Investing money without a specific purpose

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NullPointer
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Joined: Mon Oct 07, 2019 10:46 pm

Investing money without a specific purpose

Post by NullPointer » Tue Oct 08, 2019 5:44 pm

Typically asset allocation is decided based on time frame and purpose (retirement, college savings, house, etc). We are fortunate to have extra money each month even after saving for other purposes and need to put the leftover somewhere.

How should I think about investing when the money isn't being saved for anything specific?

The only possible reason I could think of for this money is to supplement what we have in 529s. There is enough saved for undergrad at our very good in-state local. If they go out of state or private or go to grad school we will need more, but there is also a good chance they won't need more, so I don't want to lock it up in a 529.

For purposes of this discussion, assume 1) we are on track saving for retirement and are already maxing out 401ks and Roths and 2) no debt that it would make sense to pay down. We are 44 and 43.

This is my first time posting after a long time reading and learning.

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Phineas J. Whoopee
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Joined: Sun Dec 18, 2011 6:18 pm

Re: Investing money without a specific purpose

Post by Phineas J. Whoopee » Tue Oct 08, 2019 6:53 pm

Welcome to the forum.

I did that for years, and it worked out well for me.

I reconstructed it later, but had I been able to articulate my investing mission statement at the time it would have been:

To increase my future financial flexibility.

Today, much further on, my investing mission statement, which took ever so long to formulate and still longer to express compactly, is:

To meet my future financial needs, and within reason wants, without taking undue risk.

Let's imagine a person has no specific purpose and therefore doesn't save. Then, later, they identify something specific. Will they be closer to it or farther away from it if they hadn't saved yet?

Without becoming excessively biblical, I have had lean years and fat years. Although uncomfortable at the time, perhaps it's good that my first independent years were lean, including my having to go into debt (to go to college). Later, when the first series of fat years occurred, I paid off the debt and saved and invested. Then came more lean years, but they were voluntary (I earned a second graduate degree in a different field, then started my business in that field). Then came another set of fat years (I went back into my former industry after my business financially failed) so I saved and invested as much as I reasonably could.

If I'd insisted on spending every dollar that wasn't contributed to a tax-advantaged account from every paycheck until I could articulate an end goal I wouldn't be nearly as far as I am today.

I say save and invest, save and invest, save and invest.

PJW

Ferdinand2014
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Joined: Mon Dec 17, 2018 6:49 pm

Re: Investing money without a specific purpose

Post by Ferdinand2014 » Tue Oct 08, 2019 7:22 pm

NullPointer wrote:
Tue Oct 08, 2019 5:44 pm
Typically asset allocation is decided based on time frame and purpose (retirement, college savings, house, etc). We are fortunate to have extra money each month even after saving for other purposes and need to put the leftover somewhere.

How should I think about investing when the money isn't being saved for anything specific?

The only possible reason I could think of for this money is to supplement what we have in 529s. There is enough saved for undergrad at our very good in-state local. If they go out of state or private or go to grad school we will need more, but there is also a good chance they won't need more, so I don't want to lock it up in a 529.

For purposes of this discussion, assume 1) we are on track saving for retirement and are already maxing out 401ks and Roths and 2) no debt that it would make sense to pay down. We are 44 and 43.

This is my first time posting after a long time reading and learning.
Of all the things I do with my money, investing it in organizations and individuals of need makes me the happiest.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

mortfree
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Joined: Mon Sep 12, 2016 7:06 pm

Re: Investing money without a specific purpose

Post by mortfree » Tue Oct 08, 2019 7:25 pm

Age 42. I just buy VTI in taxable with whatever money I feel like investing that has no purpose (because I don’t like to spend money)

Independent George
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Re: Investing money without a specific purpose

Post by Independent George » Tue Oct 08, 2019 9:00 pm

The single most important thing that extra money can buy you is time. You can use it to retire earlier than you planned, or take a family vacation you had put off, or hire some help with the house. As long as your financial goals are met, you can use it (or not) as you see fit.

Topic Author
NullPointer
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Joined: Mon Oct 07, 2019 10:46 pm

Re: Investing money without a specific purpose

Post by NullPointer » Tue Oct 08, 2019 9:25 pm

Good points. Thank you.

The main thing I am struggling with is how aggressive to be in this situation. Part of me thinks that I am unlikely to use the money for a while, so I should go 100% stocks. Another part of me thinks I should be in a balanced fund like Wellington since I might need the money in 5-10 years to supplement college savings.

Also, as a previous poster pointed out, we should increase our charitable giving.

aristotelian
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Re: Investing money without a specific purpose

Post by aristotelian » Tue Oct 08, 2019 9:35 pm

Independent George wrote:
Tue Oct 08, 2019 9:00 pm
The single most important thing that extra money can buy you is time. You can use it to retire earlier than you planned, or take a family vacation you had put off, or hire some help with the house. As long as your financial goals are met, you can use it (or not) as you see fit.
I would say options. Time is one option. When you don't have a specific need, I would also say experiences and charity/legacy. Stuff would be at the bottom of the list, IMO.

remomnyc
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Re: Investing money without a specific purpose

Post by remomnyc » Wed Oct 09, 2019 10:57 am

I would invest it according to your overall asset allocation.

MotoTrojan
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Re: Investing money without a specific purpose

Post by MotoTrojan » Wed Oct 09, 2019 11:12 am

remomnyc wrote:
Wed Oct 09, 2019 10:57 am
I would invest it according to your overall asset allocation.
+1. You don’t seem to be in a situation that warrants a one-off fund or allocation to me.

emoore
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Joined: Mon Mar 04, 2013 8:16 pm

Re: Investing money without a specific purpose

Post by emoore » Wed Oct 09, 2019 11:34 am

MotoTrojan wrote:
Wed Oct 09, 2019 11:12 am
remomnyc wrote:
Wed Oct 09, 2019 10:57 am
I would invest it according to your overall asset allocation.
+1. You don’t seem to be in a situation that warrants a one-off fund or allocation to me.
I put any money that isn't toward a specific goal into a total stock market index fund. I shouldn't need this money unless it's an absolute emergency. I also might use it for a car in 5 years but I don't worry about having it in 100% stocks. If they market is down I can either buy less of a car, put off the car purchase or take out a car loan instead. I don't want to have to worry about allocations with this money.

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