Cash plays a crucial, albeit often overlooked, role in any financial plan — providing you with the flexibility to handle unexpected expenses. But as your wealth grows, the composition of both your portfolio and your personal balance sheet (including your allocation to cash) will shift. Hold too much in low-yielding cash equivalents, and you’ll sacrifice opportunities to grow your wealth. Hold too little, and you could face liquidity challenges that force you to sell off investments that could trigger a tax liability.

It’s not at all uncommon to see an individual’s cash levels shrink as their wealth grows. Why? Because substantial wealth opens the door to owning more sophisticated but illiquid investments — things like real estate, hedge funds, private equity and even works of art. Yet, you still need liquidity to fund a large purchase, pay a tuition bill or take advantage of an unexpected opportunity.

Many people see cash as their ultimate safety net. It’s there for emergencies, smooths out life’s ups and downs, and covers big-ticket expenditures. But how much is enough? And what’s the best way to handle the extra? Robert Dyer, Managing Director, Private Wealth Advisor, puts it this way: "Cash is the lowest-return asset on your balance sheet. While it’s essential to keep some cash on hand, having too much can hold you back from achieving your financial goals." The key is to strike a balance. Keep enough cash to feel secure, but think about putting the rest to work in ways that align with your plans for the future.

While there are many types of financing available, certain types of debt may be more favorable than others and can help you wisely fund investments that will grow in value or generate income. The right kind of debt can be a strategic tool that you can use for a wide range of purposes — from providing much-needed liquidity to financing major purchases or mitigating estate taxes. In short, debt can provide valuable leverage to strengthen your personal balance sheet.

Whether you’re short of cash on hand to meet immediate needs or simply prefer to ‘keep your powder dry’ and save your available cash for another purpose, the strategic use of credit can be an invaluable liquidity management tool.

Keep in mind that your assets represent just one side of your balance sheet. Secured lines of credit, like a securities-based loan or a home equity line of credit (HELOC), afford you a simple and straightforward way to generate additional cash flow and liquidity using the liability side of your balance sheet.

For wealthier clients, it’s a way to borrow against your longer-term assets — often at highly competitive rates — to temporarily fund a major expenditure or unexpected tax liability. For instance, you might want to tap into a line of credit to facilitate the upfront cash purchase of a new home while you take your time to secure the most advantageous mortgage terms. Common lending solutions for liquidity management include:

Patrick Bitter, a director for high-net-worth lending, points out, "Lending tools such as securities-based lines of credit allow you to access liquidity when you need it, for as long as you need it, without having to disrupt your investment strategy and possibly trigger capital gains taxes. For wealthy individuals and families, it’s a flexible and efficient way to manage liquidity needs and your balance sheet."

Life doesn’t always come with a steady cash flow. Whether it’s a larger-than-expected tax liability, a philanthropic desire, or an opportunistic business or investment venture, there are times when you may need extra liquidity. Credit lines can help bridge these gaps, letting you manage large outflows without sacrificing your financial momentum. Chelsea Botta, a Private Wealth Advisor, says, "Flexible credit solutions like securities-based lines of credit give you access to funds during uneven cash flow periods. It’s not just about having cash on hand but having the right tools to help keep your financial plan on track."

However, while it might feel ‘safe’ to leave large amounts of cash in low-yield accounts, it could cost you considerably in the long run. With cash management accounts typically yielding between 2-4% annually while the stock market averages can provide 8% annual return, you’ll need to carefully consider investing a portion of your cash reserves in a diversified portfolio if you expect to generate higher returns and grow your wealth over time. Michelle Mayer, a Managing Director and Private Wealth Advisor, explains, "When clients have excess cash, we often talk about whether that money could be working harder for them, but always with an eye on making sure they keep the liquidity they need for daily expenses or major purchases." Even small adjustments — like moving cash into investments with higher yields — can make a big difference over time.

Wealth planning doesn’t begin and end with your investments. It encompasses your entire personal balance sheet — including your cash flow needs and liabilities. When managed thoughtfully, a strategic liquidity management plan can unlock incredible new opportunities, reduce financial risk and help you accelerate the growth of your wealth over time. Strategic cash flow management is about stepping back to see the bigger picture. By staying invested and using credit wisely, you can create a wealth strategy that works for you both today and tomorrow.

But there’s no one-size-fits-all approach that works for everyone. Your cash management decisions will depend on a host of factors, such as the current makeup of your assets and liabilities, your anticipated short- and long-term cash flow needs, your appetite for risk and your overall wealth goals. The trick is to work closely with your advisor to make sure every dollar is pulling its weight. Ready to get started? Here are a few tips:

Ultimately, managing cash flow isn’t just about saving — it’s about making thoughtful choices that align with your goals. Whether you’re thinking about investing, exploring credit options or optimizing your cash reserves, your financial advisor can help you develop a plan that fits your needs. Connect with your advisor today to start empowering your cash to work harder for you.