What Happens to Your Money When You Do Nothing?

Doing nothing with your money feels safe — but it comes with real costs, both financial and emotional. In this episode, Tim explains why cash is essential for short-term stability but loses value over time to inflation, and why investing anything beyond your cash reserve is one of the most important financial moves you can make. He also explores two emotional patterns that keep people stuck: "the leaky bucket", where money slowly disappears without intention, and the "but what comes next" mindset, where fear of making the wrong decision leads to making no decision at all. The solution to both, it turns out, is the same: define how much cash you actually need, stick to that number, and put everything above it to work for you through investing.

One Key Takeaway: Making no decision for what to do with your money is itself a decision — and it usually costs you.

Links:
Send me a question to be answered on a future episode.
Sign up for the Keep It Easy newsletter.

What is The Thing We Never Talk About?

The Thing We Never Talk About is an educational podcast about personal finance for creatives and other weirdos. We'll discuss managing cash flow with a lumpy income, when to save & when to invest, and how to reduce stress & build confidence when it comes to your money. No hot stock tips, no complicated strategies, and no finance bro jargon. We'll hear from artists, musicians, creative professionals, and other weirdos about how they navigate these questions for themselves. The Thing We Never Talk About is hosted by Timothy Iseler, CFP®, a former recording & touring audio engineer with 18 years experience in the music industry.

Timothy Iseler: Hi, everyone.

Welcome to The Thing We Never Talk About.

My name is Tim Iseler.

I'm a certified financial planner, and I
run my own independent financial advisory

business, Helping musicians, artists,
and other people with weird jobs make

smarter decisions with their money.

You can learn more at iselerfinancial.com.

If you have suggestions for things you'd
like to hear about or a question you would

like me to answer in a future episode,
please visit iselerfinancial.com/podcast.

And if you like what you hear,
you can also subscribe to my

Keep It Easy newsletter at
iselerfinancial.com/newsletter.

I write about this kind of stuff
and share it there most weeks.

Today I wanna talk about a topic
that seems simple but still stops

a lot of people in their tracks.

What happens to your
money when you do nothing?

When you have an up and down, irregular
income, it can be pretty hard to know

how to use your money wisely during
those higher income periods so that it

will support you when things slow down.

And the way I tend to see that
manifest is a desire to keep

everything in cash or to just ignore
the issue and hope for the best.

But it's not just self-employed people
that get overwhelmed when they know

they should be doing more with their
money, but aren't sure where to start.

I've seen this happen to people after
a few years of steady pay increases

who now just have more cash than they
ever expected and don't know what

to do, as well as people who inherit
money and are so scared of screwing

it up that they end up doing nothing.

If any of this sounds like you, I want
you to know that you are not alone.

I'm gonna share a very simple rule of
thumb for understanding when to keep

your money in cash and when to invest it.

I've Said it before, I'll say it again:
keeping the right amount of cash in

an interest-bearing account is one
of the smartest moves you can make.

Everyone should aim for at least
three months worth of expenses,

But self-employed people should
aim for more like six months of

spending in a savings account.

Some Especially cautious people might
want to set aside one or even two full

years of spending before they feel
comfortable, and that's totally fine.

Again, having a big cash cushion
will seem like the smartest idea

you've ever had once you need it.

What I wanna talk about today is
something else: when you don't set a

purpose for your money, or you keep
moving the goalpost for how much cash

is enough, and that ends up holding you

back.

I'll be honest, when I started thinking
about this topic, I imagined I would

mostly talk about investing and
inflation and the difference between

short-term needs and long-term goals.

And I will talk about that
because it's important.

But the more I thought about it, the
more I realized that there's actually

a really big mental or emotional burden
that comes with knowing that you should

be making good decisions with your
money, but not knowing how to do that.

And that feeling of not knowing can have
a really big negative impact on your life.

But let's start with the nuts
and bolts side of it first.

I've already said that keeping enough cash
in an interest-bearing account is smart.

You can think of this as short-term
money to cover short-term needs,

like an unexpected car repair or a
medical expense, or even taking a

big swing on a project at work, which
you wouldn't be able to do if you

were living paycheck to paycheck.

Having money specifically designated
for these types of unexpected

short-term needs is really wise.

But cash in a bank account is
not effective for long-term

goals and hopes and dreams.

Almost by definition, a bank account
can't really pay above the rate of

inflation over a long period of time.

Banks are also subject to inflation,
and of course, they're trying to

turn a profit, so there's a limit
to how much interest they can

pay and still stay in business.

Here's an example: I hold my savings
in a high-yield cash account that

currently pays around three point three
percent annual percentage yield, or APY.

The most recent Consumer Price Index
report from the US Bureau of Labor

Statistics showed inflation over the last
twelve months at three point four percent.

So if I'm earning three point three
percent on my cash, but my expenses are

increasing at three point four percent,
that means that even an account paying

a relatively high APY is losing spending
power over time due to inflation.

So, while I encourage everyone to maintain
a sizable cash savings account at all

times, there is no benefit to keeping
extra money above that number in cash.

It actually loses value over time.

Cash works for the short
term, but not the long term.

So what should you do instead?

In my opinion, you should be
investing any money that you don't

need in the next two-ish years.

The S&P 500, which is a decent proxy for
the overall US stock market, has returned

about nineteen percent over the last year.

Compare that with inflation of three
point four percent, and you can see that

money invested in the stock market is
outpacing inflation by a wide margin.

But not everyone can stomach the
volatility of having everything

in the stock market all the time.

That's okay.

As much as I advocate for everyone having
an emergency fund, I also recommend

that everyone find a mix of investments
that matches their goals and timeline,

but also lets them sleep at night.

If being a little less risky with
your investments helps you stick

with it longer, that's a big win.

Compounding growth is a powerful
thing, but it only works if you

stick with it for a long time.

So a less risky investment mix that
you can stick with for years or decades

is a better match than a riskier
one that might offer higher returns

but makes you super stressed out.

For reference, even a very conservative
50% stock 50% bond investment mix,

which is a typical mix for retirees
who can't take on a lot of extra risk,

should be able to outpace inflation
over any meaningful period of time.

So just in terms of dollars and cents
and rates of inflation and rates of

return, doing nothing with your money
can cost you a lot in the long term

as inflation erodes your buying power.

If you want your money to work for
you over the coming years and decades,

you need to balance the short-term
stability of cash with the long-term

growth potential of investing.

Both are equally important
to your financial well-being.

That's the analytical side
of the argument, and I think

it's a pretty good one.

But when it comes to money, most
people don't actually make decisions

based on crunching the numbers.

They make decisions based on emotions.

Are you excited?

Are you scared?

Do you see opportunity where
someone else sees risk?

There are numbers attached to
those decisions, but emotion is

usually what influences how people
decide what to do with their money.

So let's switch from rates of
inflation versus growth and talk

about the emotional cost of not
doing anything with your money.

I want to explore two different
symptoms that I see a lot.

One I'll call "the leaky bucket", and the
other I will call "but what comes next?"

Here's a scenario that I've lived
through many times: you finish up

a big gig and you're flush with
cash, and even though you know that

money needs to last until your next
gig, you decide to live a little.

You go out for dinner with friends
and pick up the tab, maybe you treat

someone to a ticket for a concert
or a baseball game, you buy a few

things that you've been putting off.

You're not, quote-unquote,
doing anything with your money.

This is all just normal
quality of life stuff, right?

But then, sooner than you expected, that
checking account starts to dry up and you

realize you need to really pinch a few
pennies until that next paycheck comes in.

This is the leaky bucket.

You're not doing anything with your
money per se, but because you're also

not being intentional, it slowly and
steadily disappears, a little bit

here, a little bit there, until you
find yourself back to square one.

And it is emotionally draining to
go from feeling like you're on top

of the world to barely getting by.

Trust me, I've been there.

It sucks.

If you have an unpredictable income
and you get stuck in that cycle, You

end up giving up a ton of autonomy
by just not paying attention.

You feel jerked around by life instead
of in control of your decisions.

The second symptom I see is almost the
opposite: someone manages to save up a lot

of money and wants to be very smart about
using it, but there's this fear: what if

I make a decision and then things change?

What if I put my money in my IRA and then
something comes up and I need that money?

What if I invest and the stock
market goes down right away?

How can I make any decisions when
I don't know what comes next?"

Even worse, this mindset often looks
at the recent past and thinks, "If only

I had made that decision last week or
last month or last year, that would've

been smart, but now it seems too risky."

Here's an example: i've talked to
a few people in the last few months

who told me that they moved all
of their investments to cash last

year to get ready for a recession.

And expecting a recession
is not a, quote-unquote,

"wrong perspective" to have.

At any point in the last six
years, if you had said that all

the conditions for a recession were
happening, you would have been right.

But of course, a recession didn't happen.

The stock market has actually done
pretty well in those last six years.

I mentioned earlier that the S&P five
hundred has returned about nineteen

percent in the last twelve months.

So those people who moved their money
from investments to cash actually

missed out on a lot of upside.

In other words, even if you're
directionally correct about the potential

risks, if you get the timing wrong,
you still might end up worse off.

Here's the problem, though.

We know how the past worked out, so we
can say, "Ah, I wish I had invested last

year because it would have gone up."

But the "what comes next" mindset
then circles back to, "Yeah,

but what if I invest now and

the economy tanks?

I better just stick with
cash until I'm sure."

Do you see the inherent conflict in that?

The fear or uncertainty of what comes
next keeps you from making decisions

while simultaneously looking back
on the past and saying, "If only

I'd done X, Y, or Z back then."

You end up constantly worried about
the future and disappointed that

you weren't more bold in the past.

Just like the leaky bucket
mentality, this is an extremely

emotionally draining state of mind.

The solution to both of those symptoms
is to clearly define how much money you

need for the short term, then use that
as a benchmark for deciding when you have

extra money that can be invested or when
you need to cut back on your spending.

The leaky bucket person will benefit
from setting a cash savings goal because

it will both smooth out those income
ups and downs, and it will quickly let

you know when you're spending too much.

And setting a specific, well-articulated
cash goal, even if it's really big, can

help the what comes next person know
that they've got enough of a safety net

that putting extra money into investing
doesn't feel like such a big risk.

When you have a plan to help you
understand what to do with your money,

not only do you avoid confusing short-term
security with long-term goals, you also

get off the emotional rollercoaster
of always feeling like you should be

doing something different, but being
stuck because you don't know how.

One of the easiest ways to get started
is to define the size of your target cash

reserve and then put everything above
that to work for you by investing it.

As long as you have a number,
you can articulate why you chose

that number, and then you stick
with it, this method will work.

Okay, that's it for today.

Next week I'll be speaking with author
and game narrative expert Richard Dansky.

Richard writes for video games
and tabletop role-playing games,

as well as novels, short stories,
and an upcoming comic book.

There were some interesting similarities
and differences with how he thinks

about his craft compared with
other authors I've had on the show.

So I hope you will join me next week
for my conversation with Richard Dansky.

The Thing We Never Talk
About is for educational and

entertainment purposes only.

It's not legal, investment, or tax advice.

People on the show, including myself,
may have interests for or against

any investments discussed, so do
yourself a favor and don't ever make

any investment decisions based on
what you hear on this or any podcast.

If you like what you hear, please like
and subscribe to this show wherever

you are listening to it right now.

If you have a money or finance question
you'd like answered in a future episode,

please visit iselerfinancial.com/podcast.

And you can get my insights on money and
more delivered directly to your inbox by

subscribing to my Keep It Easy newsletter
at iselerfinancial.com/newsletter.

Thank you so much for listening.

I appreciate you.