House rich and cash poor: lessons on liquidity

Last week, I went into a local coffee shop in desperate need of a midday jolt of caffeine. Just as I was about to place my order, I was told their credit card machine was down so I would need to pay in cash. As I don’t generally carry much, if any, cash, I knew the double espresso I’d been thinking about just wasn’t going to happen. It wasn’t a great start to a long afternoon of meetings.

We all run into situations like this from time to time, and my coffee example didn’t really matter much to my life (though it was a tough afternoon!). But in personal finance the fact that sometimes you have the money to buy something but can’t, because your money isn’t immediately accessible, is important and is called “liquidity.” One of the expressions you sometimes hear about liquidity (or being liquid) is “house rich and cash poor.” This refers to people who own nice houses but have no extra money for furniture, a car, or the other necessities of life. It’s not the biggest problem out there, but it is a problem.

The World Series just ended, and baseball is front of mind. So a related item to liquidity is Shohei Ohtani’s most recent contract. For those baseball fans out there, you’ll know he signed the largest contract in the history of baseball in 2024 (since exceeded by Juan Soto) — $700 million over 10 years. While that’s certainly worth noting, what is interesting is that he deferred 97% of his payments for over 10 years. So, while Ohtani is undoubtedly rich by any standard, depending on how he chooses to spend his money in the coming years, he could end up short of cash. A “first world problem” for sure, but a potential problem nonetheless. If you are interested in more details about this contract, the Poole Business school team at NC State wrote an interesting article about it last year .

For those of us closer to average in compensation, which is just about everyone, the lesson is simpler — building wealth and having access to that wealth are related, but different, things. And we need to pay attention to both. Most of the guidance out there suggests up to three months of income in a rainy-day fund once you are in your working career. But starting with whatever you can save today and working it up slowly to at least $500 over time is a good goal to get going. Keep that money accessible in a checking account or savings account at a bank — and even some in cash, just in case. It doesn’t really do you any good for this purpose if you invest it in either illiquid investments like real estate, or volatile assets like stocks or crypto.

For all of us, being sure that you can meet essential expenses when things go wrong is an important part of financial well-being, and a key but underappreciated way to have an even happier life. I certainly would have had a happier day with some rainy-day cash in my wallet at the coffee shop!

 State Treasurer Brad Briner is focused on preserving, protecting and sustaining the state’s pension and healthcare plans.