It’s easy to be complacent when it comes to your surplus cash. There’s a lot to think about: how much should you hold on to for life’s uncertainties; what large expenses are coming up; should you wait for a market correction before you invest in the stock market? Work and life can be hectic and we often postpone these decisions – sometimes for years.
But a career’s worth of inertia could cost you 7 extra years of work.
So, why are people often complacent with their cash?
The current economic environment – characterised by high inflation, increased interest rates, volatile equity markets and even, perhaps, a tax hike – means that holding onto cash could prove very expensive.
As Einstein said: “compound interest is the eighth wonder of the world. He who gets it earns it; he who doesn’t pays it.” The compound impact of inflation can dramatically erode our ability to sustain our lifestyle, particularly in an age when we are expected to live well into our 90s.
Holding cash feels comfortable. There’s safety and security in having a healthy bank balance to fall back on.
This is linked to our cognitive bias for loss aversion: many studies show that the pain of losing feels psychologically twice as powerful as the pleasure of winning. When we think there is a chance we might lose in the short-term, we exercise caution. It feels better to be conservative and maintain the status quo than to take the risk.
But, holding cash is, in itself, a choice. And it’s a risky one, particularly over the long-term because you may need to grow your capital, ie work more, to sustain your lifestyle.
Inflation has been low and stable over the past few decades. Having cash in the bank hasn’t been too much of a problem because its value hasn’t been eroded by inflation.
Now, things have changed.
At Y TREE, we take a systematic, unemotional approach to managing your risk and liquidity. We always ensure that you have a safety net for the unexpected.
Any cash you hold above that buffer is put to work. Meanwhile, our technology continuously monitors and manages this process so you don’t have to.
In other words, we remove human inertia from your financial life. We want to maximise the efficiency of your balance sheet, giving you time back to spend on the things you value most.
Making the most of your liquidity is one of many multiple, marginal gains we create across your entire financial profile – risk mix, liquidity, currency, cost, structuring. Each little win compounds to significant value over time.
These efficiencies give you time you never knew you had. Time to spend on the things you care about most – children, businesses you’re passionate about, travel, retirement, house renovations, philanthropy. It’s up to you.
We are bringing money back to life.
Get in touch with your team if you want to know more about cash efficiency.
The value of investments as well as the income derived from them can go down as well as up and investors may get back less than the original amount invested. Changes to the macroeconomic environment may alter the results of this analysis. These figures are projections and are not guaranteed.
At Y TREE, transparency means making the complex simple. We give you a bird’s-eye-view of your financial life so you can make sense of what it means for you and your family.
We aggregate your data, pulling together all the strands of your financial life to give you an instantly accessible, intuitive and objective view. We carry out analysis that provides insight into your income, expenditure, assets and debts.
We create efficiencies at every level with multiple incremental gains that can compound to significant value over time. Compounding is one of the most powerful forces in the financial world; the earlier you start, the greater the impact.
We advise comprehensively on risk, liquidity, currency, cost and structuring – making continuous adjustments when needed.
At Y TREE, we connect your finances - your income, assets and debts - with the things you value most: your plans for the future, your family and the legacy you want to leave.
We design financial life strategies to meet your ambitions and enable you to navigate changes in lifestyle, health, family, business, economies and markets.
