Cash - Throw it all on the table!!!

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abuss368
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Cash - Throw it all on the table!!!

Post by abuss368 » Wed Nov 05, 2014 10:14 am

Bogleheads,

This thread is regarding cash. How high of a savings account balance, or number of months expenses, or years of expenses, etc. do you aim for (or have) before you reduce new deposits of cash and redirect to investments?

How liquid are you or do you plan to be over time?

Not short term bonds, etc. but regular cash. Cold hard cash in checking and/or savings!

I look at cash not for a return anymore as a result of interest rates (unfortunately), but rather peace of mind, a mental form of insurance, liquidity, etc.

This is an open ended thread with a request to elaborate and expand on the topic of cash. So please, any and all thoughts, perspectives, are welcome.

Best.
Last edited by abuss368 on Wed Nov 05, 2014 1:40 pm, edited 1 time in total.
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Re: Cash - Throw it on the table!

Post by Grt2bOutdoors » Wed Nov 05, 2014 10:19 am

I hold a minimum of one year's net expenses in cold hard FDIC insured accounts that are not time deposits.
I value liquidity at the expense of return, I will always value liquidity. When you come from an illiquid environment, you see opportunities but are unable to act upon it. Now I see opportunities and can make my own decisions as opposed to having someone (a bank, a lender, a landlord) making the decision.
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Re: Cash - Throw it on the table!

Post by kaudrey » Wed Nov 05, 2014 10:24 am

I probably keep about 3 months of expenses in my savings account and another 3-6 months in MM at Schwab. But it fluctuates - it's a little low right now because in the last month we needed a new hot water heater and $1500 in repairs to my car. But, that's what it's for, right? We also use it as our vacation fund...

I have a fed job and my DH works for himself and isn't planning to fire himself any time soon (and has very steady income sources), so I don't feel like we need more in cash sitting around. We also have a fairly sizeable taxable account; if there were any true, large emergencies, we could get a lot more cash in a few days.

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Re: Cash - Throw it on the table!

Post by livesoft » Wed Nov 05, 2014 10:28 am

Cold hard cash: Besides some cash turds of less than $7 in various cash sweep accounts, we have only $1447.60 in the checking accounts. We are going to have to sell some equity ETFs in order to pay some bills around Thanksgiving.

I consider the investments I own to be as liquid as cash, but taxed at a lower rate. I can sell and get them into my checking account in 2 to 3 days.
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Re: Cash - Throw it on the table!

Post by placeholder » Wed Nov 05, 2014 10:30 am

The amount that my spreadsheet allocates to emergency fund is currently 16k and any cash above that is counted in the fixed income category and is (in baseball parlance) "designated for assignment" to be invested when I get to it and by cash I mean in checking accounts because I don't hold CDs or anything like that as a deliberate investment.

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Re: Cash - Throw it on the table!

Post by FillorKill » Wed Nov 05, 2014 10:38 am

More than 15Y expenses in cash equivalents as defined by the OP.

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Re: Cash - Throw it on the table!

Post by BigFoot48 » Wed Nov 05, 2014 10:45 am

I tend to be a bit lazy about properly managing my money market accounts and noticed at the end of last month they represented about 3.8% of my portfolio, or some two years of spending needs (over SS income). I'd like that to be more like one year so one of these days I'm going to get that invested properly. Maybe today, or tomorrow.
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Re: Cash - Throw it on the table!

Post by JimmyD » Wed Nov 05, 2014 10:47 am

I aim to keep about $5,000 minimum in cash in our joint checking account in which everything is paid from, but it typically sits closer to $8 or $9K.

Keep another couple thousand in various sinking funds that are used throughout the year for various one-off expenses like flights, car repairs, etc. We contribute to all of these monthly.

Lastly, we're going to keep another $30K in an emergency fund which would cover 6 months of expenses. We only have $23K there now due to paying off one of my wife's private student loans that I was sick of paying interest on, but we'll have it back up to $30K in six months or so.

Grand total in cash - ~$40K

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Re: Cash - Throw it on the table!

Post by John3754 » Wed Nov 05, 2014 10:52 am

2 months expenses in the checking account and $20 in my pocket.

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Re: Cash - Throw it on the table!

Post by ny_rn » Wed Nov 05, 2014 10:53 am

30 year-old, single male living in Brooklyn, NY.

I like to keep ~ $10k in my Capital One 360 account for peace of mind. I then keep a minimum of $2,500 in my checking account. Over the next year I plan to raise my cash holding to a minimum of $20k. :D

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Re: Cash - Throw it on the table!

Post by JDCarpenter » Wed Nov 05, 2014 10:57 am

Not yet retired and two high incomes with monthly expenses covered by either paycheck, so not much in true cash. Say 10,00-20,000 in checking in a typical quarter and another 1500 tucked away in the basement for true emergency conditions.

Starting to shift more funds into liquid assets for upcoming retirement, but instead of narrowly defined cash, that money goes into VBIRX, which gives us some return--albeit with some principal risk. Goal will be four-five years retirement spending permanently in cash/"cash" when we jump that threshold.
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Re: Cash - Throw it on the table!

Post by cfs » Wed Nov 05, 2014 10:59 am

We have plenty of cash in our money market account to be able to leave our investments untouched for many many years.
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earlyout
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Re: Cash - Throw it on the table!

Post by earlyout » Wed Nov 05, 2014 11:03 am

Usually just a couple of months expenses in the checking account. I strongly believe the rest should be invested. If I need extra cash I'll sell something.

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Re: Cash - Throw it on the table!

Post by fortywinks » Wed Nov 05, 2014 11:04 am

50% of taxable funds

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Re: Cash - Throw it on the table!

Post by bungalow10 » Wed Nov 05, 2014 11:05 am

I think we have about 8-9 months of cash.

eta: this is about $42k
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Re: Cash - Throw it on the table!

Post by flyingaway » Wed Nov 05, 2014 11:07 am

I think you are talking about the so-called emergency fund. I have a Capital One 360 account holding some cash between $3,000 and $20,000. I move my left-over money there each month. When there is a market drop, I use that money to buy some stocks into my taxable account. This is in addition to fully funding all tax-advantaged accounts and having about 15% of my portfolio in CD.

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Re: Cash - Throw it on the table!

Post by midareff » Wed Nov 05, 2014 11:08 am

Probably 8 to 9 months draw over pension and SS at Ally.

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Re: Cash - Throw it on the table!

Post by dbCooperAir » Wed Nov 05, 2014 11:12 am

We keep $40k in what I call liquid for the most part. 1/2 checking and the other 1/2 in ibonds (ibonds are dead cash for year so hence why I call it liquid for the most part). Enough to cover us for about a year. The above is the goal, next year the last $10k will be moved to ibonds, with ibonds being dead cash for a year it seem reasonable to take 2 years to move it, not a huge deal.

My next line of thinking is making 1/2 of our 12 month emergency fund that's in ibonds play double duty and apply it to our AA as well. I look at it if we need to sell the ibonds it would not push out of our rebalancing band and if we end up tapping it we may have bigger problems to worry about anyway.

I'm still thinking where to put the car cash, current thinking is 50/50 short term/S&P type funds, all S%P etc. This pile is starting to get a little bigger, I wish I would have put a little more thought about what to do with it besides just tossing it in the savings account. To make it even more fun as I get older I really don't give a hoot what I drive anyway so not sure why I keep saving for another car anymore.
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Re: Cash - Throw it on the table!

Post by mhc » Wed Nov 05, 2014 11:18 am

I keep 10% of annual expenses in checking account and another 10% in MMA. Both are at a local brick and mortar bank.

Intellectually, I would like to get to 5% and 5%, but I feel better with a bigger cash flow cushion.

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Re: Cash - Throw it on the table!

Post by bigred77 » Wed Nov 05, 2014 11:19 am

We keep only 1000 in cash right now and invest/pay down debt with everything else.

I hope to have 6-8 months in cash built before we have kids though, especially if we're able to go to being a single income family.

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Re: Cash - Throw it on the table!

Post by Sbashore » Wed Nov 05, 2014 11:34 am

I'm retired and keep one years income in cash. My cash holding is part of my AA so it just gets replenished along with everything else when I rebalance according to my plan. I do track the duration of my bond holdings to make sure it coincides with my cash needs, allowing me to rebalance as needed without incurring a capital loss in my bonds.
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Leif
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Re: Cash - Throw it on the table!

Post by Leif » Wed Nov 05, 2014 11:37 am

Right now I have about 6% of my portfolio in cash. Prior to retirement, which should not be long now, I'm planning to have 5-10% in cash (1- 2.5 years of living expenses). About 1% in MM (Money for Minuscule rates) accounts for cash flow. My cash in primarily in "High Yield" (ha ha) accounts. That with a ladder in CDs (that I'm still building) up to 70, when my SS will kick in, allows me to travel and SWAN.
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Re: Cash - Throw it on the table!

Post by magneto » Wed Nov 05, 2014 11:39 am

abuss368 wrote: I look at cash not for a return anymore as a result of interest rates (unfortunately), but rather peace of mind, a mental form of insurance, liquidity, etc.
This is an open ended thread with a request to elaborate and expand on the topic of cash. So please, any and all thoughts, perspectives, are welcome.
Best.
Taking up the invite to expand!

Have let cash build up to well in excess of 50%.
Why I hear you ask?
Believe that central banks' intervention has severely distorted markets, leaving :-
Stocks expensive (if not wildly so as in 1999), hold stocks nevertheless in modest amounts.
Bonds offering negative real yields, with strong possibility of capital loss.
Cash negative real yields.

Don't know how all this is going to end, but prepared to suffer the negative real yields of cash while waiting for better days (market timing perhaps, or maybe value investing, or just insurance as you suggest). Feel the central banks are driving us into asset classes at prices where we would not rationally choose to go. This provokes the contrarian streak, hence cash.

Yours
Cassandra
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HomerJ
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Re: Cash - Throw it on the table!

Post by HomerJ » Wed Nov 05, 2014 11:50 am

We keep probably way too much in cash... We currently have more than a year's worth of expenses in checking...

But that's also our vacation fund, new car (in 3 years) fund, maybe two wave-runners (if we see a really good deal) fund.

It's a substantial amount... around 7% of our total investable portfolio.

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Re: Cash - Throw it on the table!

Post by FrugalFrida » Wed Nov 05, 2014 11:52 am

I have $30k in cash right now but I haven't decided on the limit yet. Early retirement could be in five years.

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Re: Cash - Throw it on the table!

Post by Random Poster » Wed Nov 05, 2014 12:05 pm

Roughly $410K, but the current balance is due to a desire to buy a home, in cash, in the near future.

Once the house has been bought and all of the associated furniture and outdoor supplies, I'd like to maintain and set aside at least 2 years worth of living expenses in cash, plus $25K to allow for the purchase of a car upon any immediate need to do so.

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rob
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Re: Cash - Throw it on the table!

Post by rob » Wed Nov 05, 2014 12:13 pm

In cash accounts - probably only 2-3 months of savings (I use it more for big ticket purchases) but also have a large taxable retirement portfolio, so after that pot of cash I would sell and re-balance in tax deferred accounts. Due to some upcoming changes we have been growing the cash some but I don't see the point of large amounts of cash when I could liquidate some taxable savings - yes I know the market might tank at the same time but that's the risk I prefer to take than to lose money holding cash.
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G12
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Re: Cash - Throw it on the table!

Post by G12 » Wed Nov 05, 2014 12:18 pm

Roughly $160k, which would be a pretty small % of our portfolio. Part of it is rental RE reserve for repairs, taxes, etc. Part of it is due to maxing retiring accounts/HSA in a one income family and needing additional cash for monthly expenditures. Part of it is an opportunity fund for private sector investments or capital calls. Part of of it is we need to pay estimated taxes. Lots of parts here, better than having to sell some VG intermediate tax exempt when it was down June, 2013. We now have 2 car loans at very favorable rates, but we might pay one or both off. There is a CD coming up for renewal December which may stay in cash or maybe fund 2015 IRAs or pay off a car loan. YMMV.

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Re: Cash - Throw it on the table!

Post by Meg77 » Wed Nov 05, 2014 12:28 pm

My relationship with cash is complicated and divvied up into multiple "buckets" both physically and psychologically.

Personal
I have always prioritized retirement savings over having a "fully funded" cash reserve. I tend to spend more when my personal cash balances get too high, so forcing myself to max out retirement accounts has been one method of forcing myself to spend well within my means over the years. Knowing I could always suspend my heavy retirement contributions and/or access my large Roth IRA is sort of a backup "emergency" plan though, so I don't like to keep tons of cash on the balance sheet.

After getting married earlier this year and establishing a new budget, we are at the point where we really should be saving even more than it takes to max out all tax-advantaged space. I'm still struggling with how to implement that and boost our savings rate/dept repayment rate beyond what happens automatically from payroll deductions and regular amortization. Currently my actual cash balance (checking) is down to $15K, which equals appx 3 months of expenses for me and my husband. Once the balances creep up to about $25K we start planning our next vacation and/or paying extra toward debt.

Rental
I have a bunch of rental properties from before my marriage, and I've never had much of a cushion in cash for those either. When the money piles up, inevitably a major expense arises (a fire, some vandalism, a long term vacancy). Currently I have about $23K in rental checking, which is about as high as it gets since cash grows all year until property taxes paid in December wipe out the "reserves." My balance in January will be about $3,000 - not even one month of rental reserves.

Trust
The reason I have been able to get away with so little in cash is that I've always had a separate "bucket" of reserves that I don't control, in the form of a trust that was established for my college education. It used to be invested but has been in cash for 4-5 years now, and there is about $90K left in it. That's close to 1.5 years of cash reserves for me and my husband OR 9 months of expenses for the rentals. I don't plan to touch it unless there is a true emergency such as a simultaneous job loss of both of us or calamity with the rental cash flow.
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Re: Cash - Throw it on the table!

Post by MoonOrb » Wed Nov 05, 2014 12:35 pm

We keep about 4-6 months of expenses in cash, or about $30k. If I notice we're a few thousand dollars over this I'll usually make a lump sum deposit. I don't worry about it much.

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Re: Cash - Throw it on the table!

Post by MathWizard » Wed Nov 05, 2014 12:40 pm

I am not able to fill up all tax advantaged, so I just use cash in the bank for smoothing cash flow.
I also keep 4 months expenses in several CDs, which I can break for an emergency.

True cash (not CDs) fluctuates between 1 and 6 months expenses. I am still writing tuition checks, so
ebbs occur in Jan and Aug, along with Apr when I write checks for ROTH contributions.

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Re: Cash - Throw it on the table!

Post by staythecourse » Wed Nov 05, 2014 12:56 pm

Not sure if this has been mentioned, but would most likely be useful to mention if one is retired or still working as that will be a factor in folk's need for liquidity.

Good luck.
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Re: Cash - Throw it on the table!

Post by House Blend » Wed Nov 05, 2014 1:10 pm

I keep more cash reserves than strictly necessary, because I prefer to keep cash flow planning simple. I prefer not to fuss with arranging for cash to arrive in advance of a bill coming due.

I also don't measure the balance in months of expenses. Part of the reason for this is that I typically have a few transactions every year that are noticeably larger than normal monthly take home pay.

My definition of "excess" cash is any amount above 2X, where $X is the size of the largest transaction I expect over the course of a year. (Buying a new car, or paying off a mortgage, or other rare one-time lumps do not count. Those are not paid out of normal cash flow.)

I've already had one transaction this year of size ~ X. May have another one on or around Dec. 22.

This way, I don't need to plan in advance for, say, the income tax I will be paying in April, or the property tax in July, or the vacation bill in August. And I have the flexibiliy to buy shares in taxable before or after large bills are due, or in the window between when a dividend is declared and when it is actually credited to my bank account.

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Re: Cash - Throw it on the table!

Post by livesoft » Wed Nov 05, 2014 1:24 pm

^Interesting comments, House Blend, because I am almost the opposite in what I do. But then I don't consider us to be in the accumulating stage anymore.

I don't need flexibility in our taxable accounts and rarely make any buys or sells in taxable. If I do sell something in taxable, I am usually selling for a loss in a tax-loss harvesting move or for a small gain that is offset by previous carryover losses. If the market moves a lot up or down and I see a rebalancing opportunity, then I use my tax-advantaged accounts. If I remove assets from taxable, I just rebalance in tax-advantaged.

Our big expenses are well-known: College tuition, property taxes, and vacations. College expenses and vacations can go on a 2% cash-back credit card which extends the flexibility. If an emergency comes knocking, then selling in taxable making a near simultaneous change in tax-advantaged is easy. Also dividend income is very predictable, too, coming at the end of calendar quarters.

I can understand that folks need peace of mind especially when they have not experienced how easy it is to move money around without paying taxes on it.
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Re: Cash - Throw it on the table!

Post by BigFoot48 » Wed Nov 05, 2014 1:36 pm

I just looked at my Schwab brokerage account where about half of my cash, i.e. Money Market fund, is located. I also have a Vanguard Short Term Bond ETF (BSV) there, which is what I use as a higher return, low risk taxable account investment. For the last three months MM and ETF have had about the same balance, $44,000. I see the earnings each month have been about $2 for the Money Market and $46 for the Short Term bond fund. So as a result of keeping a little too much in cash than I really need to, say $20k, I'm probably missing out on about $300 a year in earnings. Realizing this has motivated me to re-balance and get that cash working harder for me.
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abuss368
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Re: Cash - Throw it all on the table!!!

Post by abuss368 » Wed Nov 05, 2014 1:54 pm

I wanted to also ask the forum "How many different buckets of cash do you use, if any?"

Example: Cash(Savings & Emergency), Auto Fund, Future Repairs, Once a year invoices, etc.

Thanks!
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Re: Cash - Throw it all on the table!!!

Post by Shredder » Wed Nov 05, 2014 2:12 pm

abuss368 wrote:I wanted to also ask the forum "How many different buckets of cash do you use, if any?"

Example: Cash(Savings & Emergency), Auto Fund, Future Repairs, Once a year invoices, etc.

Thanks!
I have 3 months expenses in a MM account currently. That will increase to 6 months after my cars are paid off. Aside from my emergency fund I will open some sort of account or large expenditures like a car, new roof, large appliance, repairs, etc. That would be either a high yield savings or something conservative in taxable (total US or a short term bond fund).

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Re: Cash - Throw it all on the table!!!

Post by fposte » Wed Nov 05, 2014 2:17 pm

I start the employment year with about $15k in cash in savings, which gradually gets used throughout the year in order to allow me to max out 403b/457s.

But I also have an insurance payout account at a fixed, guaranteed 3% that currently holds about 2 years' living expenses. Absent an emergency, I don't anticipate touching it any time soon unless I can get a better fixed rate than that, but it's liquid any time I want to write a check on it.

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Re: Cash - Throw it all on the table!!!

Post by Bacchus01 » Wed Nov 05, 2014 2:18 pm

Too much.

Probably have 1X expenses in cash right now. Another year in CDs and ST Corporate Bond fund.

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Re: Cash - Throw it all on the table!!!

Post by JoMoney » Wed Nov 05, 2014 3:21 pm

abuss368 wrote:...Not short term bonds, etc. but regular cash. Cold hard cash in checking and/or savings!...
...But but... Checking / Savings isn't really "cash" either, and what if I have check writing access to my short-term bond fund? And Treasuries might theoretically be "safer" than a FDIC insured account? :confused
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Re: Cash - Throw it all on the table!!!

Post by White Coat Investor » Wed Nov 05, 2014 3:53 pm

I've got a lot of cash right now (like 20%+ of a 7 figure net worth), but it's all earmarked for stuff in the near future- big tax bills in January and especially April, some end of year charitable contributions, my emergency fund, a boat I'm saving up for, Roth IRAs, HSAs, and 529s I'll be funding the first of January, my annual dBP contribution, annual insurance payments due this month etc. Come April, it'll probably be half the size it is now.

Knowing I have no big cash needs in the next few months that I don't already have cash on hand for allows me to be very aggressive with my investments and still sleep well at night. It's a nice feeling to have that when my furnace went out last week and we had the salesman come over to sell us a new one all I had to ask is "Which one is the best one?"
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raidman
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Re: Cash - Throw it all on the table!!!

Post by raidman » Wed Nov 05, 2014 4:06 pm

About 15k in a MM account, about 1k to 2k in checking.

My monthly expenses are ~1200. I like having extra cushion for an unexpected LARGE expense like needing a new car suddenly.

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Re: Cash - Throw it all on the table!!!

Post by janiebegood » Wed Nov 05, 2014 5:19 pm

We have 1 year of expenses in a MMA and another year in a 1-year CD at PenFed. We're about 50, so that's probably more than we need to keep liquid, but it helps me sleep at night, and it allows me to feel more comfortable keeping our other investments at a 75/25 asset allocation. It's about 7% of our total net worth.

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Re: Cash - Throw it all on the table!!!

Post by LadyIJ » Wed Nov 05, 2014 5:21 pm

About $55K in liquid (checking accounts, money markets).

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Re: Cash - Throw it on the table!

Post by arcticpineapplecorp. » Wed Nov 05, 2014 6:01 pm

Grt2bOutdoors wrote:I hold a minimum of one year's net expenses in cold hard FDIC insured accounts that are not time deposits.
I value liquidity at the expense of return, I will always value liquidity. When you come from an illiquid environment, you see opportunities but are unable to act upon it. Now I see opportunities and can make my own decisions as opposed to having someone (a bank, a lender, a landlord) making the decision.
From: https://www.fdic.gov/consumers/banking/ ... yment.html
"It is the FDIC's goal to make deposit insurance payments within two business day of the failure of the insured institution."

Hopefully, that is liquid enough for you.
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Re: Cash - Throw it all on the table!!!

Post by Ged » Wed Nov 05, 2014 6:06 pm

About $25K which is 6 mos of cash needs. That is backed up by about 3 years of expenses in BSV.

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obgyn65
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Re: Cash - Throw it all on the table!!!

Post by obgyn65 » Wed Nov 05, 2014 6:26 pm

I have about 50 years of expenses in cash - mainly CDs. I am 49 years old.
"The two most important days in someone's life are the day that they are born and the day they discover why." -John Maxwell

tbradnc
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Re: Cash - Throw it all on the table!!!

Post by tbradnc » Wed Nov 05, 2014 6:55 pm

Recently retired (at 52 woo-hoo) - we're keeping 18 months / living expenses in cash in Ally. I also have 26 additional months of my former salary coming as part of the deal from the sale of my company.

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goodenyou
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Re: Cash - Throw it all on the table!!!

Post by goodenyou » Wed Nov 05, 2014 7:56 pm

Mid 6-figures. About 15% of current net liquid worth. I have 2 years of expenses and a reserve for taxes. It gives me piece of mind that I have choices. I have had to fund a lot of home repairs and bought a 3rd car for cash. I am DCA $100k this year.
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

madbrain
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Re: Cash - Throw it all on the table!!!

Post by madbrain » Wed Nov 05, 2014 8:25 pm

I try to keep it below $10,000 . Right now it's about $20,000.
I am going on a long foreign vacation in December so that problem will take care of itself.

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