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“I have too much cash and I don’t know what to do with it.”
I hear this all the time from new clients. It’s a main reason people decide to work with a financial advisor: they’ve gotten to a point where they’re earning more than they’re spending, they’re accumulating cash, and they don’t know what to do with it.
I love encountering this problem. It’s a great “problem” to have!
And my first question when I encounter it may surprise you:
How much cash do you actually need?
Job #1: Protect You
Having adequate cash reserves is one of the most important foundations of building wealth.
Cash is your first line of defense in protecting everything else you’re building.
Imagine you’ve been diligently contributing to your 401(k) for the last 10 years. You make Roth IRA contributions when you can. You bought a home a couple years ago.
Then you find out your sewer line needs replacing. It’s going to cost $20,000, and you only have $5,000 in the bank.
Now you’re choosing between putting $15,000 on a high-interest credit card or finding another way to access money that was intended for your future.
Neither solution feels particularly good.
But with an adequate emergency reserve, your cash gets to do exactly what it’s there to do: absorb the unexpected without disrupting everything else.
Cash is the buffer.
So if you feel like you have “too much cash” sitting in the bank, first make sure you understand how much you actually need.
Three to six months of living expenses is a common starting point, but the right number depends on your life: your income stability, whether you own a home, whether you own a business, your ongoing obligations—and frankly, what helps you feel safe.
And if you’re cringing at the thought of keeping $25,000 or $50,000 “on the side” instead of “putting it to work”, this is exactly the thinking I want you to reframe.
Not all money has the same job.
The objective of your emergency savings isn’t to maximize returns. Its job is to preserve liquidity and protect you from having to take on expensive debt or derail your long-term investments when life happens.
Job #2: Support Your Future
Once we know today is protected, we can start thinking about the future.
This is where your long-term investments and retirement accounts come in.
Unlike your emergency savings, this money has time. And time changes what we can ask the money to do.
Money you won’t need for decades can generally tolerate less liquidity and more short-term volatility in pursuit of long-term growth. It has the opportunity and time to compound quietly in the background while you continue living your life.
Your cash reserves aren’t supposed to fund 30 years of retirement.
And your retirement portfolio isn’t supposed to replace your sewer line tomorrow.
Different job. Different timeline. Different strategy.
The “best” financial decision in isolation isn't always the best decision for your financial life as a whole.
Job #3: Create Optionality
But your financial life isn’t divided neatly between the cash you need today and the money you’re saving for retirement. You also need resources for the life that unfolds along the way.
Maybe you want to take a sabbatical. Buy a second home. Start a business. Retire early. Make a career change. Or simply have resources available for an opportunity you can’t predict yet.
This is where we start thinking about optionality.
For some people, that might mean building investments outside of retirement accounts. For others, it might mean intentionally keeping more cash available for a known goal in the next five years. This is where it gets personal. Because before we can decide what your money should be doing, we have to understand what you're actually trying to build with it.
Often, the answer is usually a combination of different types of accounts with different time horizons, tax treatments, and levels of accessibility.
We can't predict what tax rates will look like decades from now. We can't perfectly predict your future income, career, family, health, priorities—or the opportunities that might come along.
So rather than trying to perfectly optimize your finances for one imagined—and changing—future, I’d rather build you a financial life with options.
The questions become:
What is this money for? When might you need it? And what does it need to do between now and then?
Supporting Your Life, Today and Tomorrow
Before you get swallowed up by the financial-comparison quicksand and start worrying that you should be investing more, saving differently, or doing something “better” with your money, come back to a simpler question:
What is the job of this money?
If you know you want to take a year-long sabbatical in Europe two years from now and you need $100,000 to do it, keeping that money somewhere safe and accessible isn’t “wasting it.”
That money is already doing its job. And the “return” on that money is the sabbatical itself.
Some money needs to protect you.
Some needs to grow.
Some needs to remain flexible.
And some is meant to be spent.
Your financial life doesn’t need to be optimized against someone else’s definition of what you should be doing with your money.
It needs to support the life you’re actually building.
And if you don’t know what each dollar needs to do yet? That’s part of the work of planning. A good financial advisor isn’t just there to tell you where to put your money. They’re there to help you get clear on what matters to you, what you want your life to look like, and then build a financial strategy that supports it.
