Too much cash can be just as risky as too little. This video walks through a practical method to figure out the right amount of cash to keep on hand for monthly bills, emergencies, and upcoming big expenses. It’s a key step in aligning your money with your goals.

Topics Discussed:

• Emergency fund strategy
• Cash for short-term goals
• When to invest excess cash

Transcript:

Hi, everybody. Welcome. I’m Paul Sydlansky and this is Unlocking Hidden Value. Today we’re going to talk about a question we hear all the time, which is how much cash do you need to have on hand, and how much cash is too much cash to have on hand?

When we think about investing, we don’t think about cash as an investment. It’s a store of value, so when we’re trying to figure out how much cash to have on hand, there’s only really two reasons we want to have cash. The first is to pay our monthly bills, so we recommend one to two months of expenses in your checking account, and then after that it’s to cover emergencies. For most folks, the biggest emergency you can have, it’s going to be a job loss, and so think about if you had a job loss, how long would it take you to get another job? Six months, nine months, a year? You should have that amount in expenses saved away and held in cash in a high-yield savings account in case there is that job loss. This way, you know you are prepared in case of an emergency.

Now, once you’ve stored away that one to two months plus 3, 6, 9 months – whatever it is that you decide is appropriate for your emergency account – we really don’t recommend holding too much cash on hand after that. The only other time you should have cash is let’s say you have something coming up in the next year, whether that’s a new car you’re going to buy or a down payment for a second property, whatever that may be. If it’s less than one year, you should have that goal in cash. Other than that, we want all extra dollars invested so they’re working towards your long-term goals.

If you are not sure how to go about this or where to start, you can click on the button below to get our free guide that helps you walk through the process that we use for clients to help them decide how much cash is enough and how to allocate their remaining cash. If you have any questions, please don’t hesitate to reach out. We’re happy to help.

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Lake Road Advisors, a Fee-Only, independent financial planning firm with offices in Corning, NY, Ithaca, NY and Portland, OR works with clients virtually all across the country. Paul Sydlansky, the founder of Lake Road Advisors LLC, has worked in the financial services industry for 20+ years. Prior to founding Lake Road Advisors, Paul worked at Morgan Stanley in Manhattan for 13 years. While at Morgan Stanley, Paul was a senior-level manager within the Institutional Equities Department. In 2018 he was named to Investopedia’s Top 100 Financial Advisors list. Paul received a Bachelor’s degree in Economics from Marist College and holds an MBA from New York University Leonard N. Stern School of Business. Paul is a CERTIFIED FINANCIAL PLANNER® and a member of the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network. They can be reached by phone at the Corning, NY office at (607) 438-2914, Ithaca, NY office at (607) 463-8400, or Portland, OR office at (607) 292-2172 or at the firm’s website at https://lakeroadadvisors.com/