Author Topic: Where to put my savings?  (Read 3168 times)

lwhorton

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Where to put my savings?
« on: January 01, 2015, 10:45:07 AM »
I have a simple question related to savings, and perhaps I haven't read far enough through MMM blog posts, but where do I put my 'savings' funds? Or more specifically, after maxing out Roth IRA/401k contributions, where can I store my other 'funds' that will benefit me most? I assume this has something to do with liquidity versus gains versus loss tolerance... I have seen mention of Betterment/Vanguard, but where do I even start?

For example, beyond the normal expenses (rent, groceries, etc) I have monthly budgets for...
* Car ($500)
* Vacation ($600)
* Restaurant ($200)
* Misc. - (House savings? $920)

I don't actually have a car payment, but at some point in the future I will need another car, and this enables me to pay cash.
I, like the rest of the world, enjoy vacations. I have no target destination in mind, but at some point I'm going to want to go away.
My 'end of the month' bottom line is quite large, which is currently filling up a year-long emergency fund. I assume at some point this will go towards house savings.

I just don't know where to put these funds, aside from a savings account. I feel I should put these into a brokerage account and start investing, but some items are more risk-tolerant than others. On one hand, I wouldn't want to have 5k stashed for a vacation fund in a brokerage, only to see the markets take a dive and consequently cancel my vacation that year, for example. On the other, it seems super wasteful to have giant chunks of change just lying around at .09 interest. Thoughts?

« Last Edit: January 01, 2015, 11:02:52 AM by lwhorton »

Chrissy

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Re: Where to put my savings?
« Reply #1 on: January 01, 2015, 11:31:31 AM »
I'm confused.  Are you saying you already have a full, 1-yr emergency fund, and these monthly amounts of are on top of that?  If so, you have a number of options:  savings account, money market, CD--although these are not going to get you much better than .9%.  If you're comfortable taking a little bit of risk, a 50/50% stock/bond split is considered good enough for retirees who have to live on it.  Maybe that?

By the way, you're saving $7,200/yr for vacations.  That seems like a whole, whole lot.  Like, Australia lot.  A month at an all-inclusive Mexican resort lot.  Multiple cruises lot.  Just sayin'.

lwhorton

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Re: Where to put my savings?
« Reply #2 on: January 01, 2015, 12:06:14 PM »
Thanks for the quick response Chrissy. I don't yet have a full 1-yr emergency fund, I am working up to that. I have thought about CD's but haven't looked into them sincerely since, at first glance, interest rates are just so low. It seems like a bad idea to have an 'emergency fund' sitting in stocks/bonds.

The stock/bond split seems more like what I'm looking for for non-emergency. I currently have my IRA self-managed with Fidelity (not really self managed, just a subscriber to Fidelity Monitor & Insight). I suppose I could open a brokerage and mimic my mutual-fund distributions, just on a smaller scale? But then again, that is another can of worms I just don't understand. Perhaps what I really need is to talk to an investment advisor.

Yea, my vacation fund is exorbitant... but traveling far and wide aligns with my long-term goals in life. I travel on the cheap, but there's no way around airfare sometimes.
« Last Edit: January 01, 2015, 12:08:15 PM by lwhorton »

Chrissy

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Re: Where to put my savings?
« Reply #3 on: January 01, 2015, 01:43:31 PM »
How old are you?  You know, ballpark...

MDM

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Re: Where to put my savings?
« Reply #4 on: January 01, 2015, 01:58:58 PM »
...after maxing out Roth IRA/401k contributions, where can I store my other 'funds' that will benefit me most?
...
I just don't know where to put these funds, aside from a savings account. ... On one hand, I wouldn't want to have 5k stashed for a vacation fund in a brokerage, only to see the markets take a dive and consequently cancel my vacation that year, for example. On the other, it seems super wasteful to have giant chunks of change just lying around at .09 interest. Thoughts?

lwhorton, welcome to the forums.

The answers are, for the most part, contained in your questions.  For a buffer to hold extra cash for a few months, anticipating a known lump sum payment, a savings account is perfect.  There are, however, places that will pay better than .09%.  GE Capital and Ally (both are online banks) come quickly to mind.

If you are fortunate and disciplined enough to have investable income beyond the tax-advantaged limits, then you could look to low-fee funds available at Vanguard, Fidelity, Schwab, etc.  E.g., go to any of those companies' web sites and they will make it rather painless for you to
  - open a non-retirement account
  - connect that account to your existing checking account
  - do (either one-time or recurring) an electronic transfer from checking to brokerage
  - put that money into an investment fund of your choosing.

For now you could indeed mimic your Fidelity IRA holdings.  Longer term see things like http://www.bogleheads.org/wiki/Tax-adjusted_asset_allocation

Good luck!

 

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