Cash - Throw it all on the table!!!

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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AtomicCash
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Re: Cash - Throw it all on the table!!!

Post by AtomicCash » Tue May 14, 2019 7:20 pm

abuss368 wrote:
Fri May 10, 2019 8:24 pm
Would be interested in updated responses from Bogleheads regarding cash.
...
I wasn't on the forum for the first round of this question, but I'll chime in now.

I'm retired. I've got about 20 years living expenses in cash (about a year in my neighborhood bank, another year in high yield online accounts, and the rest in a 2 year CD ladder with about a dozen rungs so a CD matures every few months). At my age, this is probably close to a lifetime of living expenses and represents about 1/3 of my portfolio. These funds are FDIC insured and I'm currently earning about 2.6% interest as a weighted average.

The remaining 2/3rds of my portfolio is in the standard low ER boring (in a good way) Boglehead stock/bond funds appropriate for my age.

To be clear, this wasn't the asset allocation I had when I was working. But not having to worry about the markets for a couple decades lets me sleep much better at night now that I don't have any earned income.

Marc

shell921
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Re: Cash - Throw it all on the table!!!

Post by shell921 » Wed May 15, 2019 9:34 am

I'm retired and here is my breakdown:

2 checking accounts with ~$3k each - no interest, for monthly bills
1 B&M saving account with $65k
1 credit union account with $25k
$40k in brokerage acct

I keep $100 in my purse
I have $600 cash in my cash box at home

I'd say close to $137k in cash available
Last edited by shell921 on Thu May 16, 2019 11:26 am, edited 1 time in total.

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

Post by tampaite » Wed May 15, 2019 9:53 am

abuss368 wrote:
Wed Nov 05, 2014 10:14 am

How liquid are you or do you plan to be over time?
Aiming to have minimum of 2 years of annual expenses in CASH or CD.

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

Post by Simple Simon » Wed May 15, 2019 3:42 pm

Having decided some years ago that I don't want bonds, I'm 50% cash, 50% VWRL in my non retirement investment accounts.

In addition I keep about 3 months of cash hand in a current account.

So quite a lot of cash here.

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

Post by SQRT » Wed May 15, 2019 4:25 pm

Answers are all over the map. Without context not much use. Can someone develop a rational list of considerations that would go into a model that might help one decide how much cash to keep? Maybe we can move the discussion up a notch?

Maybe, things like risk appetite, asset allocation, sources of regular cash flow, whether you keep cash in reserve for security purchases, stage of life/age, health insurance, lumpy/large expenses, confidence of budgeting, security of job, debt levels, etc.
Last edited by SQRT on Thu May 16, 2019 4:28 am, edited 2 times in total.

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willthrill81
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Re: Cash - Throw it all on the table!!!

Post by willthrill81 » Wed May 15, 2019 6:03 pm

Since my job is very secure (i.e. long-term contract), our mortgage should be paid off in about a year, and we are well insured on all fronts, we personally have little need for liquidity and don't keep much cash on hand. If our house burned down, we'd be about $1k. If we totaled our car, we'd be out $500. We have almost two years of our maximum out-of-pocket expense for health insurance in our HSA alone.

The biggest 'source' of cash we have is a fund used non-monthly and irregular expenses (e.g. biannual HOA dues, clothing, gifts, home and auto maintenance). But we are no longer in the position of needing X months of expenses in cash. That said, we could live for a good decade on what's in our portfolio.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

shell921
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Re: Cash - Throw it all on the table!!!

Post by shell921 » Thu May 16, 2019 11:34 am

SQRT wrote:
Wed May 15, 2019 4:25 pm
Answers are all over the map. Without context not much use. Can someone develop a rational list of considerations that would go into a model that might help one decide how much cash to keep? Maybe we can move the discussion up a notch?

Maybe, things like risk appetite, asset allocation, sources of regular cash flow, whether you keep cash in reserve for security purchases, stage of life/age, health insurance, lumpy/large expenses, confidence of budgeting, security of job, debt levels, etc.
As I said, I am retired - I have pension income, no debt & a paid off mortgage. My largest single expense in the last 4 years was solar panels-cost
was $28k. Used cash to pay for that. I need cash periodically for things like having my front and garage doors refinished every 2-3 years at a cost of about $1200. Spa repairs - sometimes can be $2000 in a year. Bought some new patio umbrellas and an area rug last year for $2000. Took a 2 week cruise a year ago-cost was $2800. Gifted a relative $14,000 in 2017.

If I want a new car, I can buy one. If I want to travel, I can. If I want to give a fancy catered party, or treat friends to meals out, or a concert, I can. If I want to gift my niece with some $$ I can do that. I like knowing I can pay for things.

acenj11
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Re: Cash - Throw it all on the table!!!

Post by acenj11 » Thu May 16, 2019 12:01 pm

I usually hold 2 months worth, enough for me to find another job if I lost my current one.

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

Post by SQRT » Fri May 17, 2019 7:13 am

After thinking about this issue a little more, it seems to me that there are basically 3 reasons to hold cash.

1) Emergency fund. This would be most important for younger people who rely on employment income. Unemployment would be their biggest risk. Often a precarious financial position that would be mitigated by having say 6 months of expenses held as cash.

2) Part of an investment strategy. This would relate to people who want their asset allocation to include some cash (or near cash) assets. Either to reduce overall risk or to allow for opportunistic equity purchases.

3)Operational needs. This would simply be the requirement to hold enough cash to allow for lumpy expenses or perhaps smooth out lumpy income like dividends. This would allow someone to cover say a car purchase, expensive trip, or health care expense, without selling non cash assets.

As a retiree, I find the third objective the most important one.

Since holding cash has an opportunity cost associated with it, it makes sense to analyze your individual needs and hold only an appropriate level of cash.
Last edited by SQRT on Sat May 18, 2019 6:00 am, edited 1 time in total.

FI4LIFE
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Re: Cash - Throw it all on the table!!!

Post by FI4LIFE » Fri May 17, 2019 7:36 am

Only 1-2 months. My HELOC is my emergency fund. I do keep some cash in retirement accounts, about 7% of assets at the moment.

Coltrane75
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Re: Cash - Throw it all on the table!!!

Post by Coltrane75 » Fri May 17, 2019 10:52 am

I have:
1. One month of expenses in a high savings FDIC insured account paying 2.1% at a credit union
2. 12 months in 4 week treasury bills paying 2.5% TEY
3. 2 months in I Bonds
4. 1 month in a Vanguard Money Market that rotates money to/fro a company ESPP account buying stocks at 15% discount and selling at settlement date.

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

Post by FrugalProfessor » Fri May 17, 2019 6:50 pm

I hold $1k of cash (specifically SPRXX yielding 2.23%) to cover checks (piano lessons, etc).

If an emergency comes up, I put it on a credit card giving me 45ish days of float, then pay for with next paycheck by temporarily ramping down savings rate.

If an emergency comes up that I can't swipe on a card, I would sell some of my brokerage account, preferably at a loss to harvest the capital loss. This has never happened to me but could be easily accomplished via a couple mouse clicks.

I've never understood emergency funds. In contrast, I understand very well the power of sizable assets (i.e. index funds) that can be liquidated at a moment's notice.
I blog. Taxes are the lowest hanging source of alpha.

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

Post by azianbob » Fri May 17, 2019 7:24 pm

I currently hold more cash than I would since I am considering buying a home soon so want to have it liquid and not suseptible to any market downturn.

Normally, I keep about $2000 in checking after I have paid all my monthly bills, then $10k in Purepoint Savings (2.35% interest) for any sudden big purchase I want to make. I keep about $100k in Purepoint No Penalty CD (2.5%) as backup for any emergencies.

Rest of taxable money is in VTI. Each month after I pay off my bills all money left over in checking other than $2000 is used to buy more VTI.

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