Too Much Cash

Welcome to this week's edition of The Weekly Trail Report, where we share,

1 Story, where real stories of architects and engineers meet tailored financial strategies,

1 Actionable Tip, to provide actionable insights and guide you towards financial success,

1 Financial Term, to demystify key concepts and empower your decisions.

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1. Story: Cassy Has Too Much Cash

Cassy thought she was doing the smart thing.

She had built a thriving 5-person architecture firm, and after a few rocky early years, the business was finally cash flowing well.

Every month, after paying expenses and salaries, whatever was left over stayed in the business account.

By the time we met, Cassy had quietly built up over $400,000 in cash.

When I asked her about it, she shrugged.

“It just feels safer to leave it there. You never know what could happen.”

On the surface, it made sense.

More cash meant more security. 

Right?

Not exactly.

When we dug a little deeper, Cassy realized the cash wasn’t giving her peace—it was giving her paralysis.

She wasn’t sleeping better at night. She was worrying:

• Should I be investing some of this?

• Am I being irresponsible if I take some out personally?

• What if I need it later?

The “safety” she thought she had built was actually fear in disguise.

Cash is important.

A strong operating reserve is critical for a healthy business.

But too much idle cash comes at a cost.

Inflation chips away at its value.

Investment opportunities pass by.

And psychologically, it keeps you locked in a defensive posture—always bracing for disaster, never building for growth.

Cassy wasn’t building wealth.

She was stockpiling anxiety.

So we created a plan:

✅ We set a clear operating reserve target—enough to cover six months of core business expenses.

✅ We carved out personal distributions to fund retirement and investment accounts.

✅ We set up a simple investment strategy that kept a portion accessible but put the rest to work for long-term goals.

We didn’t drain the business.

We right-sized the cash—and right-sized the risk.

“I didn’t realize how much it was weighing on me,” Cassy said. Now I feel like I’m actually moving forward instead of just sitting still.”

Cash is important.

But cash alone isn’t a strategy.

Security doesn’t come from hoarding money—it comes from having a plan for it.

If you’re sitting on a growing pile of cash, it might be time to ask:

Are you protecting yourself—or holding yourself back?

2. Actionable Tip: Set a Target for Your Operating Reserves

Cash is critical for any business. But without a clear target, it’s easy for a growing cash balance to create more confusion than confidence.

Instead of guessing how much is “enough,” set a specific reserve goal.

A good starting point for most firms is 3 to 6 months of core business expenses.

This isn’t just rent and payroll—it’s the essential costs you’d need to keep the business running during a slowdown or unexpected event.

Once you reach that reserve target, you can stop stockpiling.

You don’t have to live in fear of “what if.”

Any cash above your reserve can be put to work—whether that’s investing for the future, funding growth opportunities, or strengthening your personal finances.

Structure creates clarity.

Clarity creates confidence.

When every dollar has a purpose, you stop feeling stuck—and start moving forward with peace of mind.

3. Financial Term: Inflation Risk

Inflation risk is the danger that the purchasing power of your money will decline over time as prices rise.

Even if your cash balance stays the same, its ability to buy goods and services shrinks year after year if it's not keeping pace with inflation.

For example, if inflation is 3% and your cash earns 0%, you’re effectively losing 3% in purchasing power annually—without ever making a bad decision. The erosion just happens quietly in the background.

Holding some cash is essential for stability and flexibility.

But holding too much cash exposes you to inflation risk—the silent thief that can eat away at your financial security over time.

A smart strategy balances protection (reserves) with growth (investments), so your money isn’t just sitting still—it’s working to increase your purchasing power.

Happy Trails,

Ryan

Disclaimer: We employ fictional characters to illustrate financial concepts faced by individuals in the architecture and engineering industry. Any resemblance to real persons, living or dead, is coincidental. While the stories are inspired by our experiences, the specific details, circumstances, and outcomes mentioned are entirely fictional and created for educational purposes only. Real client information is strictly confidential and never disclosed without explicit consent. Our aim is to provide relatable examples for educational purposes, respecting the privacy and confidentiality of our clients. This information is presented for educational purposes only and is not to be considered financial, tax, legal, or investment advice.