post.

When’s the last time you shopped your auto or homeowners insurance? These types of coverages (and other property & casualty lines) are worth reviewing at least every few years. If it’s been a while, you very well may be able to lock in a better rate for the same coverage with another carrier. 

Clarify Your Purpose and Any Trade-Offs

If change is necessary, zero in on your motivation to reinforce your efforts.

What is your specific goal in wanting to improve your cash flow management? It’s one thing to say you want greater control. There’s going to be much more friction if you’re crystal clear on why. Maybe you want to…

  • Shrink that high-interest debt balance a lot faster
  • Finally build up to a full Emergency Fund
  • Save up for an international trip later in the year
  • Treat you and your partner to more fun date nights
  • Get closer to maxing out a retirement account
  • Save for a house down payment
  • Etc…

Whatever it is, put that purpose at the front of your mind. Without it, it will be hard to maintain motivation because any changes you have to make are going to involve very real trade-offs. Maybe putting more money towards saving for a much-needed new car will require spending less on eating out. If so, spelling it out like this might lead to better results than simply telling yourself that you’re going to restaurants too much and need to cut back. 

  • Lame: “We spend too much money at restaurants and have to cook from home more now.”

  • Cool: “By cooking from home a little more, I’ll be able to put $500 more per month towards the next car my growing family needs and drastically speed up the purchase timeline.”

Make the effort to define what things are most important for your money to go towards and why. Similarly, identify the things that aren’t as important for you to be directing resources towards.

Keep it Realistic and Celebrate Small Wins

Take it one step at a time.

If you’re normally spending $400 per month on food delivery services, it may not work very well if you immediately try pulling this down to $100 each month. Incremental steps over time will help you ease into change and keep with it. So maybe you’d target spending $100 less each month until you arrive at your goal of $100. 

Are you focused on growing a bucket of savings for a major expense like a house down payment? Maybe you have a pile of credit card debt, and it’s tough to fathom getting past it. Financial obstacles like these could easily take several months or even years to overcome. A seemingly long road ahead can be daunting. Along the way, focus on smaller targets, acknowledging and celebrating in some way each time your balance for the down payment grows by another $10,000, or you pay off another one of the credit card balances. A lot of the big milestones we work towards involve major dedication. So help keep yourself on track by recognizing the smaller wins as you progress.

AUTOMATE, AUTOMATE, AUTOMATE

Remove as much thinking as possible. Automate savings and debt payments.

The less manual an action is, the more likely it is to occur. If you determine that you’re able to save or invest a certain dollar amount each month, go ahead and set up automatic contributions into those accounts. The same can be done with debt payments. You can set your credit card balance to autopay and even automate extra payments to any type of liability for those you’re working to aggressively pay down.

Automating gets you out of your own way. It also helps with the practice of “save first, spend second”. By ensuring your goals are being met first, it frees you up to spend what’s left over without any guilt.

Consider Setting the Credit Card Aside

If spending or credit card balances are getting hard to rein in, switch to strictly using the debit card.

By exclusively swiping your debit card, you can only spend what you have in the bank. It forces you to think a bit more before any purchase. On the other hand – with credit cards – it doesn’t matter how hard we tell ourselves otherwise, they simply don’t feel as real. And don’t worry about the points. The cash back and those miles are no good if chasing them ends up costing you more in the long run. It doesn’t have to be a permanent change, but it’s a sure way to curb spending. 

Be Mindful of Lifestyle Creep

Take a proactive stance when income increases.

As your income goes up over time, continue to keep your focus on what is most important to you and your family. It’s ok if that means spending more money on certain things – as long as your other priorities are met too. You worked hard for it, why not put more towards travel, treating the kids, or whatever else brings you joy?

At the same time, a jump in pay is a wonderful opportunity to enhance progress towards goals. So when this happens, take a pause. Revisit your financial plan. See if you can identify tangible ways to put those new dollars to work in a way that supports your goals. If nothing else, consider initially saving at least half of the increase. Be thoughtful with what spending areas get the other half of the increase. One thing is almost certain – if you’re not intentional with it, the new income will find a way to disappear.

In closing, I can’t overstate the benefits of ruling your cash flow. While it may not make a good hip-hop hook, it is most definitely the foundation of a healthy financial plan.

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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.

Presidential Inauguration and Your 401k

Inauguration, 401k, investments

Presidential Elections vs. the Stock Market

New President = New Investment Strategy? Not so fast! 

Historically speaking, there is nothing red or blue about the United States stock market. It’s green (see below). Regardless of who is leading the administration, the stock market and your 401k has consistently moved up and to the right. 

And look, there are many reasons each election can be conceived as the most important in our lifetime. Indeed, the presidential and congressional election winners affect our geopolitical and economic outlook. Our debt is soaring. Instability is rising across the globe. There’s much work to be done on issues surrounding inequality and human rights at home. However, it pays to zoom out when it comes to the stock market and your 401k + investment portfolios.

S&P index, Presidencies, Investment Management

Source: YCHARTS

THE Reason Against Changing Your Investment Strategy. Spoiler Alert: It’s Your Money.

If you had only remained invested when your preferred candidate was in office, you would have missed out on some significant opportunities and cost yourself a fortune. Check out the graphic below created by YCHARTS! Assuming an initial investment of $10,000 starting in January of 1950, here’s how your portfolio would have performed if you had only remained invested under a Democrat or Republican.

  • During Democratic Presidencies Only: $444,760
  • During Republican Presidencies Only: $77,770

And here comes the big BUT. If you had remained invested regardless of who was in the White House, that $10,000 would have grown to $3.49 Million by September of 2024.

Portfolio Performance, Investing, Politics

Source: YCHARTS

Allowing your political beliefs to influence your portfolio can lead to disastrous outcomes.

Attempting to time the market is a fool’s errand! Just turn on the TV. No matter if the market is rising or falling, everyone always has an explanation. Although they may act as if they possess one, there is no crystal ball. Not even when it comes to explaining intraday market swings.

Uncertainty is a certainty, which is why I love this Vanguard article and its principle: TUNING OUT THE NOISE NEEDS TO BE YOUR SUPERPOWER.

Now That I’m Thinking About My Portfolio, Are There Any Practical Adjustments I Can Make?

Risk Capacity: Are your investments appropriately aligned with the level of risk you can afford to take? e.g., Do you already have an emergency fund? Could you experience a loss of income, a medical emergency, car trouble, or a home repair without having to withdraw from your investment accounts at an unfavorable time? Depending on the account type, untimely withdraws could lead to penalties and tax issues in addition to loss of principal. 

Check out the graphic below compiled by Lincoln Financial Group. From 1976 to 2022, in any given 12-month period, your investment in the S&P 500 (the 500 largest companies in America) may have gained 61.2% at the peak or lost 43.3% at the trough. 

Is that a gamble that you want to take if there’s a chance you might need your money in the interim (less than 15 years)? Feel free to check out a quick risk checklist in a previous Upbeat Wealth blog post.

S&P 500 index, Investing, Rolling Returns

Source: Advisorpedia via Lincoln Financial Group

Time Horizon: Have you clearly defined your goals and corresponding timelines to achieve them? Are you properly allocated to maximize risk-adjusted returns based on when you expect to need the money? We often receive questions about investment optimization with condensed time horizons. “I want to buy a home in five years; how should I invest the money?” Well, probably not very aggressively. 

Below is our firm’s current general guidance on how to approach short-term time horizon investing, especially given the current high-interest rate environment and the virtually risk-free returns of FDIC-insured high-yield savings accounts and fixed income such as U.S. Treasury bonds, backed by the full faith and credit of the U.S. government. 

One strategy we like to implement with our families is to separate taxable investment accounts into different sleeves or buckets. We assist them in identifying their goals and timelines, and we encourage them to create separate accounts for a clearer allocation and visualization of their objectives for those funds.

investment allocation, equities, fixed income, high-yield savings

Managing Costs: Are you invested in low-cost index funds and effectively tax planning around your contribution and investment strategy? I can’t tell you how often I have reviewed household 401(k) investments and seen selections in the highest-fee mutual funds, which seldom beat their respective benchmarks. 

Rule of thumb: the fancier the name, the higher the fees. If you see a Yellowstone Dutton Ranch New Pioneers Beth is Aggressively Back on The Booze, Psych – She Never Actually Left Portfolio, RUN for the Vanguard or Fidelity Index Funds if they are there, pleeeeease!

Dollar Cost Averaging: Are you already sitting on a heavy concentration of cash or encountering a sudden money event? Consider investing it over time rather than all at once. While it might not be the mathematically preferred approach, taking this route can help minimize your investment timing risk and serve as a portfolio Ambien when it comes to getting your money a better night’s sleep. 

What If This Time is Different?

The U.S. stock market has recently outperformed its average annual returns despite the election, higher interest rates, Russia invading Ukraine, and conflict in the Middle East. When market volatility rears its head, it’s impossible to point to one single factor.

At the beginning of every year, banks and wealth management companies are issuing their annual market forecasts and it’s a whole lot of blah blah blah. Some interesting insights? Maybe. But, ultimately, the themes are indistinguishable and laced with caveats about what the future holds. Because if they knew, they wouldn’t be writing about it. And there are no real consequences because it is all hot air to begin with. Most of the larger well-known wealth management firms conveniently erase their previous year market predictions. Look around, they’re hard to find. That’s because there are no crystal balls, especially during an administration change.

If you make investment decisions solely based on who is in the White House, you might be costing yourself a chance to reach your financial goals. If you’re investing for retirement with 15 years or more ahead of you, embrace a long-term, disciplined strategy. Staying the course now will pay off in the future! It’s important to remember that the market reflects the companies that provide goods and services and drive innovation rather than the actions of any one political party. The only thing we can predict about recessions is that they will occur, but not when. Make sure to have an emergency fund prepared and focus on the things within your control!

“The only president who didn’t complain about the previous administration was George Washington” – like every political speaker or journalist

Great Day Louisiana: Financial Advice Ahead Of Inauguration Day (originally aired on January 16th, 2025)

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Fiduciary, fee-only, Certified Financial Planner, Mike Turi

Mike Turi, CFP® APMA™ is the Founder and a 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.

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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.