How much "liquid cash" does one need?

[ScrimpAndSave]

I guess what I mean is ... how much cash do you need sitting around outside of retirement and investments?

After we buy a home, I am planning on having a $15,000 emergency fund. Then we will have sub accounts for car, vet, Christmas money etc. Is there anything more that we need in liquid cash? Do we send the rest to our cash to our ROTHs? It's only going to be about $200 a month going to our Roth's the start out...

Thanks!

[MiikeB]

I find it is nice to have a "slush fund" that I can go in to when I see a really good deal on something that I was saving for that I didn't quite have the money for, or things that come up that I want to do but didn't budget for, like last minute trips with friends. That way, if I spend from it I don't mess up the rest of my budget and feel bad.

[disneysteve]

Are you asking about an emergency fund or other cash? As we all know, the general advice for an EF is 3-6 months of living expenses. Suze Orman advises 8 months. That doesn't all have to be totally liquid. It could be in laddered CDs, for example. Some people look at their Roths as part of their EF since Roth contributions can be withdrawn at any time without penalty, but I'd only go that route if your Roth money won't be needed for retirement.

In your case, I think it will depend on where things stand with debt, particularly the student loans, and what you end up deciding as far as housing is concerned. It might make more sense to pay down debt than to do something else with spare cash, so I'm not sure that you can really have a firm answer to the question right now.

[jIM_Ohio]

Liquid is the key term.

15k- is that 3 months expenses, more, or less?

I recomend "layers" of an EF.
3 months needs to be liquid- as in you can get to 1 months expenses within 24 hours anytime. For some 6 months is needed. This is layer 1.
another 3-24 months needs to be liquid, but if there is a 3-7 day delay, should not be an issue. This depends on occupation and personal circumstance. This is layer 2. Coul take on more risk than layer 1, but is generally in something not too volatile.

For example- 1 spouse is self employed- 24 months expenses is recomended... but not all in cash. Maybe 6 months cash and other 18 in a mutual fund in a taxable account.

For example 2 spouses work, 18 months of larger income in a taxable account (the expenses covered by larger of two incomes).

For example getting close to retirement, kids starting college or other large expense and need more conservative investments.

I do not consider this part of asset allocation.
$200/mo to Roths to start works OK. Look to increase this with little increases ($20 here and $30 there begin to add up).

[MonkeyMama]

Here's another "it depends" question.

What do you need as far as an emergency fund? What do you need cash for in the near future and long-term future?

We are heavy in cash, but we have a lot of expenses (medical and dental come to mind) and we prefer to pay cash for automobiles and home improvements.

Aside from the cash set aside for those goals, we like to have $1k cash immediately accessible, and $5k cash sitting in our high yield savings account. I just feel uncomfortable when that gets below $5k.

This last year was very expensive for us (dental/medical bills) so I am considering upping my minimum to $10k readily accessible cash.

We have a larger efund, but the rest of the cash is in our ROTH - would take a few days to get.

[arthurb999]

I would say 6 months of living expenses...

[Ima saver]

We use to keep 6 months of expenses because my husband is self employed. Now, with the work situation, we keep many years worth in a cash account and certificates of deposit.

[ScrimpAndSave]

I can see what you mean. I am assuming that since we have a butt-load of student loans to pay off, we should keep our cash reserves a little lower. I am assuming we will have a house payment of $2,000 (including property taxes) and another $500 for all of the utilities (this is a high end estimate). So, that would be 6 months of expenses (including tv and cell phone - which are really luxuries and not necessities).

[disneysteve]

tv and cell phone - which are really luxuries and not necessities).

I agree that a cell phone is a luxury (unless it is your only phone) but keep in mind that if you have a contract, you might still want to count that as a necessary bill if something were to happen. The contracts often have hefty cancellation fees of about $200.

[ScrimpAndSave]

Yeah our phone had a cancellation fee of $175, but it decreases $5 per month that you have the plan...so now there is no cancellation fee.

I've been weighing the options of buying the home with 10% down and getting a second mortgage to cover the rest of the loan. It totally depends...its an idea...and it would get us in a house about a year sooner.

We will see. Weighing all options.

[webcontacts00]

Cash enough to support you and your family for at least 6-12 months should be good.

[MaxPowers]

Not trying to hijack, but...
I plan to have $20K liquid cash in my bank account. After I get that, besides my IRA, where else where my money go? into stocks? TSP? more cash? spend it?