The Money Question Nobody Can Answer But You
By: Rocco Pendola
Tags: Personal Finance, Money, Saving, Investing, Self

Most personal finance experts would likely ridicule you for keeping money under your mattress. This is where they miss both the point and the long game.

You might be the type of person who — quite literally — needs to be close to your money. You can’t get much closer than under your mattress.

Others might be like, “hell, no.” Money under a mattress means money left unattended. Someone could steal it when you’re not home. Or they might gently lift the mattress as you’re sound asleep and silently snag a few wads of cash. These people might opt for a safe, bolted to the ground and held down by cinder blocks.

I’m not one of these people, however I can totally empathize with those who are.

I’m more like this:

It all comes down to cash security. If you’re cash insecure — which is often the case when you’re in debt and lack ample cash on hand — it’s a tough psychological move to keep money in a seemingly faraway land. While you can sell stock, withdraw money, and have it hit your bank account in as little as a couple to a few business days with most online brokers, money in stocks doesn’t feel quite as liquid. Because it isn’t.

My mattress or safe is my bank account. I need ample cash in my bank account so I feel cash secure and, equally as important, so I don’t make stupid investment-related decisions.

On the ground that looks like this: I have money invested in stocks. To realize the explosive growth of compounding, I need to keep it there. But something that requires cash comes up. Or I perceive I’m low on cash (even if I’m objectively not) and freak out. So I sell my stock. I shoot myself in the proverbial wealth-building foot. I use the proceeds to satisfy my current cash needs.

According to many personal finance douchebags, I keep too much money in bank accounts — my mattress or safe equivalent. They riff endlessly about inflation. About making your money work for you. But what they fail to take into account is that stupid investment decisions (like frantic sales of stock) can produce losses that render the impact of inflation relatively insignificant. Beyond this, they fail to respect the role individual psychology and emotion play in the decisions we make with our money.

Nobody can decide for you how much cash you should keep on hand and where or how you should keep it. This is a personal decision. The faster everybody realizes this, the better we’ll all be.

Here’s the sucky part of this whole dynamic. There’s a snowball’s chance in a warming climate that the first piece of personal finance advice someone comes across might be, “Fear Inflation, Don’t Keep Too Much Cash on Hand!” There’s generally no nuance associated with this horrific, black and white advice.

Articles and related pronouncements that focus on the evils of inflation and hoarding cash do little more than lay out seemingly objective assessments of what inflation is, why it’s bad, and how it’s going to make you poor in 20 or 30 years even if you manage to save a ton of money. Guidance that focuses on inflation tends to leave out the psychological components of personal finance.

There’s no greater sin in personal finance than ignoring the psychological aspects of our relationships with money.

This is one reason why Ben’s article is so great, and I wanted to piggy back on it.

Ben outlines his experience. He finds comfort in, theoretically, not needing his 9-to-5 job to survive. He has layers of financial security in place. If he loses his day job, he can cover his expenses with his side hustle. If he loses both, he has his emergency fund at the ready. He sleeps well at night because he hopes and intends to never touch that emergency fund. For him, the way his personal financial setup developed provides the ultimate in household economic security.

I get off on stories like this.

They empower individuals rather than waxing pretentious and top-down on them. Here’s Ben’s personal experience and story. Here’s my personal experience and story. Listen to them. Consider them. Take from them what you will.

But, most of all, use them to help figure out where you stand — practically and psychologically — so you can best answer your questions and devise a personal financial strategy that not only works for you, but helps you sleep at night.