Author Topic: How much cash?  (Read 1057 times)

ericbonabike

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How much cash?
« on: April 12, 2019, 07:49:28 AM »
How much cash does everybody keep on hand?

When I was young, I'd keep 6 months or more of monthly income as cash.  I eventually got "sophisticated" created a CD ladder, thought my 1.0 % interest was super awesome.


My adoption of Mustachian lifestyle has led me to do the following:
Now, I start each month with ~1.5x monthly bills in cash.  Then as the month advances, that gets spent down to about 0.5x monthly bills (gives me a small margin in case bills are a bit higher than expected).

I get paid once a month, and that money takes my cash from 0.5x monthly up to 2.5x monthly.   I siphon about 1x monthly bills into brokerage account.  This means that in general, my monthly net is twice my monthly bills.  So, my after-tax savings rate is about 50%.

Last month, my large credit card bill posted the day before i got paid, and it took me down to about $250 cash.  I was sweating bullets about whether my paycheck would post before the next one hit.

RWD

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Re: How much cash?
« Reply #1 on: April 12, 2019, 07:53:04 AM »
I always keep enough in our checking accounts to pay the current balance of all our credit cards plus recurring bills (utilities, car loan, mortgage). Everything else gets swept to savings which then gets swept to Vanguard quarterly.

mountain mustache

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Re: How much cash?
« Reply #2 on: April 12, 2019, 07:54:53 AM »
I keep about $200 in my checking account. But I have two other separate high interest savings accounts where I can somewhat quickly move money if I really need it. I try to not keep too much in my checking because I feel it could go to better use elsewhere. My savings accounts earn about 2.3-2.4% interest, which is nice. In your situation of a monthly paycheck though, I understand the need to keep more of a buffer, especially if your bills are not always predictable. I do think that with credit cards you can actually call and make a change to your due date, if you need it to line up better with your once a month paycheck...

FLBiker

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Re: How much cash?
« Reply #3 on: April 12, 2019, 08:01:29 AM »
Historically, we kept around $15K.  Now, we're actually keeping a lot (~$30K) because we're planning to move to Canada and need to show a certain amount of cash on hand to support ourselves.  Once we're settled, I think we'll probably go lower again.  That being said, it depends on work.  If we don't have stable work, we'll keep more cash on hand.

While we've had steady jobs, we certainly could have gotten by with less, but I personally like not having to think about when credit card bills (even relatively expensive ones) will hit.  And I like to have cash on hand for things like a new AC or a new used car.  It's not maximally efficient, but it reduces my cognitive load. :)

Freedomin5

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Re: How much cash?
« Reply #4 on: April 12, 2019, 08:24:53 AM »
We keep about $1000 more than the minimum balance required to waive the monthly bank fee.

v8rx7guy

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Re: How much cash?
« Reply #5 on: April 12, 2019, 08:39:12 AM »
We keep one month's cash as the "zero" in our day to day checking account.  That way we don't have to worry when the bills come in and autopay during the month, we know the funds are there.  Then we keep 2 additional months expenses in a Money Market account along with our sinking funds for major house repairs, vacations, etc.  Typically around $10K total in our Money Market Account.

thesis

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Re: How much cash?
« Reply #6 on: April 12, 2019, 08:56:33 AM »
I have an emergency fund of $10k in a money market account, about $3k for car maintenance and repairs (partly in the money market account, partly in a savings account), and then a "personal development" account of $2k (travel, expensive items, etc), which I keep in a savings account.

I'm leaning toward grouping these all together, or maybe only having one savings account with $1k in it and all the rest in the money market, at least earning me a little scratch every month. My preferred total would be $20k, which would allow me to survive a year of unemployment with no unemployment checks. I don't have any reason to believe I would be out of work that long, but you never know. More realistically, if something happened to my quality used car, I'd be able to spend less than half of it for another quality used car, have extra for any parts I need to change, and still have a 6-month emergency fund. I'm a bit risk-averse, but that's all a matter of perspective :D. I just feel that $20k is a benchmark that would make me happy.

For what it's worth, though, my 50% savings rate is all going to my 401k, to max that juicy employer match ASAP. Whatever I save above that goes to the cash bucket or is spent. I also deliberately set aside $100 every month for the car.

SpareChange

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Re: How much cash?
« Reply #7 on: April 12, 2019, 10:31:42 AM »
I get paid every two weeks. I keep enough to cover the bills due in the next two weeks plus $100-$200 extra. I have margin enabled on my brokerage account (my checking account), which acts as an LOC in case of overdraft.

Nick_Miller

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Re: How much cash?
« Reply #8 on: April 12, 2019, 10:54:10 AM »
About $30K these days, about 6 months of living expenses.

ericbonabike

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Re: How much cash?
« Reply #9 on: April 12, 2019, 12:47:58 PM »
I get paid every two weeks. I keep enough to cover the bills due in the next two weeks plus $100-$200 extra. I have margin enabled on my brokerage account (my checking account), which acts as an LOC in case of overdraft.

I use a "Cash Management" account with Fidelity.   And I was considering enabling margin on it for the same purpose.  Wasn't sure it would work like that though.  Does it automatically cover any shortfalls?
Is there any cost associated with this? 

JSMustachian

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Re: How much cash?
« Reply #10 on: April 12, 2019, 02:04:31 PM »
Our jobs are very stable so we do not keep much cash in savings.

We keep enough in checking to be able to pay the living expenses each month and $5,000-$10,000 in a money market account for emergencies.

Duke03

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Re: How much cash?
« Reply #11 on: April 12, 2019, 04:28:35 PM »
I normally keep 50k to 60k in cash.  I have a very stable job, but being a 1 income family it does put more pressure on me.  Also I like keeping that much cash on hand in case I find a very good deal on something ie: land, house, or stock market decides to drop 20% percent tomorrow.  I have a net worth over 500k so I don't see it as a huge deal if I keep 10% in cash laying around.  I do bank account churning and credit chard churning so the money is making some cash and not just totally sitting there.

Villanelle

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Re: How much cash?
« Reply #12 on: April 12, 2019, 04:44:39 PM »
We are in the middle of a move, with tons of unexpected expenses so right now our balance is insanely high.  But typically, at the low point, our main account balance is about $10k.  Honestly, that mostly due to simple laziness.  It's nice not to have to coordinate purchases with DH.  If he pays the property taxes and forgets to mention it, it's fine when we have that much cushion.

When that number starts creeping up, I scrape off the extra and invest. 

use2betrix

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Re: How much cash?
« Reply #13 on: April 12, 2019, 05:20:53 PM »
I work as a contractor so my work is somewhat volatile. Also, because a project may end, I may want to take a sabbatical between contracts (in the last few years Iíve taken two, 4 month sabbaticals).

Usually at the start of projects I keep less in cash as I know I have a long job outlook. Right now, even though my pay is incredibly high and I have about 2 years left in my contract, I still have around $70k in savings/checking. Largely because I feel the market is high, and also because I just really like having a good F U stache for the olí reassurance.

SpareChange

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Re: How much cash?
« Reply #14 on: April 12, 2019, 11:25:55 PM »
I use a "Cash Management" account with Fidelity.   And I was considering enabling margin on it for the same purpose.  Wasn't sure it would work like that though.  Does it automatically cover any shortfalls?
Is there any cost associated with this?

Yes, and yes. My account is at TD Ameritrade though. The cost is the margin interest that accrues. I've only had to use it one time so far. I overdrafted my account by about $600. My next paycheck deposited about 3 days later. At the end of the month, TDA deducted about 27 cents for the interest accrued. It's the whole "springy debt" idea. I don't own a home, so heloc is not an option. Stable job.

 

jpdx

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Re: How much cash?
« Reply #15 on: April 12, 2019, 11:59:31 PM »
As a freelancer with irregular income, we keep at least 6 months worth of expenses as cash.

Works out to about 5% of our asset allocation as outlined in our IPS.
« Last Edit: April 13, 2019, 12:04:29 AM by jpdx »

FatFI2025

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Re: How much cash?
« Reply #16 on: April 13, 2019, 12:12:37 PM »
Between $5K and $10K -- my floor is $5K because it's the minimum balance required for my First Republic student loan refi, otherwise I would go down to $1K. The rest of my EF is in MM and short term treasuries.