|
It might not seem like a large bank account balance would be a problem, but it often is. Many clients hire me specifically to plan to deal with this issue.
Whether it's your job that gives regular bonuses, your spending is far below your income or you received a large one-time amount, cash in a bank account casuses pressue to make a decsision. The right decision.
Some general considerations if you are in this situation:
do you have an emergency account? If you lost your income for 6 weeks to 6-8 months, how would you pay your bills? If you don't have any emergency account, consider moving the cash into a savings account (if it is currently in your main chequing account). This money's job is to be available; it's not irresponsible to have the money 'sit there doing nothing'. It's job is to protect your financial stability.
Are you saving for a specific purchase or a known expense? If yes, leave that money in cash. Sometimes, clients tell me that they feel like they could be gaining a higher return, or doing something else with the money. If you are considering investing in either the stock or bond market, you are taking risk. Risk that your investment might be worth less when you need to sell it than the day you bought it. If your timeline is less than 3 years for a purchase/ expense, you don't have the time to invest without taking on large amounts of risk (aka- you would be gambling with money that you know you need in a certain amount in a certain time).
Did this money come to you through a loss or a big life change? Is this inheritance money? Severance from a job loss? A settlement after a separation/divorce? Sale of a business? I recommend taking time to review your priorities if your money came from any type of 'sudden wealth' event. In my experience, clients take about 12-18 months to make any decisions on an inheritance. You need time to review your new situation, set new priorities and test out what your life looks like now. Using smaller amounts to pay off high-interest debt or purchase something that is meaningful to you is reasonable, but if you are feeling overwhelmed or a bit lost with the money goals, put it into a savings account, gather information and ideas and make decisions later.
If the bank or any other advisor is pressuring you to make a decision or purchase a product, I recommend getting another opinion. There is rarely a situation that demands a decision on money like this before you are ready. On the other hand, there are very real consequences to you to making a decision that doesn't align with your situation, goals or values.
|
