Too much cash in EF?

[cypher1]

I'm sitting on about 35K in cash, with 65K in taxable. Cash broken down is about 12 mo EF of 24K, 6K for next year Roth, and the rest for tuition or vacation fund. I'm not looking for a different car for at least 2 years, and the extra cash is more for home repairs/maintenance.

While my job is relatively stable (knock on wood), does it make sense to start dumping more cash into taxable and stick with a 6-9mo EF?

The 12mo EF is more of peace of mind, but I'm starting to think if I really needed cash for something down the road, I could pull from taxables. Since the pandemic started last year have others upped their EF as well? Thoughts?

[Like2Plan]

FVRR ! (Just kidding)

If you can't think of any near term need and you have you EF adequately funded, it makes sense to invest the excess.

[cypher1]

FVRR ! (Just kidding)

If you can't think of any near term need and you have you EF adequately funded, it makes sense to invest the excess.

Is this WSB? LOL jk! I never did jump on FVRR bandwagon, and vaguely follow the thread since stocks are not normally my cup of tea. Is it too late?

Otherwise this year I've definitely been buying more into taxable for VTSAX since Roth was lump summed at the beginning.

[Like2Plan]

Is this WSB? LOL jk! I never did jump on FVRR bandwagon, and vaguely follow the thread since stocks are not normally my cup of tea. Is it too late?

Otherwise this year I've definitely been buying more into taxable for VTSAX since Roth was lump summed at the beginning.

VTSAX sounds like a good plan to me.

[disneysteve]

You certainly can have too much in cash. One thing is to look at your intended AA. Another, which it sounds like you've done, is to look at anticipated significant upcoming expenditures.

A lot of people are finding they're heavy on cash as a result of COVID. No travel. No dining out. Decreased commuting costs. Not buying new clothes. No sporting events or concerts. The income has continued but the expenses dropped off.

If it fits your overall investment plan and AA, VTSAX, or VTI - the ETF version, is a perfectly good option if you want to boost your stock allocation.

[LivingAlmostLarge]

I'm sitting on about 35K in cash, with 65K in taxable. Cash broken down is about 12 mo EF of 24K, 6K for next year Roth, and the rest for tuition or vacation fund. I'm not looking for a different car for at least 2 years, and the extra cash is more for home repairs/maintenance.

While my job is relatively stable (knock on wood), does it make sense to start dumping more cash into taxable and stick with a 6-9mo EF?

The 12mo EF is more of peace of mind, but I'm starting to think if I really needed cash for something down the road, I could pull from taxables. Since the pandemic started last year have others upped their EF as well? Thoughts?

So we had a lot of cash for many years. But the reason was we were thinking we were going to buy real estate. We gave up that fallacy about 18 months ago. A year ago into the pandemic I dumped all that excess cash into the market. Turns out it was a good buying opportunity. I'd have made more if i had DCA probably since 2017 but hindsight is 20/20. And truthfully i still look at RE and think I really want to pull the trigger. But I don't think right now we have the bandwidth to buy RE and build an empire I was hoping for. Multiple units and lots of free cash flow.

Instead now I have about 6 months of cash tied up in Ibonds i bought back in 2017/2018, I have 4 months of cash in savings account and 2 months of cash in checking account. I am trying to finagle our budget so I can still save and I'm not sure but I might be able to do it. Should I bring our EF lower? Maybe I'm really torn. It's a lot of cash but the ibonds i never see I just know I have it on treasury direct. DH has no idea how much cash we have or investments. He probably would panic if he saw our accounts right now and only 4 months in savings and 2 months in checking. He likes to see large cash savings.

But you are single cypher. If i were you I'd keep 2 months cash and invest the rest aggressively. I'd probably also take out subsidized student loans and pay them off within 6 months (BTDT actually). I'd aggressively invest too like 100% stocks if you keep 6 months cash and see if that sets up your portfolio to 90/10 asset allocation. Being less than 40? Go for it. You can always stabilize by working a bit longer or maybe you'll find you have more than enough.

I'm back to looking at running as lean as possible and investing everything to make up for our lack of savings.

[disneysteve]

Personally, we're on the glide path to retirement in 3-4 years, so I'm working to beef up our cash. I'd like to have 2 years of spending set aside when I hang it up. Right now we're at about 1.25 years or so.

[cypher1]

So we had a lot of cash for many years. But the reason was we were thinking we were going to buy real estate. We gave up that fallacy about 18 months ago. A year ago into the pandemic I dumped all that excess cash into the market. Turns out it was a good buying opportunity. I'd have made more if i had DCA probably since 2017 but hindsight is 20/20. And truthfully i still look at RE and think I really want to pull the trigger. But I don't think right now we have the bandwidth to buy RE and build an empire I was hoping for. Multiple units and lots of free cash flow.

Instead now I have about 6 months of cash tied up in Ibonds i bought back in 2017/2018, I have 4 months of cash in savings account and 2 months of cash in checking account. I am trying to finagle our budget so I can still save and I'm not sure but I might be able to do it. Should I bring our EF lower? Maybe I'm really torn. It's a lot of cash but the ibonds i never see I just know I have it on treasury direct. DH has no idea how much cash we have or investments. He probably would panic if he saw our accounts right now and only 4 months in savings and 2 months in checking. He likes to see large cash savings.

But you are single cypher. If i were you I'd keep 2 months cash and invest the rest aggressively. I'd probably also take out subsidized student loans and pay them off within 6 months (BTDT actually). I'd aggressively invest too like 100% stocks if you keep 6 months cash and see if that sets up your portfolio to 90/10 asset allocation. Being less than 40? Go for it. You can always stabilize by working a bit longer or maybe you'll find you have more than enough.

I'm back to looking at running as lean as possible and investing everything to make up for our lack of savings.

LAL, you brought up some great suggestions. I may slowly DCA taxable to get to 6mo EF. 2months is way too lean for me. I may be more your DH with seeing a nice cushion of cash in balance. I keep my AA around 90/10, but I'm leaning more to 95/5 like my current 401K. As for tuition, I'm only part-time plus my employer does reimbursement. So I don't mind paying out-of-pocket as anything I get refunded is redirected back to into school fund.

[kork13]

I'm sort of having the same argument with myself. We have ~$75k held in cash, with $25k of that as our 6mo EF, and $8k is reserved for our rental property (taxes, insurance, repairs, etc). The other 40k+? It's mostly set aside into designated sub accounts for travel, charitable giving, our next car, taxes/insurance... and ~$17k is unassigned as our personal slush fund for anything that comes up.

I feel like we have too much in cash savings, and could easily fold much of it into our investments. However, the savings accounts allow such an easy way of designating the money for their desired purposes, and I feel like having them there gives me "permission" to use them as such. For example, when we're finally able to travel again, it's emotionally easier to spend $5k out of our travel fund because I know it's there for that purpose. I'm still trying to decide what's "reasonable" in there.... But the amounts are definitely approaching the point that I may have to start either moving them into investments, or at least setting a cap on the cash I leave in there.

[Jluke]

Your expenses are 2k per month.

will that be higher if you were to lose your job? Thinking medical coverage.

based on the numbers and your plan I think 35k is a good target for you.

it might not make sense to have the 6k intended for next years Roth sitting in cash though.

at this point any new cash could go to your taxable investing account.

remember your 65k could go to 45k in a few bad trading sessions.

[LivingAlmostLarge]

LAL, you brought up some great suggestions. I may slowly DCA taxable to get to 6mo EF. 2months is way too lean for me. I may be more your DH with seeing a nice cushion of cash in balance. I keep my AA around 90/10, but I'm leaning more to 95/5 like my current 401K. As for tuition, I'm only part-time plus my employer does reimbursement. So I don't mind paying out-of-pocket as anything I get refunded is redirected back to into school fund.

As a single person with a house I think you can afford to take more risk. Here is a way to look at investing the cash is that when it gets large enough you could pay off the house in one fell swoop. The house right now looks impossible probably because of other diverting expenses likes school. But imagine having the taxable account to carry you in case as a single income you lose your job? That in and of itself is the time to tap it. Or your expenses will drop even lower once you could pay off the house and open a HELOC just in case.

[LivingAlmostLarge]

I'm sort of having the same argument with myself. We have ~$75k held in cash, with $25k of that as our 6mo EF, and $8k is reserved for our rental property (taxes, insurance, repairs, etc). The other 40k+? It's mostly set aside into designated sub accounts for travel, charitable giving, our next car, taxes/insurance... and ~$17k is unassigned as our personal slush fund for anything that comes up.

I feel like we have too much in cash savings, and could easily fold much of it into our investments. However, the savings accounts allow such an easy way of designating the money for their desired purposes, and I feel like having them there gives me "permission" to use them as such. For example, when we're finally able to travel again, it's emotionally easier to spend $5k out of our travel fund because I know it's there for that purpose. I'm still trying to decide what's "reasonable" in there.... But the amounts are definitely approaching the point that I may have to start either moving them into investments, or at least setting a cap on the cash I leave in there.

So Kork here is where I am as well. I struggled for a lot of years with my DH between our income and cash on hand and wanting to buy property and able to pay cash for anything we wanted. I did not invest the way I should in the market holding too much cash because of it. But at the same time we paid cash and for our home renovations, new cars, private school, travel etc. A lot of stuff that would probably have stressed me out if I had invested everything because I'm sort of like that. I don't like pulling money from our investments ever. Once it's gone it's gone, it's not coming out. I am not the type to ever borrow from an investment account.

That being said a few years ago you were the person who talked about ibond laddering I think? And I decided that I would quell my nerves by settling $60k (6 months of expenses) into ibonds knowing that I would preserve that permanently and I did. I now have an untouchable to me 6 month EF. We are a single income, high expense family. We cannot cut our expenses to the bone because we have a large mortgage there is only so much that can be done. So I now have an untouchable cash cushion and I have a cash savings account slush that I tap and let build or use. To me with 4 mouths (you have 5 i hope now!) and one income I am a bit more conservative than I used to be. So i keep 6 months cash on hand. We might want to buy a different car if we were to say get into an accident. I want to be able to loan someone (family) money. I want to pay for home renovations cash or travel in a blink without ever touching our investments. So I know back of my head I have a cushion that is for really job loss or maybe a major health issue. Otherwise I just play with the rest of our money.

So if you wanted to make yourself feel better go ahead and lock $25k into Ibonds and then leave your cash at 6 months $25k. Then invest the rest knowing you have a year basically covered. Truthfully? Would we even need the ibond money? I don't know, I'd like to believe that with unemployment and stuff DH would find a job within 3 months (right now I believe he still is pretty desirable). In 10 years? Maybe not but in 10 years I plan on being completely FI we are almost there now. We will definitely be there by my goal of 45 for DH where if he got laid off we wouldn't care.

You are there upon retirement from the military right? Then the pension and medical cover all your needs so you are set. I think until then the biggest fear is disability or death. Both of which I covered by buying excessive life insurance and disability insurance on DH.

[kork13]

So Kork here is where I am as well. I struggled for a lot of years with my DH between our income and cash on hand and wanting to buy property and able to pay cash for anything we wanted. ...... I don't like pulling money from our investments ever. Once it's gone it's gone, it's not coming out. I am not the type to ever borrow from an investment account.

That being said a few years ago you were the person who talked about ibond laddering I think? And I decided that I would quell my nerves by settling $60k (6 months of expenses) into ibonds knowing that I would preserve that permanently and I did. I now have an untouchable to me 6 month EF. ....
So if you wanted to make yourself feel better go ahead and lock $25k into Ibonds and then leave your cash at 6 months $25k. Then invest the rest knowing you have a year basically covered. Truthfully? Would we even need the ibond money? I don't know, I'd like to believe that with unemployment and stuff DH would find a job within 3 months (right now I believe he still is pretty desirable). In 10 years? Maybe not but in 10 years I plan on being completely FI we are almost there now. We will definitely be there by my goal of 45 for DH where if he got laid off we wouldn't care.

You are there upon retirement from the military right? Then the pension and medical cover all your needs so you are set. I think until then the biggest fear is disability or death. Both of which I covered by buying excessive life insurance and disability insurance on DH.

I do remember convincing you to go with the I-Bonds, and I do still like them. Funny thing, though, was that I ended up selling out of mine last summer to pull assets for buying our house in cash, and with our lower expenses, we didn't need so much in our EF. I ended up moving our EF to Ally, at least for now. I probably should get it back into the I-Bonds at some point though.

I think in the end, setting a max limit for our savings accounts will be the best way forward, at least for us (hard part being where to set those caps). I really like the flexibility of having plenty of cash on hand, and the reassurance that when I spend a large chunk of it, I know it's been so aside for it. Funny thing is that it's not really even a security thing (I think), because you're right -- I'll be FIRE once I hit military retirement. We're in a great place, I really just want the money I want to spend readily available to me, and the knowledge that I never need to resort to debt to spent that money.

[docstudent]

I was having a similar conversation with a friend and I’m somewhat stuck on an ideal EF account. At the moment, I have the following in cash and other investment accounts:

Savings account #1: $40,000 (currently saving $2000 per month)
Savings account #2: $4,000

Robinhood: $12,000

403b #1: $78,000
403b #2: $22,000
403b #3: $17,500 (Currently contributing $900 per month)

STRS: $121,500
Defined Benefit: $52,000

Mortgage: $176,000, value $402,000 (purchase price $235,000)

Salary: $117, 450 (take home $3989)
No credit card debt
Car: $499 month, $27,300
Mortgage: $1455 (including $125 extra on principal)
HOA: $360, Car insurance: $179.
Student loan: $623 (on hold till Oct of 21), part of the PSLFP and loan will be forgiven in April of 2025).
Fuel: $450, Groceries $250, Misc 280.

What would be reasonable to maintain in cash reserve?

[Jluke]

^^^
40k seems about right. Around 4K per month in expenses.

direct the additional 2k per month elsewhere.