{"id":10321,"date":"2019-05-01T12:52:13","date_gmt":"2019-05-01T19:52:13","guid":{"rendered":"http:\/\/www.wealthfront.com/blog\/?p=10321"},"modified":"2024-06-12T11:47:30","modified_gmt":"2024-06-12T18:47:30","slug":"4-signs-you-have-too-much-cash","status":"publish","type":"post","link":"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/","title":{"rendered":"4 Signs You Have Too Much Cash, And What To Do To Fix It"},"content":{"rendered":"\n

The impulse to hang onto as much cash as possible<\/a> is an understandable one, to say the least. Cash is as good as the air we breathe. It\u2019s how we buy food, shelter, and medicine. To a less tangible extent, it\u2019s how we assign value to so many things, not the least of which might include ourselves. (Hey, who among us hasn\u2019t, at times, felt defined by our net worth?) There\u2019s something that feels so gratifying and validating about just seeing a balance stack up. The flexibility of keeping your cash uninvested can feel very safe: you\u2019re less affected by market instability, and with cash on hand, you\u2019re as ready for anything as you could possibly be. Beyond safety, having maximum access to cash can be liberating, even thrilling \u2014 you could do anything<\/em>.
<\/p>\n\n\n\n

All that said, cash drag is real. Doing something productive with your money is better than doing nothing with it. This doesn\u2019t mean you should invest everything<\/em>. Keeping some of your cash liquid for a specific reason is<\/em> doing something. Keeping too much cash out of the market<\/a>? That\u2019s doing nothing. Your money wants to work: Paying for things you need or want, making gains in the market, growing interest for your future<\/a> \u2014 these are all very good jobs for your money. Employing excess cash as a security blanket is basically the least fulfilling job you can give it, no matter how comforting it might feel to wrap yourself in.
<\/p>\n\n\n\n

So where is the line between what cash you should hang onto and what you should invest? The actual dollar amount isn\u2019t a fixed point, but rather something that changes all the time, depending on what money you have coming in and what expenses and opportunities you have coming up \u2014 but you can check yourself to make sure you\u2019re hitting the mark as much as possible.
<\/p>\n\n\n\n

Here are a few signs you might be overshooting the cash zone:
<\/p>\n\n\n\n

1. You\u2019re anxious about having \u201cenough\u201d of an emergency fund<\/strong><\/h4>\n\n\n
\n
\"\"\/
Giphy<\/a><\/em><\/figcaption><\/figure>\n<\/div>\n\n\n

There are completely understandable reasons why people end up keeping more cash on hand than they really need. And it\u2019s usually not a matter of these people not knowing <\/em>that they would be better off investing or spending more of it. Indecision, a paralyzing number of financial paths to possibly take, fears about market instability \u2014 even the people who are armed with information about how to make their money go as far as possible can end up with a pile of cash that\u2019s just…sitting there.
<\/p>\n\n\n\n

What to do:<\/strong> <\/em>When it comes to figuring out how to build the right emergency fund<\/a>, start simple.
<\/p>\n\n\n\n

How much do you absolutely have<\/em> to pay every month or you\u2019re out on the street? Add up your rent\/mortgage, car payment, cell phone bill (it\u2019s no longer a nice-to-have; it\u2019s essential), utilities, child care, insurance, school loans, recurring medical expenses \u2014 whatever you need to pay every month to keep your life functioning on a basic level. From there, dig a little deeper: How big are your credit card bills? If you give yourself a weekly food budget, a monthly gas (or Uber\/Lyft) allowance, and a small living allowance, how much is that per month? Add that to your essentials \u2014 that\u2019s your monthly critical cash outflow. Now multiply that number by however many months you want to build out your buffer. (We\u2019re fans of saving at least three months\u2019 worth of expenses, but six is even better.) That is your emergency fund.
<\/p>\n\n\n\n

If you have this amount saved and are still feeling actively anxious about hanging onto more cash unrelated to an upcoming purchase or investing, that\u2019s a problem to work out with your brain, not your budget. (Alas, for most of us, our biggest financial obstacles are totally mental and emotional, not logistical.)
<\/p>\n\n\n\n

2. You consistently have a cash balance in excess of your monthly expenses<\/strong><\/h4>\n\n\n
\n
\"\"\/
Giphy<\/a><\/em><\/figcaption><\/figure>\n<\/div>\n\n\n

Any low or zero interest checking account should ultimately be viewed as a temporary holding tank. It helps to stop thinking of this as where your money works. Checking accounts are like the train your money takes from one job to another. If you regularly find yourself with more cash in your checking account than you reasonably need to cover your bills and day-to-day spending, you can likely get away with having less in there. Beyond that, any cash you need for expenses or investments that you have coming up in the next 3-5 years<\/a> should go into a high-yield cash account. (Hey, we have one of those<\/a>.)
<\/p>\n\n\n\n

What to do:<\/em><\/strong> <\/em>This is one cash-soggy habit that you can <\/em>effectively combat with hard math. Look at the math you did when calculating your emergency fund \u2014 you already know how much your monthly expenses are! This is how much you should have in the cash account you use to pay your bills and for day-to-day spending.
<\/p>\n\n\n\n

3. You\u2019re always waiting for the \u201cright time\u201d to invest<\/strong><\/h4>\n\n\n
\n
\"\"\/
Giphy<\/em><\/a><\/figcaption><\/figure>\n<\/div>\n\n\n

People who have trouble pulling the trigger on spending and investing are more likely to sit with more cash than they need. If you know <\/em>you want to invest<\/a> but find yourself hesitating to the point of not acting \u2014 whether you\u2019re wrestling with concerns about the stability of investments<\/a> or indecision about how much money to put in which place \u2014 it\u2019s all too easy to end up doing nothing<\/a> while drowning in liquidity.
<\/p>\n\n\n\n

What to do: <\/em><\/strong>Look, we\u2019re not trying to tell you how to live, but we love telling you what we think is the best strategy when it comes to investing. Waiting for the most opportune moment can be a smart strategy sometimes. Figuring out the right time to, say, buy a house is something we can help with<\/a>. But when it comes to investing, timing the market just doesn\u2019t work. A better bet? Investing in a globally diversified portfolio of low-cost index funds<\/a>, contributing to it regularly, and unburdening your mind of the anxiety about when you should invest. There is no perfect time. Always be investing.
<\/p>\n\n\n\n

4. You love to say yes to \u201ceasy action\u201d<\/strong><\/h4>\n\n\n
\n
\"\"\/
Giphy<\/a><\/em><\/figcaption><\/figure>\n<\/div>\n\n\n

Having cash on hand is important, but only when it\u2019s cash for a reason<\/em>. If you\u2019re someone who is inclined to make quick decisions and impulsive choices (no judgment!), having too much liquidity could make it too <\/em>easy for you to instantly jump on investments and big purchases when, truth be told, you could probably benefit from having a few days to cool off and make sure you actually want <\/em>to say yes to a new car or backing your friend\u2019s alpaca farm.
<\/p>\n\n\n\n

The good news? As it goes with most fears, they dissipate under the bright light of information and facts. There are tested and proven strategies for logical financial planning that can effectively silence that worried little voice (or at least make it super small and quiet and irrelevant) that says, \u201cWhat if you don\u2019t have enough?\u201d There is <\/em>a reasonable amount of cash to keep around \u201cjust in case.\u201d
<\/p>\n\n\n\n

What to do:<\/em><\/strong> <\/em>Well, first of all, sleep on it. That said \u2014 and please forgive us for invoking this acronym in 2019 \u2014 YOLO. Only you know what opportunities are worth jumping in. If an investment opportunity or a potential big purchase pops up, and your judgment (or your gut or whatever you listen to) tells you to go for it, we would never tell you not to do it. But we will <\/em>tell you that the possibility of this happening is not a good reason to keep an overabundance of cash on hand. You can always dip into your emergency fund and replenish it later. If you have a Wealthfront individual, trust, or joint investment account of $25,000 or more, you automatically have a line of credit available, meaning you can very easily <\/em>borrow cash<\/a> up to 30% of the value of your investment. Part of why we created this feature is so you could say \u201cyes\u201d to things while keeping your money working for you.
<\/p>\n\n\n\n

In a perfect world, you would never have this problem.<\/strong>
<\/h4>\n\n\n\n

The real <\/em>ideal situation would be having the ability to automatically have your whole paycheck split up and routed to various investment and cash accounts based on the goals and priorities you\u2019ve specified. (We want that too. We\u2019re working on it<\/a>.) But Wealthfront clients already have tools at their disposal when it comes to nailing a just right <\/em>level of liquidity for their needs. We want you to have the flexibility you need from your money without suffering the disadvantages of having too much of your cash sitting on the bench when it could be in the game, invested and actually working toward your long-term financial goals. This is basically the entire thought process that inspired us to create Wealthfront\u2019s Portfolio Line of Credit<\/a>. It lets you keep your cash invested while killing any cash-flow anxiety that might otherwise prompt you to keep more of your assets in a cash account. (And our clients loved this so much, we made it available to even more people<\/a>.) Because your line of credit is secured by your diversified investment portfolio, we can keep interest rates low. (The current rate as of June 12, 2024 is 6.41%.)<\/p>\n\n\n\n

So you can finally cool it with your cash hoarding \u2014 Wealthfront has your back. You definitely can <\/em>have too much cash, but you can never have too many back-up plans. <\/p>\n","protected":false},"excerpt":{"rendered":"

Where is the line between what cash you should hang onto and what you should invest? Here are a few signs you might be overshooting the cash zone.<\/p>\n","protected":false},"author":129,"featured_media":10323,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1278],"tags":[2153,1604,1281,2205,2209],"coauthors":[82],"class_list":["post-10321","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-planning","tag-cash","tag-emergency-fund","tag-investing","tag-portfolio-line-of-credit","tag-savings"],"acf":[],"yoast_head":"\nHow Much Cash Should You Have? 4 Signs You Have Too Much<\/title>\n<meta name=\"description\" content=\"Here are the signs you're holding too much cash \u2013\u2013 and what you can do to fix it.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How Much Cash Should You Have? 4 Signs You Have Too Much\" \/>\n<meta property=\"og:description\" content=\"Here are the signs you're holding too much cash \u2013\u2013 and what you can do to fix it.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/\" \/>\n<meta property=\"og:site_name\" content=\"Wealthfront Blog\" \/>\n<meta property=\"article:published_time\" content=\"2019-05-01T19:52:13+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-06-12T18:47:30+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.wealthfront.com/blog\/wp-content\/uploads\/2019\/04\/unnamed-2-scaled.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2560\" \/>\n\t<meta property=\"og:image:height\" content=\"922\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"The Wealthfront Team\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@Wealthfront\" \/>\n<meta name=\"twitter:site\" content=\"@Wealthfront\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"The Wealthfront Team\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"8 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/\",\"url\":\"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/\",\"name\":\"How Much Cash Should You Have? 4 Signs You Have Too Much\",\"isPartOf\":{\"@id\":\"https:\/\/www.wealthfront.com/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.wealthfront.com/blog\/wp-content\/uploads\/2019\/04\/unnamed-2-scaled.jpg\",\"datePublished\":\"2019-05-01T19:52:13+00:00\",\"dateModified\":\"2024-06-12T18:47:30+00:00\",\"author\":{\"@id\":\"https:\/\/www.wealthfront.com/blog\/#\/schema\/person\/3eca21c0f00c276ebcaa3d634995cb77\"},\"description\":\"Here are the signs you're holding too much cash \u2013\u2013 and what you can do to fix it.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/#primaryimage\",\"url\":\"https:\/\/www.wealthfront.com/blog\/wp-content\/uploads\/2019\/04\/unnamed-2-scaled.jpg\",\"contentUrl\":\"https:\/\/www.wealthfront.com/blog\/wp-content\/uploads\/2019\/04\/unnamed-2-scaled.jpg\",\"width\":2560,\"height\":922},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.wealthfront.com/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"4 Signs You Have Too Much Cash, And What To Do To Fix It\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.wealthfront.com/blog\/#website\",\"url\":\"https:\/\/www.wealthfront.com/blog\/\",\"name\":\"Wealthfront Blog\",\"description\":\"Personal Finance & Investing Insights\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.wealthfront.com/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.wealthfront.com/blog\/#\/schema\/person\/3eca21c0f00c276ebcaa3d634995cb77\",\"name\":\"The Wealthfront Team\",\"description\":\"The Wealthfront Team believes everyone deserves access to sophisticated financial advice. The team includes Certified Financial Planners (CFPs), Chartered Financial Analysts (CFAs), a Certified Public Accountant (CPA), and individuals with Series 7 and Series 66 registrations from FINRA. Collectively, the Wealthfront Team has decades of experience helping people build secure and rewarding financial lives.\",\"url\":\"https:\/\/www.wealthfront.com/blog\/author\/teamwealthfront\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"How Much Cash Should You Have? 4 Signs You Have Too Much","description":"Here are the signs you're holding too much cash \u2013\u2013 and what you can do to fix it.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/","og_locale":"en_US","og_type":"article","og_title":"How Much Cash Should You Have? 4 Signs You Have Too Much","og_description":"Here are the signs you're holding too much cash \u2013\u2013 and what you can do to fix it.","og_url":"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/","og_site_name":"Wealthfront Blog","article_published_time":"2019-05-01T19:52:13+00:00","article_modified_time":"2024-06-12T18:47:30+00:00","og_image":[{"width":2560,"height":922,"url":"https:\/\/www.wealthfront.com/blog\/wp-content\/uploads\/2019\/04\/unnamed-2-scaled.jpg","type":"image\/jpeg"}],"author":"The Wealthfront Team","twitter_card":"summary_large_image","twitter_creator":"@Wealthfront","twitter_site":"@Wealthfront","twitter_misc":{"Written by":"The Wealthfront Team","Est. reading time":"8 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/","url":"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/","name":"How Much Cash Should You Have? 4 Signs You Have Too Much","isPartOf":{"@id":"https:\/\/www.wealthfront.com/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/#primaryimage"},"image":{"@id":"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/#primaryimage"},"thumbnailUrl":"https:\/\/www.wealthfront.com/blog\/wp-content\/uploads\/2019\/04\/unnamed-2-scaled.jpg","datePublished":"2019-05-01T19:52:13+00:00","dateModified":"2024-06-12T18:47:30+00:00","author":{"@id":"https:\/\/www.wealthfront.com/blog\/#\/schema\/person\/3eca21c0f00c276ebcaa3d634995cb77"},"description":"Here are the signs you're holding too much cash \u2013\u2013 and what you can do to fix it.","breadcrumb":{"@id":"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/#primaryimage","url":"https:\/\/www.wealthfront.com/blog\/wp-content\/uploads\/2019\/04\/unnamed-2-scaled.jpg","contentUrl":"https:\/\/www.wealthfront.com/blog\/wp-content\/uploads\/2019\/04\/unnamed-2-scaled.jpg","width":2560,"height":922},{"@type":"BreadcrumbList","@id":"https:\/\/www.wealthfront.com/blog\/4-signs-you-have-too-much-cash\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.wealthfront.com/blog\/"},{"@type":"ListItem","position":2,"name":"4 Signs You Have Too Much Cash, And What To Do To Fix It"}]},{"@type":"WebSite","@id":"https:\/\/www.wealthfront.com/blog\/#website","url":"https:\/\/www.wealthfront.com/blog\/","name":"Wealthfront Blog","description":"Personal Finance & Investing Insights","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.wealthfront.com/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.wealthfront.com/blog\/#\/schema\/person\/3eca21c0f00c276ebcaa3d634995cb77","name":"The Wealthfront Team","description":"The Wealthfront Team believes everyone deserves access to sophisticated financial advice. The team includes Certified Financial Planners (CFPs), Chartered Financial Analysts (CFAs), a Certified Public Accountant (CPA), and individuals with Series 7 and Series 66 registrations from FINRA. Collectively, the Wealthfront Team has decades of experience helping people build secure and rewarding financial lives.","url":"https:\/\/www.wealthfront.com/blog\/author\/teamwealthfront\/"}]}},"_links":{"self":[{"href":"https:\/\/www.wealthfront.com/blog\/wp-json\/wp\/v2\/posts\/10321","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.wealthfront.com/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.wealthfront.com/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.wealthfront.com/blog\/wp-json\/wp\/v2\/users\/129"}],"replies":[{"embeddable":true,"href":"https:\/\/www.wealthfront.com/blog\/wp-json\/wp\/v2\/comments?post=10321"}],"version-history":[{"count":4,"href":"https:\/\/www.wealthfront.com/blog\/wp-json\/wp\/v2\/posts\/10321\/revisions"}],"predecessor-version":[{"id":17217,"href":"https:\/\/www.wealthfront.com/blog\/wp-json\/wp\/v2\/posts\/10321\/revisions\/17217"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.wealthfront.com/blog\/wp-json\/wp\/v2\/media\/10323"}],"wp:attachment":[{"href":"https:\/\/www.wealthfront.com/blog\/wp-json\/wp\/v2\/media?parent=10321"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.wealthfront.com/blog\/wp-json\/wp\/v2\/categories?post=10321"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.wealthfront.com/blog\/wp-json\/wp\/v2\/tags?post=10321"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.wealthfront.com/blog\/wp-json\/wp\/v2\/coauthors?post=10321"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}