Case Study: High Savings/High Cost of Living;

[dec38]

I’m new to this forum, and just beginning to learn about the Mustachian way of life.  We are a family of 4, dual earners, with high incomes in a very HCOL area.  Running the numbers, it looks like we are on track to become financially independent, at our current spending rate, in about 10 years.  But I’ve been thinking more and more about leaving my job to stay home with my kids (ages 5 and 7).  When I think about what I would really like to do if financially independent, I see my current needs, not those 10 years from now.  That is, what I would really like is to be home for my kids when they come home from school, to volunteer more in their schools, to have time to exercise and eat healthier,  to not have to work more after they go to bed, and get more sleep.  I’d be interested in exploring finding more meaningful work in education – I do not have a background in this area at all, but enjoy reading about education policy, research,  and trends, and helping children learn is certainly more meaningful than my current work!

BUT, I am not a risk taker at all.  And the fact is our current (very non-Mustachian) spending exceeds my spouse’s take home salary.  And with my salary, we are currently able to save $96,000 per year for retirement ($36,000 in our 401ks, and $60,000 (or $5,000 per month) into a taxable Vanguard fund).  We are also saving $19,200 per year total ($800/month for each child) for college for our 2 children.  So I would be very worried about not being able to save.
So, I am posting info about our (I think) not-too shabby savings and also our crazy expensive spending to get input.  I confess I really do not enjoy my current job, so that is driving a lot of my current angst.  A big part of me thinks I should just stay the course for the stability and security it brings – after all, my job is flexible, allows me to be home for dinner virtually every night and have weekends off with my family (although I do put in  after-hours time when kids are asleep on a not-infrequent basis).  But part of me thinks that just when we are finally financially independent, my oldest will be leaving for college and I’ll be facing an empty nest and lack of purpose; whereas now, my children need me…

So, the numbers:

Assets: 

Vanguard (includes 401k, IRAs, and taxable accounts):  $1,196,597
529 accounts (combined total for 2 children):  $148,632.72
Bank Checking + Savings:  $224,904.79

Total Liquid Assets:  $1,570,134.51

House Equity:  $170,000  ($430,000 remaining on mortgage.  Purchase price 10 years ago (market peak) was $647,000, but I think is worth only around $600,000 today)

2 cars bought with cash (2007 Subaru and 2011 Toyota)

No non-mortgage debt

Annual Savings:

Retirement:  $96,000 (401ks and Vanguard taxable account)
College Savings:  $19,200

Gross Income:

Me:     $212,000
Spouse:  $165,000

Annual Expenses:

Mortgage (includes property taxes and home insurance)       $39,955.32    
(2000 sq foot house in the city. The exclusive suburbs
surrounding us would be far more expensive.
 Moving further out would mean hour + commute)

Travel/Family Fun                  $21,997.86 (yikes!)
 (includes multiple ski trips w/lessons, trip to Costa Rica,
airfare for trip to see family, local excursions,
community memberships to zoo, aquarium, etc.)

Child Care Total    (afterschool care, summer camp)      $18,070

Shopping                      $12,729.28
(includes clothing, books, school supplies/school projects,
household goods, gifts, plus new refrigerator after old one broke)

Medical/Pharmacy (total after payroll deductions)      $10,384.48    
--Medical (after payroll deductions)  $6,224.55
--Pharmacy  $4,159.93

Groceries                     $9549.24

Utilities Total                  $8,467.72    

-- Electric    $3,057.71
--Oil       $2,203.84
-- Water    $482.37
-- WPCA    $507.76
--Internet    $719.40
--cell phone    $911.07
--ADT (home security)   $585.57

Insurance (total)                   $6,125.32    
--Long Term Care Insurance  $2,808.00
--term life insurance (me)   $549.72
--term life insurance (spouse)    $1,252.25
--Auto + umbrella insurance (2 cars) $1,515.35

Kids Activities Total                   $5,934.59   
(includes Piano, soccer, cub scouts, dance, gymnastics,
swim lessons, school fundraisers and events, birthday parties)   

Business Services Total                   $4,210.79    

--Lawn Care    $1,450.00
--Terminix    $717.86
--Haircuts    $484.80
--Dry Cleaning    $222.60
--Home Maintenance/Repairs    $1335.53

Restaurants                     $4048.35
(restaurants while on vacation are included
in the Travel line item, not here)

Car Total                      $3,288.28    
--Gas    $1,962.47
--Car Maintenance/Parking    $1,325.81

Family Photos                      $928.12

Movies/NetFlix                      $645.91

I’d appreciate all thoughts, including baby steps we should take toward a more Mustachian lifestyle, etc.

[scantee]

Well.

The good news is that there is a lot of fat to cut in your budget, so even just a few small changes should drastically improve your situation enough that you can live on just your husband's income. By my rough calculation, that means you need to get your expenses under $9600 a month. Right now, they are at about $11.5k/mo, so you need to cut out at least $2000. Looks like the best place to cut are:

-Child care: Reduce from $18k to $6k. With you at home they kids won't need after school. They'll probably have camps and other things, but you could easily cut out $1000 a month were you to quit your job.

-Travel/family fun: You clearly know this amount is bonkers. Reduce this by $12k a year and you will STILL have $10k to spend on vacations and family fun. That's is a ton of money to go on more than one spendy vacation each year and do fun stuff on a regular basis.

That's it! If you really want to stay home, that really all you need to cut to break even. And, with the amount you already have saved, breaking even should be your primary (if not only) goal. Really. If you don't save even one more cent in 10 years at a modest growth rate of 4%, you'll have close to $2.5MM dollars. The fact that you are doing this well with your savings means that you do indeed have a lot of options.

But I'm guessing you won't be satisfied with coasting on your current savings. How much do you need to save, after tax, to feel comfortable and secure? $2000 a month? $3000? Figuring out that number will be important for getting to your saving comfort zone. Then you'll need to start making more cuts. Again, you have MANY places where you can cut and still live a pretty comfy life: "shopping", groceries, eating out, kids' activities...you could all of these substantially and still live a pretty luxurious lifestyle. Another option for you is to do some consulting with the goal of saving all of the money you earn. Seeing what you currently earn, I think you could probably bring in $2-3000k a month without a ton of work. One benefit of this is that it allows you to keep one foot in the work world in case you need or want to return full-time at some point.

Congratulations! You're pretty much made it. Your savings are amazing and with just a little bit of attention to your spending you should be able to quit or downshift in the near future.

[MDM]

Given that ~40% or so of the second income (whichever one you choose to be second) goes to taxes, cutting back to one income should be feasible.  Suggestions by scantee are a great start.

One look at a possible 8.5 years to FI - using only the $147K income - is below.  It takes numbers from the OP, some guesswork, and some assumptions on what you could/should be able to reduce.  You could use it as a "springboard for discussion" between the two of you, perhaps downloading a copy of the case study spreadsheet and entering more accurate (or at least more personalized) numbers.

Category	Monthly	Comments	Annual
Salary/Wages for earner #2	$13,750		$165,000
Traditional IRA	$458	Above IRS limit?	$5,500
401(k) / 403(b) / TSP / etc.	$1,500	At maximum	$18,000
Subtotal 1	$11,792		$141,500
Federal Total Income (for IRS tax)	$11,792		$141,500
Federal tax	$1,168	2017 rates, MFJ, item. ded., 4 exempt.	$14,020
State/City tax	$661	Guess, using 6.33% * (AGI - Exempt'n)	$7,931
Soc. Sec. tax	$657	Assumes 1 earner paying	$7,886
Medicare tax	$199		$2,393
Total income taxes	$2,686		$32,231
Income before other expenses	$9,106		$109,269
Monthly Average Expenses:
Mortgage	$2,779	Input to Itemized Deductions	$33,343
Property Tax	$351	Input to Itemized Deductions	$4,212
Home/Rent Insurance	$200		$2,400
Car Insurance	$126		$1,515
Car Maintenance, Registration, etc.	$110		$1,326
Child activities	$495		$5,935
Childcare	$151	Input to Child and Dependent Care credit	$1,807
Dining (Lunch/Dinner/Etc.)	$337		$4,048
Dry Cleaning	$19		$223
Electricity	$706		$8,468
Entertainment	$131		$1,574
Fuel/Public Transport	$164		$1,962
Groceries	$398		$4,775
Hair Care	$40		$485
Household; Maintenance	$111		$1,336
Landscaping/Yard work	$181		$2,168
Life Insurance	$384		$4,610
Medical (Doctor, Hospital, etc.)	$519	Input to Itemized Deductions	$6,225
Medicine (OTC + Prescription)	$347	Input to Itemized Deductions	$4,160
Miscellaneous	$1,061		$12,729
Travel/Vacation	$458		$5,499
Non-mortgage total	$6,288		$75,456
Total Expense	$9,067		$108,799
Total to invest	$39		$470
Summary:
"Gross" income	$13,750		$165,000
Income taxes	$2,686		$32,231
After-tax income	$11,064		$132,769
IRA+401k/403b/TSP/457	$1,958		$23,500
Living expenses	$9,067		$108,799
After-tax investable	$39		$470

Time to FI?:
Time to FIRE	8.5	years
Safe Withdrawal Rate	4.00%	percent
Real return on tax-deferred investments	5.00%	percent
Real, after tax, return on taxable investments	4.25%	percent
Current Savings
Taxable	$1,025,000
Tax-deferred (e.g. trad. IRA/401k)	$400,000
Projected Savings at Retirement
Taxable	$1,464,753
Tax-deferred (e.g. trad. IRA/401k)	$847,129
Total projected stash	$2,311,882
Projected Expenses in Retirement
Non-loan, non-work expenses	$75,456
Annual non-tax retirement expense	$75,456
Income taxes	$4,386
Total	$79,842
Total loan principal due at FI	$304,880
Stash needed for retirement @4.0% SWR	$2,300,931
	Have $10,952 extra.

Filing Status	2	1=S, 2=MFJ, 3=HOH
# Exemptions	4
# Children <17	2
# Children <13	2
# Children for EIC	2
	Adult #1	Adult #2
Age	35	35
# of earners	1
Total Income	$141,500
Std. Deduct.	$12,700
Act. Deduct.	$33,429
Exemption	$16,200
AGI	$141,500
MAGI	$147,000
Taxable	$91,871
1040 Tax	$14,445
Tax after n-r credit	$14,445
Child Tax Cred.	$425
Net Tax	$14,020
Monthly	$1,168
Mtg. Int. (approx.)	$21,285
State tax	$7,931	6.33%
Prop tax	$4,212
Item. Deduct.	$33,429
Version	V8.17

Loans:	Orig. Prin.	Orig. Length	Curr. Prin.	Yrs left	Rate
Mortgage	$517,600	30	$430,000	21	5.000%

[mamagoose]

On a practical level, look into SimpliSafe and ditch ADT. Also, almost a grand a year for family photos?? Otherwise it looks like you guys have a very full life, I hope all the things you're spending on are bringing you joy. Maybe explore it from a minimalism perspective instead of financial, i.e. maybe after care isn't a big pleasure but summer camp is, maybe combine airfare to visit family with your other vacations (see if you could do group trips with the family you were flying to visit). There is a lot of fat in here, like dry cleaning, Terminix, and things that you could get comfortable DIY if you had the time in lieu of a 9-5.

[Lobo]

I might have missed it......but how much of your savings is in equities?  Basically what is your portfolio allocation?

[dec38]

Thanks for these very helpful responses!  You are right that with a little bit of cutting we should be able to be sufficient on one salary. And I know there is a lot to cut!  Travel is our weakness -- we could care less about clothes or fancy cars, and our house is relatively modest, but we spend a crazy amount on travel. I think we need to start thinking more carefully about how we spend to travel. The travel itself is what brings us "joy" because that is true family time being active together making memories, but we can do more within driving distance, or stay at less expensive hotels, or make breakfasts and lunches to cut down on meal costs when traveling, etc. Skiing was a big cost in the last year because our kids were in ski school learning. But I think next winter we won't need that. It is an expensive sport, but a true family activity we can all enjoy together, so I would want to cut that altogether.

One other consideration I have in thinking about our FI number -- healthcare. I figure if we don't get insurance from our jobs, I'd need to add $15-20,000 to our budget for health insurance.  Basically, I am figuring that the amount that is now budgeted as "child care" will become a line item for "health care" once we leave our jobs. (And we'll hope and pray we can still get insurance since my spouse in particular has a "pre-existing condition".). Of course, if my husband continues to work, we'll keep that insurance as long as we can.

I think I am going to try to see what we can cut while I keep working for now, so that we'll be in a position for me to leave the workforce or just become FI faster.  Less grocery waste, eating out less, do more ourselves instead of paying others, etc.

I will have to try the case study spreadsheet too. Thank you for filling in all those numbers!  It gives me a lot to think about.

[Lepetitange3]

Hi!  I was in your position a few months ago.  Lots of savings, no debt, but two high earners meaning two high spenders.  The first month trying to be more MMM, we easily halved our spending just by thinking harder about every purchase.  The second month, we halved it again by re evaluating services, revamping the grocery budget, getting better rates on things like insurance, and really planning the year for things like travel so we could take advantage of travel hacks etc.  That put us well below the number needed for me to just resign my job.  And I have 4 kids and 1 more mortgage than you. 

Another thing to consider because I know how kids activities (and then gas and food etc) add up.  Ask yourselves and then actually ask your children which activities give them joy.  For a LONG time, we shuffled kids around to a different activity every day.  Once we sat down and talked about it (and this was before I ever found MMM), turned out my children only really loved 1 or 2 of the activities they were doing, and preferred to have more free time at home to read or play outside or with toys or one another.  There's a definite trend to overschedule kids that I've found my children are 100% happier without doing so much.

[Dee18]

The first "expense" to cut is contributions to the college fund.  The amount you have in now should grow over the next decade to be more than sufficient.

[SHARP_00]

You have $1,421,501 in investments, excluding the college fund. At 4%, you could be supporting $56,860 a year in income on investments alone. Lets walk through a little what if scenario:

You have decided that your job just isn't what you want to be doing, you'd rather work in some form of education. However, given your current spending, HCOLA, and spouse's insurance needs, its tough to change.

So you decide to sell the house, pocketing ~155k in equity (I rounded down for costs, not that important for this example). You then decide to move to small college town, not far from a major city. I'll use Dekalb, IL in this example, since I know it fairly well. Why Dekalb? Well, I'm assuming your spouse was able to get a job with benefits here, or work remote, which may or may not be possible, but lets roll with it. They take a pay cut in the move, now making 50k, but with benefits (and you still have that 56ishk a year from investments if needed). You start taking classes part time at NIU, working towards a certification for teaching. Classes are at night or during school, so you get to spend most of your time with the kids, and drop childcare.

Now, presumably that HCOL 600k house you had before was in a suburb (assumption that could be wrong, maybe it was a high rise condo downtown, who knows). How often were you and the family able to make it into the city? You had aquarium and zoo memberships, but how often did you use them? There's an easy train outside Dekalb that can get you into Chicago for the weekend any time you want, alot easier to do when your spouse has a lower stress job and you're taking a couple classes.

The point is, it would be possible to live a dramatically lower stress life, and still have access to culture and activities you love, right now. Not in ten years, but now. Given that, its time to start really thinking about how and why you value the parts of your budget that make the large incomes necessary. Do you need the 600k house, or is it only necessary for job location? Could you drop all the childcare/expensive camps if you could utilize park district activities and do the childcare yourselves? Could you utilize the city more sporadically, and cut down on the memberships? Cut your own lawn? Cook more? All of these things become more possible if you don't have to work. Just something to think about. The life I described above might be miserable for you, and you highly value avoiding it. Buts its possible to price the difference between the example life and your own, and find something more optimal between the two!

[beantown]

Based on your current spending and love of travel, I would suggest looking into travel hacking. It'd be pretty easy to pull in over $2-3K of free airfare, hotel nights each year if not more based on the spending you're already doing. For example, right now the Sapphire Preferred has a 50k sign up with no annual cost the first year, which is worth about $1K in airfare if you transfer to United, etc. Between you and your husband, it should be pretty easy to open a few credit cards and cycle through them over the course of the year.

[dec38]

We've got a lot to think about.  It was eye opening for me just to go through all of our expenses in the last year.  We've been fortunate enough to have incomes exceeding our spending that I never really budgeted or gave meaningful thought to how the little things add up.  I am going to do that now.  We at least had the sense to keep the big things under our means (like house and car) so that at least half of our budget consists of discretionary spending.  But the benefit of that financial cushion we've had for the last several years is we don't have to worry about an unexpected expense -- we've had expensive house and car repairs and medical expenses over the years that haven't made a dent in our lifestyle.  I worry about losing that financial cushion. 

With respect to moving to a lower cost area, I don't think we're ready for a huge move.  The more likely scenario is moving somewhere lower cost within our state.  We could probably get a similar 2000 sq. ft. house in a decent school district for $350,000 or less elsewhere in the state.  But as long as one of us is employed, we'll probably want to stay put (otherwise the commute would be too difficult).   And even if we were to leave our jobs, we'd probably want to be not too far from our parents, who live about an hour from us.

I need to read up on travel hacking!  Given that we're not the most flexible travelers (we won't take kids out of school, so limited to school breaks and summer, and work schedules aligning), we've never looked into airline credit cards, etc.  We just use a cash back credit card, which we've been happy with.

[gaja]

Skiing is only expensive if you buy the equipment new and pay someone to pull you up a hill before you "ski" down. With good quality secondhand or borrowed equipment you can have just as much fun, and I hope you still have some mountains left in the us where the snow is made by Mother Nature, and you can enjoy the walk uphill before you race each other down.

[Villanelle]

Yes, Skiing is something your whole family can enjoy together.  You know what else is?  Hiking, which can be free.  And perhaps more to the point, another thing that the family can enjoy together was a lot of the things you mentioned in your OP--having mom or dad home and emotionally present when the kid get home from school, have a parent active in their classrooms, having someone with enough energy left to help with homework, etc.

You could do a staycation with your family for a week, chock full of family time, for a few hundred dollars.

Time to decide what's more important, raising kids who are awesome skiers and who grow up thinking the only real ways for them to have fun (and spend quality time with their families in the future) is expensive ski outings, or teaching them about hiking an camping and geocaching and lots of other "true family activities", and also getting to do the things you mention in your first post.    Right now, if your kids think they can only have fun doing fancy stuff, that's a problem you can still solve, and you'd be doing them a huge favor, as well as advancing your finances.  And if they don't feel they need that, then there's no reason at all to keep doing it.

[dec38]

You're right that we should focus on the free things we can do together as a family.  Now that the kids our older, I think we would all enjoy exploring the hiking trails around us.  In the spring and summer, we've always enjoyed bike riding together (although that was not cost free-  we invested in things like bike hitches and bike racks, child seats and tandem attachments for when the kids were babies-preschoolers, kids bikes, etc.) but now that we have those things, it is a free and fun way to be together.  My goal for this year is to cut our expenses by at least $20,000.  I think we can easily do this if we just pay attention to our spending.  We can cut travel in half, groceries by 20%, restaurant spending by half, shopping (clothes, gifts, etc.) by at least 25%.  If we can do this we'll be pretty close to the number we need for me to stop working, since at that point childcare expenses would drop.  I need to figure out what my husband's take home would be if it was the sole salary.  I assume our tax rate would be lower since we wouldn't have to pay the AMT, etc. but I haven't run the numbers yet.  I think I would still want to find a very part time job (20 hrs/week max) just for ongoing savings.  I would feel very uncomfortable if we did not put anything aside for emergencies or expected future expenses (college, cars for when our current cars die, house maintenance, etc.). 

Someone asked earlier what our asset allocation is.  I think our Vanguard accounts are 80/20 stocks/bonds.  They may be 75/25, I'm not 100% sure.  We should probably move some of what we now have in cash to Vanguard as well. 

[MDM]

I need to figure out what my husband's take home would be if it was the sole salary.  I assume our tax rate would be lower since we wouldn't have to pay the AMT, etc. but I haven't run the numbers yet.

See https://forum.mrmoneymustache.com/case-studies/case-study-high-savingshigh-cost-of-living/msg1575462/#msg1575462. ;)

[dec38]

I need to figure out what my husband's take home would be if it was the sole salary.  I assume our tax rate would be lower since we wouldn't have to pay the AMT, etc. but I haven't run the numbers yet.

See https://forum.mrmoneymustache.com/case-studies/case-study-high-savingshigh-cost-of-living/msg1575462/#msg1575462. ;)
[/quote

Ah yes,thank you!!!  I will update with our state income tax but that looks pretty close!

[FireHiker]

I can relate on a LOT of it (including the dual high income, HCOL, high travel expenses, even the 5 and 7 year old, although I have a 16 year old also). We aren't QUITE as high earning/high spending as you are, except where travel is concerned!

Looking at your numbers and considering childcare, work-related expenses and taxes, food budget you could cut if you were home full-time, your existing savings, etc, I would in your position absolutely stop working and be home with the kids, although it would require some adjustments. Unfortunately we aren't QUITE there with savings, and our mortgage is worse than yours, so alas I am still chained to my high paying/medium to low satisfaction job. We have made a lot of minor (and some major) budget cuts just by tracking everything. It really is eye opening when you add up the total spent year over year, especially if you have a kid in club soccer (and one in gymnastics, etc, I get it). We cut pest control, don't have a security service, cut cleaning lady (that savings alone paid for our flights to Rome over spring break). It adds up!

I recommend you at least get a Chase card even if you don't get into full-blown travel hacking. We have the CSP (got it before the CSR came out; haven't gotten it yet). It seems to be the best for value/flexibility if you are only wanting to travel when kids are off school.

Good luck!

[zz_marcello]

First: Congratulations! You are in a fantastic position!
You just need a few tweaks and you can either retire now alone or both of you together in ~3 years.

- Reduce you non-mortgage spending of currently ~$100k to about $75k/year by cutting travel, shopping, child camps, kids activities and restaurants in half and reducing others a bit.
- Your electric bill is insane. We (family, 2 kids) live in a 2300sqft Washington DC suburb house with pool (electric pumps), two monster refrigerators and humid summer air-con galore and we spend $1000/year.
- Heating oil the same.
- Why do you have life insurance? You are double earners, already worth $1.7M and will retire soon.
- Lawn Care $1.450 / Family Photos ~$1000? Seriously? :-)
...

This tweaks will boost your yearly savings from $115.000 to $140.000.
Which means in three years you will look at ~$2.2M in your investment accounts (4% after inflation/tax yield on portfolio).
(BTW: What are you doing with $225.000 in a checking/savings account? Throw it in the stock market or at last at your mortgage).

- Then move to your new lower cost of living instate house ($350.000) and pay it with cash from your current house equity + savings).
This leaves you with a paid of house and >$2M in investments.
This amount provides you even under super ultra conservative assumptions (below 3.5% withdrawal rate with ~$70.000/year rising with inflation till the end of your life).
This is more than you need, because after you retire you don't need the $18.000/year after school/child care any more.
The ~$10.000/year that you easily under spend your possible withdrawal rate you can either put into a health care pot or mark as additional 529 fund money.

Done.

[Tuskalusa]

Wow.  I read your post and it could have been mine about 2 years ago. We were two high earners, and we'd been working and raising our son for 8 years. I finally got tired of the juggling, and I wanted to be home when my kid got home from school.

We spent about a year reducing our costs, or at least figuring out what we could cut if I quit. Here's what we considered:

- After about 18 hears as a high earner, I felt that my 401k would grow enough on its own before retirement age. So we didn't worry about making additional contributions.
- We refinanced the balance on our mortgage, to a lower rate, but still for 30 years. Our thinking was that we would eventually pay the house off (no intent to keep it for 30 years and pay all that interest), but we would reduce our cash flow for now.
- We got rid of after school care. Being home after school has been great. Things are more laid back. Homework isn't stressful anymore.  I hated paying for after school care because it didn't bring much value beyond keeping my son occupied so we could work.
- We reduced after school activities. This became less about cost cutting and more about prioritizing downtime. My son now only does one activity at a time (1 sport or one class). And I cut activities that he's not enjoying. He's happier. We're happier. We save money.
- I reduced my cleaning/other help. I run my own errands, I don't send out shirts and dry cleaning, and I clean my own house more. That being said, I just started up a house cleaning service again. Just cuz I'd rather spend my time with my family, and try as I might, I can't get the whole family into cleaning consistently. (Not Mustacian, but it works for us.)
- I grocery shop more thoughtfully and cook more. We were using things like Amazon Fresh and other delivery services. That all became unnecessary when I quit my job.

Once I stepped back, expenses re-shuffled. I've had to come to terms with saving less, but being home has been worth it.

Then, about 8 months after I quit, I landed a part time job with an education nonprofit group. It's been a great way to learn about education policy, and it provides a little income. And I'm home by the time school is out.

If you changed things up, I bet you would eventually find your own path of finding work, purpose and family.

Looking forward to seeing how things work out for you!

[Zariana]

Over $200k in checking/savings. I was in that position a year ago as my company was undergoing layoffs and the liquidity gave me a sense of security--but after binge-reading MMMs blog from start to finish, I realized I was letting 200,000 little workers sit idle.  I pushed most of it in the market before the recent run-up--so you may have some trepidation putting it in right now. I'd still consider it, more recently I've focused on international index funds (because the dollar seems strong now) and dividend funds (like Vanguard Equity Income) which will still provide dividend income if you are willing to hold it through a market drop.