One of the downsides of hoarding cash is that it begins to burn a hole in your pocket after it exceeds a certain amount. When I was a kid, I remember it was always hard to save a $20 bill my grandmother gave me, so I spent it instantly on candy and coin-op video games. Since then, I’ve built up a tolerance against spending any cash under $50,000. I’ve seen too many missed opportunities and financial tragedies to not have a decent financial cushion.
My tolerance against spending is being tested with a 4X accumulation of what I’m used to because I don’t see many good investment opportunities. In fact, I expect real estate and equities to provide flat-to-negative returns over the next two years (will revisit my thesis at the end of 2016). Therefore, accumulating cash doesn’t feel like a bad investment.
I suspect many of you will be tempted to spend some of your extra money on wasteful things as well. It’s like going all day without eating and then denying yourself a freshly baked apple pie in order to continue starving yourself. Why punish yourself?!