How much Cash is too much Cash ?

Author

AJ Neeme
March 02, 2025

A common statement I get from readers is “I have too much sitting in cash.I need to start investing”

Obviously, this isn’t the worst financial challenge to have; but it isn’t ideal.

Your cash IS losing value to inflation and it’s not working for you.

But when I ask “How much cash do you think is too much cash ? and Why ?” they rarely have an accurate answer.

The thing is $20K for Person A might be too much. 

But, too little for Person B.

Here’s how I look at calculating Excess Cash:

1. Determine my monthly expenses. Ex: $2,000

2. How many months worth of expenses do I want covered ? (3-6 months is the minimum recommended. I aim for 1 year. It helps me sleep better at night.). This is my Emergency Fund.
Ex: $2,000*12 months = $24,000

3. Do I have any short to medium term expenses I’m expecting ? House deposit ? Vacation ? (medium term is 3 to 5 years) Ex: $5,000 for travel

4. Amount of cash I need: $24,000 + $5,000 = $29,000

In this case, if I have $40,000 in total cash, I have an excess of $11,000 ($40,000-$29,000=$11,000).

However, if I expect to pay a $30,000 deposit on a house in the next 3-5 years, then I actually need to build up MORE cash. 

So, if you’re feeling like you have “too much cash”:

1. Get Precise: determine how much is too much cash

2. Check your Emotions: Is it actually FOMO because you’re seeing stocks/investments rise ?

3. Make sure you don’t fall into the loop of “Never enough cash”. Cash feels safe and “saving” is a good thing. But it can become an excuse to take the next step (ex: investing)

Does the above sound complicated ? I’ve built a system for people just like us:

Busy and in Search of a Money roadmap.

It’s the exact system I used to go from paycheck to paycheck to:

➡ Regularly saving/investing between 30 to 40% 

➡ 1 year of Emergency Cash

➡ $6 Figures invested

➡ Splurging on what matters

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The information contained in this newsletter is for general informational purposes only. It should not be construed as financial or investment advice. Please consult a qualified financial advisor before making any investment decisions.