ST. CROIX INSIGHTS
The Worst Financial Advice You Should Actually Follow!
BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
I can’t tell you how many times over years I keep hearing this particular phrase: How much cash should I have? It’s not once, not twice, but rather, it seems like it’s all the time. Yet it seems so fundamental to a financial plan. Are you ready for the worst financial advice I hear myself give all the time? Here it is: I believe you should hold 2 years of cash. No, that’s not a type-o. For some reason as a society we have it ingrained in our minds that we only need a nominal amount of cash in our checking or savings account, and we are good to go.
I want my clients to have $50,000, $100,000 or $500,000 or more in cash, and when I discuss that with my clients, I hear more often than not that that is the worst financial advice I could give. Yet it’s in the top 10 best planning ideas and yet so simple! Simple you say? Let me explain.
Cash is King
Cash is king in so many situations. Most individuals have too much of their assets held in liquid assets or invested in the stock market which in bull markets can work well, but in bear markets can certainly backfire. Just look at the market ups and downs. I believe an incredible advantage of holding a sizable amount of cash allows your investment portfolio time to recover in the event of market downturns. We’ve become 8 years removed from an economic downturn and our memories have faded that stock markets can and do drop. And if and when they do drop, holding a few years of cash allows your portfolio time to recover versus having to sell your holdings at loss in the event you need access to your monies.
“When we have cash, cash creates opportunities and freedom, especially in times of economic uncertainty.”
It is just downright simple & easy to have a savings account with $50,000, $100,000 or $500,000 or more in cash. Let’s not worry about rate of return when it comes to these dollars; instead focus on access and safety.
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Ask yourself- can my portfolio support my lifestyle in my retirement?