🗑️ Cash is Trash
FIRE BTC Issue #23 - My buddy's $270k cash stash blunder
My buddy (let’s call him Hal) told me he has $270,000 sitting in cash.
I didn’t believe it until he showed me. Hal pulled up his phone, logged into his bank account, and there it was — a huge cash stash practically jumping off the screen.
To add insult to injury, that hefty balance earns exactly 0.00% interest.
Being FIRE-minded, we sometimes take for granted the different perspectives and approaches people have to money and finances. The topic is deeply personal, and emotion plays a big role.
We are hard-wired as humans toward loss aversion. For some of us, this runs especially deep. When it comes to personal finances, this can manifest in taking a “safe” position that ignores economic reality.
Not everyone approaches their finances with the deliberate focus that FIRE practitioners do. Some people just go with the flow of life without consciously working to optimize their financial position.
That’s where it seems my friend is at. He’s a smart dude with a successful career and a beautiful family. I couldn’t just let that slide, though.
I told him it’s crazy to hold that much cash. When he asked what I would do with it, I gave him an honest answer…
💸 Guaranteed losses
Cash is trash.
It’s a common refrain, and it’s something that the FIRE community understands very naturally.
In Bitcoin is FIRE Friendly, I described this as an intuitive awareness of three key truths about today's economic landscape.
Truth #1: The nature of money is not what it seems.
The reality of the monetary system is disconnected from the way we experience using money every day. Most people never question the nature of money — it’s simply embedded in daily life, invisible and unquestioned. Yet the money we exchange digitally, like paying a friend on Venmo, doesn’t transfer value physically. It’s just an update to internal ledgers managed by financial intermediaries. Tracing these digital ledger entries reveals the reality that today's money originates not from assets, but from debt. Banks lend new money into existence.
Truth #2: Life continually gets more expensive.
Because the fiat monetary system relies on debt, it requires continuous credit expansion — essentially "printing" more money — to remain operational, which inevitably pushes its value toward zero. This debasement becomes evident in the persistently rising prices of essential goods and services like housing, education, and health care, which are difficult to supply abundantly. Our money is engineered to lose value over time, and we see the effects in the form of these increasing costs, observed consistently over decades.
Truth #3: Saving money you’ve earned is not enough.
With relentless increased costs of the essentials in life, you're forced to consistently save and invest (adding risk) to maintain a positive savings rate. You must earn your money twice: first through work, then again through investing, because simply saving without risk won't secure your retirement.
Using cash as a savings vehicle is a guaranteed way to lose purchasing power. While it may be prudent to keep a small amount of dollars set aside for emergencies (3-6 months worth), holding more than that for an extended period of time is sub-optimal at best and financial suicide at worst.
For my friend, I’m pretty sure he’s not locked into $45,000 of expenses every month.
🧭 What options does Hal have?
After recognizing that his money is melting away, it’s time to find a better home for it. So what can he do?
Here are a few options he can consider:
High-yield savings account (HYSA): At the very least, he should move this money into an account that pays a yield. This will at least slow the bleeding. Right now, these accounts are paying 3.5% to 4.5% on balances. That would amount to over $9,000 of interest earned every year ($800+ per month). He would still be losing purchasing power over time, but at a much slower rate.
Bitcoin yield account: New financial products that integrate bitcoin are being built. One of my favorites is a cash account that pays a yield in bitcoin. River, the bitcoin company that I use for my DCA purchases, currently pays 3.8% on dollar balances. When I need to hold some cash for upcoming expenses, this is where I stash it. It’s a great way to keep some dollar liquidity on hand and stack sats in the process. Here is a referral link to River if you’re interested in setting up an account.
Buy real estate: $270k is plenty of money for a downpayment on a rental property. A lot of FIRE promoters harp on real estate as a way to create wealth and generate income. While true on the surface, buying investment properties to generate those returns requires a lot of leverage, maintenance, and dealing with tenants. It’s also very illiquid, which means you can’t access that wealth quickly if you need to. Real estate is a good choice for some people, but you should be aware of the downsides.
Buy stocks: Most FIRE practitioners opt for using stock market index funds, like the Vanguard Total Market Index Fund (VTI) or the Vanguard S&P 500 ETF (VOO), as their savings vehicle of choice. Historically speaking, US stocks have grown at 8%-10% annually on average, which provides a positive real return relative to most people’s personal inflation index. Plus, it’s liquid and accessible, and it provides a low-maintenance, easy way to build wealth.
Buy bitcoin: If you’re looking for the fastest way to build wealth over the medium to long term and you can stomach the volatility, bitcoin is your best bet. I personally believe there has never been a better time to buy bitcoin — the risks have never been lower, the fundamentals have never been better, and there are plenty of returns ahead of us as bitcoin’s adoption becomes mainstream. Risk-adjusted, there is no better game in town.
Of course, none of this is black and white. Hal’s $270k could be spread amongst a few or all of these options. Since he owns zero bitcoin at the moment (and there’s starting to be no excuse for that…), his strategy should involve BTC to some degree.
Since he expressed some loss aversion, he may feel more comfortable keeping some of this money in a HYSA, perhaps $50k. If it were me, I’d keep that $50k in the River cash account to earn yield in sats. This would be a great way for him to build his bitcoin balance over time in a stress-free way. I don’t like the real estate game, so I wouldn’t recommend that to him. Perhaps the other $220k could be split between stocks and bitcoin. Since he’s new to bitcoin and may be emotionally ravaged by its volatility at first, $25k to $50k is probably the right number as a starting point. The remainder can go to VTI.
🤑 If I woke up with $270k
I don’t like to give people direct advice, because I’m not in their heads and don’t know the full picture. With friends, it’s especially dangerous, because I don’t want to take the blame if things don’t work out to their expectations. My ability to withstand volatility and be comfortable with a long-term plan comes from conviction in the FIRE approach and confidence in the assets I own.
All that said, I did tell Hal what I would do if I woke up with $270k of toxic cash in hand. By the end of the next business day, it would be turned into bitcoin.
I also told him he probably shouldn’t do that, since he has a 0% allocation and doesn’t yet understand it. He couldn’t handle the volatility.
“But Trey — would you really smash buy the whole $270k in one day??”
Most likely, yes.
Dollar-cost-averaging is a great strategy to manage the emotional rollercoaster that comes with bitcoin’s volatility. But the price of bitcoin goes up on average every day, and being out of the market for the best 10 days of each year evaporates all of your gains.
I wrote about how to buy bitcoin in a previous issue of FIRE BTC:
We are at an inflection point in bitcoin’s global adoption. The race to acquire bitcoin is truly heating up. On any given day, we could wake up to an announcement that the US government or some other nation state or a Magnificent 7 company like Meta has purchased a substantial amount, and the price almost immediately doubles.
When that happens, I don’t want cash burning a hole in my pocket.
That’s it for this week. Thanks for reading!
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Until next time,
Trey ✌️