Excess Cash- What to do with it?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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ThinkingAhead
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Joined: Tue May 22, 2018 10:40 pm

Excess Cash- What to do with it?

Post by ThinkingAhead » Wed Nov 06, 2019 7:38 pm

Hey guys, I have a odd question to ask you all. Just curious, what do you guys do with your extra money? I'm in a great dilemma, I have more money than I can spend, I've been penny pitching my whole life.

I already have an emergency fund, max out my 401k, max out my IRA, and save to my taxable account. I'm already back in college. I suppose I could buy a house since I'm paying for rent, but I'm not sure if I want to stay in my town. I have great benefits with work from disability to life insurance coverage. I've paid off my car and I have zero debt due to work paying for my college. What else can I do --take vacations? lolololol

runner3081
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Joined: Mon Aug 22, 2016 3:22 pm

Re: Excess Cash- What to do with it?

Post by runner3081 » Wed Nov 06, 2019 7:41 pm

Extra money goes into post-tax index fund investing for us.

ultraviolet
Posts: 68
Joined: Tue Feb 21, 2017 10:32 am

Re: Excess Cash- What to do with it?

Post by ultraviolet » Wed Nov 06, 2019 7:54 pm

I asked a very similar question recently and the consensus was money market, high yield savings or CD for short term savings and index funds for long term storage. Municipal bonds could be another option. All of this would be in taxable. This link was very helpful in helping me make a decision https://www.bogleheads.org/wiki/Tax-eff ... _placement

soccerrules
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Joined: Mon Nov 14, 2016 4:01 pm

Re: Excess Cash- What to do with it?

Post by soccerrules » Wed Nov 06, 2019 8:05 pm

runner3081 wrote:
Wed Nov 06, 2019 7:41 pm
Extra money goes into post-tax index fund investing for us.
^^^^^ This!
Don't let your outflow exceed your income or your upkeep will be your downfall.

HomeStretch
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Re: Excess Cash- What to do with it?

Post by HomeStretch » Wed Nov 06, 2019 9:38 pm

Does your 401k plan allow after-tax contributions that can be converted to Roth either by in-plan rollovers to Roth 401k or in-Service distributions to a Roth IRA (mega Backdoor Roth)? If so, you can contribute up to the annual limit ($56k < age 50, $62k age 50+). Here’s a link to the BH wiki page “After-Tax 401k”:
https://www.bogleheads.org/wiki/After-tax_401(k)

If not, save more to your Taxable account.

H-Town
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Re: Excess Cash- What to do with it?

Post by H-Town » Wed Nov 06, 2019 9:43 pm

ThinkingAhead wrote:
Wed Nov 06, 2019 7:38 pm
Hey guys, I have a odd question to ask you all. Just curious, what do you guys do with your extra money? I'm in a great dilemma, I have more money than I can spend, I've been penny pitching my whole life.

I already have an emergency fund, max out my 401k, max out my IRA, and save to my taxable account. I'm already back in college. I suppose I could buy a house since I'm paying for rent, but I'm not sure if I want to stay in my town. I have great benefits with work from disability to life insurance coverage. I've paid off my car and I have zero debt due to work paying for my college. What else can I do --take vacations? lolololol
Invest and invest. Take vacations? Are you serious? Don’t stop until you get to 10M. Stop slacking.

UpperNwGuy
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Joined: Sun Oct 08, 2017 7:16 pm

Re: Excess Cash- What to do with it?

Post by UpperNwGuy » Thu Nov 07, 2019 1:54 am

VTSAX.

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Ricchan
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Location: Firestone D Floor

Re: Excess Cash- What to do with it?

Post by Ricchan » Thu Nov 07, 2019 2:35 am

Invest it like you would any other amount in your taxable account. By the end if you really have significantly more than you need, donate some of it to your alma mater-- not all of it, mind you, only enough so they name a building or two after you. Then spend the rest on something nice. :sharebeer

bltn
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Joined: Mon Feb 20, 2017 9:32 pm

Re: Excess Cash- What to do with it?

Post by bltn » Thu Nov 07, 2019 3:41 am

ThinkingAhead wrote:
Wed Nov 06, 2019 7:38 pm
Hey guys, I have a odd question to ask you all. Just curious, what do you guys do with your extra money? I'm in a great dilemma, I have more money than I can spend, I've been penny pitching my whole life.

I already have an emergency fund, max out my 401k, max out my IRA, and save to my taxable account. I'm already back in college. I suppose I could buy a house since I'm paying for rent, but I'm not sure if I want to stay in my town. I have great benefits with work from disability to life insurance coverage. I've paid off my car and I have zero debt due to work paying for my college. What else can I do --take vacations? lolololol
Save up for your next car.

Good start. In ten years you re going to be one of the ones we see on this forum in great shape. Keep it up.

Jack FFR1846
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Re: Excess Cash- What to do with it?

Post by Jack FFR1846 » Thu Nov 07, 2019 7:19 am

US Savings Bonds. More in taxable. There's no limit for investing.
Bogle: Smart Beta is stupid

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Meg77
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Re: Excess Cash- What to do with it?

Post by Meg77 » Thu Nov 07, 2019 11:33 am

In truth you could think about consciously spending more to enhance your life/lifestyle today. Vacations are not a bad idea! Make a list of your values and consider how much you are spending each year to express those values.

Health - buy organic produce, consult a nutritionist or personal trainer, join a yoga studio
Romantic partnership - plan date nights, weekend getaways, buy gifts to express your affection
Family - work less to spend more time with family, travel to visit extended family members
Education - study abroad, attend seminars, subscribe to high quality journalism
Community - Give to a cause or religion that matters to you; help a friend or stranger in need.

It's ok to value material things and status as well, as long as they don't take over your life. Upgrading your wardrobe, skin care routine, car or home over time is something that many people do once they have extra cash flow (or even before!). It's up to you. Money is meant to be spent, either now or in the future.
"An investment in knowledge pays the best interest." - Benjamin Franklin

anon_investor
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Re: Excess Cash- What to do with it?

Post by anon_investor » Thu Nov 07, 2019 11:52 am

UpperNwGuy wrote:
Thu Nov 07, 2019 1:54 am
VTSAX.
+1!!!

sf_tech_saver
Posts: 211
Joined: Sat Sep 08, 2018 9:03 pm

Re: Excess Cash- What to do with it?

Post by sf_tech_saver » Thu Nov 07, 2019 11:57 am

Is your portfolio $20M yet?

If not: VTI.
VTI is a modern marvel

hudson
Posts: 1961
Joined: Fri Apr 06, 2007 9:15 am

Re: Excess Cash- What to do with it?

Post by hudson » Thu Nov 07, 2019 12:00 pm

ThinkingAhead wrote:
Wed Nov 06, 2019 7:38 pm
Hey guys, I have a odd question to ask you all. Just curious, what do you guys do with your extra money? I'm in a great dilemma, I have more money than I can spend, I've been penny pitching my whole life.

I already have an emergency fund, max out my 401k, max out my IRA, and save to my taxable account. I'm already back in college. I suppose I could buy a house since I'm paying for rent, but I'm not sure if I want to stay in my town. I have great benefits with work from disability to life insurance coverage. I've paid off my car and I have zero debt due to work paying for my college. What else can I do --take vacations? lolololol
I would save more to my taxable account. Maybe when the next big purchase comes along you won't need to go in debt. Consider maxing out your iBonds every year.

grog
Posts: 390
Joined: Sat Jul 20, 2013 1:09 pm

Re: Excess Cash- What to do with it?

Post by grog » Thu Nov 07, 2019 12:24 pm

With flexible non-retirement account money, I think you ideally want the following things: 1) liquidity, 2) low volatility, 3) some upside, 4) tax efficiency.

Personally, I've found the sweet spot to be the following: I put about 75% in Money Market (or CDs or online bank, depending on relative attractiveness) and then I put the rest in tax efficient stock funds (maybe even tilt this a little aggressive). Overall it's pretty conservative and I feel like most of the money is there if I want to spent some of it. But at the same time there's enough upside so that I don't feel like the money is just sitting there.

Previously, I've contemplated other approaches for non-retirement money including permanent portfolio, conservative funds (like Wellesley), low volatility funds (USMV), but these tend to have drawbacks, in particular, trying to reduce risk directly through equity tends to be far less tax efficient. So I ended up concluding it made the most sense to pick risky funds and dilute the risk down to an acceptable level.

Back when money market was in the toilet I would do an online checking plus some CDs. Now that short term rates are higher I haven't felt the need to take any term risk.

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