How much cash do you keep?

[eddieryan]

Just curious if anyone follows guidelines on how much cash to hold. I'm a new mustachian maxing out 401 and roth and basically have no cash savings. Should I aim for a % of annual income?

If you keep a large cash savings, do you keep a reserve for buying funds when you feel they are cheap?

[MDM]

Also see http://forum.mrmoneymustache.com/ask-a-mustachian/your-checking-account-balance/ for a similar discussion.

[SaintM]

The other day, I counted up the cash in all my accounts and came up with about $80k.  I was amazed it was so high.  Of my cash, $15k makes 4.1%, $15k that makes 1.5%, my spending account has a couple thousand, and $7k is set aside for Uncle Sam.  The other ~$40k needs to find a better home.

[Michread]

Just enough to pay the monthly bills.  Everything else goes to 401, 403, IRA.  We've been doing this for 20+ yrs. 

[mabinogi]

We're a family of 4 living on a single income. I'm shooting for keeping $20k in a cash emergency fund (we're getting close to that now).

[Villanelle]

I assume you mean money in easily liquid accounts, not actual physical money?

If it is the former, we usually have about $5-8000.  We also have significant non-retirement investment accounts, and a large available HELOC.

If DH's job were so exceptionally stable, we'd probably increase that by a few thousand, but we'd still mentally rely on the HELOC to do much of the heavy lifting if push ever came to shove in that scenario. 

If you are talking physical cash, between our wallets and whatever is laying around, maybe $500, and it would be less if we didn't need to carry both USD and Euros.  Oh, and we also have a wad of bills from various countries.  No idea on the value of that but it wouldn't do us much good since none of it can be spent where we are now. 

[iamlindoro]

In actual spendable money, maybe 3-5K in checking.  Right now, I'm expanding my rental properties so that figure grows larger by the amount of a downpayment on a modest rental, then snaps back to 3-5K every six months (trying to buy two a year).

[Retire-Canada]

$3K. Everything above that gets invested.

I have a $30K LOC to manage any unexpected cash flow hits.

-- Vik

[GGNoob]

Just enough in my checking for next month's expenses (this month's income pays for next month's expenses). Everything else, except for a small buffer, gets invested. Right now I'm still debating on what that buffer should be. My final decision will be anywhere from $1k to 1 month's expenses.

[Doulos]

1) Roughly $100 spending and $100 giving in my wallet.  Wife has about the same.
- if we save up we might have more.
2) Another $100+ in the car glove-box in-case we ever need a tow that only accepts cash.
3) We spend cash, so we also have 1 month expenses in cash each month. $2.5k
- Looks something like this.

4) ~2 months expenses in Checking account.  ~$5k
- So we never think about when a check clears or when we get paid.  Just put all the bills and checks on auto-deposit/pay.  Zero worry.
5) 6 month emergency expenses.  $12k  This is based off of a cut down minimal budget.
- if we both lost our jobs at the same time, we survive on this while we figure things out.
6) Expense account at on-line back.  ~$2k To cover school/business expenses separately from our personal account.
- scholarship & expense checks go here.
- School/business expenses come out of here.

This all totals to roughly 20k.  Maybe a little more.

[Ohio Teacher]

$5000 in online savings earning 0.90%
$500 in local savings earning 3%
$1000 - $2500 in checking, enough to pay bills and keep a small cushion

The $5000 is a feel-good number that we keep just in case, but the longer we go without using it, the longer I wonder if it's really needed.

[catccc]

Right now about 50K, and I know that is too much.  About $40K is set aside for a home purchase, but IDK when that is going to happen, and it's just been sitting around for too long...

[Financial.Velociraptor]

FIRE since 5OCT2012.  I keep no emergency fund.  There is just enough cash to meet about 1.5 months of expenses in checking account.  When I get in a bind, I put it on Capital One 1.5% cash back card and then pay it off with a margin loan from Interactive Brokers (1.6% or so).  If I recoup the cash within a year, I actually come out ahead on interest.  At the same time, I stay fully invested mostly in dividend paying stocks that meet my cash flow needs and trounce money market funds.  Easy peasy and rarely tap into capital for more than 6 months.

[RapmasterD]

Right now we have about 10 weeks of living expenses, and less if I buy some handguns and canned goods.

[dungoofed]

Term Deposits make up about 1/6 of my portfolio. Then there's a war chest with a year's worth of living expenses (big changes coming), and somewhere up to $5000 which is slated for investment.

[trailrated]

18k

[Jon_Snow]

I tend to keep between 50-100k in cash. I have always done this, ostensibly to be able to quickly pounce on investment opportunities as they present themselves. In the past I have got great entry prices on a bunch of Canadian companies (a big telco, potash producer, pipeline, etc...). I will hold these companies and collect the dividends till I leave this life.

Got my eyes on a handful more stocks these days. Might pounce soon. :)

[aspiringnomad]

A $5k average daily balance is the minimum for me to avoid fees. I realize I can find much better checking account arrangements, but since $5k happens to approximate my cash comfort level, I figure it's not worth the hassle of switching.

[ruraljuror]

Just enough to cover a few months of bare bones expenses.  Holding a percent of income shouldn't be the goal since your income has no bearing on your expenses.

[FrugalKube]

Well the Emergency fund is around $15k I usually have $100 or so on me. Too much money in the checking need to move more of it to savings or the investments

[amberfocus]

Just enough to cover a few months of bare bones expenses.  Holding a percent of income shouldn't be the goal since your income has no bearing on your expenses.

This. I understand that percentages may make sense for business balance sheets, but I base my liquidity on outgoing cashflow, which is a fixed number. Right now, I'm holding ~$15K, which is a very generous 6 to 12 months worth of expenses. In reality, that can probably be lower, because even if I lose my job and the SO gets hit by a truck (…all in the same week...), unemployment can still cover all of my expenses. If I were FIRE'd, I'd probably bump that up to $50K, or 2 to 3 years of ER expenses.

[Wolf359]

Just enough to cover a few months of bare bones expenses.  Holding a percent of income shouldn't be the goal since your income has no bearing on your expenses.

This. I understand that percentages may make sense for business balance sheets, but I base my liquidity on outgoing cashflow, which is a fixed number. Right now, I'm holding ~$15K, which is a very generous 6 to 12 months worth of expenses. In reality, that can probably be lower, because even if I lose my job and the SO gets hit by a truck (…all in the same week...), unemployment can still cover all of my expenses. If I were FIRE'd, I'd probably bump that up to $50K, or 2 to 3 years of ER expenses.

+1
The actual amount of cash other people keep is irrelevant to your situation.  Focus on your monthly expenses.  The emergency cash is simply the buffer between you and the need to liquidate your accounts.  If you have a very stable job, you don't need a big emergency fund.  If your income is based on commission or is extremely cyclical, you may need to keep more set aside.  Some people keep only one month's buffer in checking/savings, then rely on the bond component of their portfolio for any larger amounts.  YMMV based on what lets you sleep at night.

$15K is 12 mos of expenses for some, 1-2 mos of expenses for others.  Other people's numbers don't matter, because that $15K number may be way too high or way to low for you.  The best responses are about how many month's expenses they're holding aside.

[MustachianMD]

We keep about 1 month's worth of expenses in an account that we can easily withdraw from at a moment's notice- i.e. physical bank or credit union.

We then have about a year's worth of slightly less liquid money in online accounts that have a higher interest rate. I am working on reducing that amount and using it to increase my investments. Our goal is to have between 3-6 months cash available in these accounts to take care of any major expenses that may come up.

I try not to market time, but I do have to say that when I see a big drop in the market it acts as a reminder for me to invest some of that "extra" cash lying around into the market so it can work with me. This is on top of the automatic investments we already do.

Hope this helps!

[willkp23]

The other day, I counted up the cash in all my accounts and came up with about $80k.  I was amazed it was so high.  Of my cash, $15k makes 4.1%, $15k that makes 1.5%, my spending account has a couple thousand, and $7k is set aside for Uncle Sam.  The other ~$40k needs to find a better home.

I have to ask, how are you getting 4.1% on cash? 1.5?

[Pootie22]

Wow most of these numbers seem really high to me. I'm curious if most of you with 5k+ use credit cards at all?

I only keep what I am going to need in like the next two weeks, currently mortgage was just paid and I have a total of about $1,500 in 2 checking accounts combined. I almost NEVER pay for anything with cash and don't think I've used my debit card in like 6 months (except to take cash out), I pay for just about everything with a credit card and pay the card at the end of the month.

With all my credit cards combined (I have 10, I love rewards :) )I have about $95k limit so I just don't see why I would ever need cash available (earning me very little interest). Also, I have a salaried job so I know the exact amount of money that is going to show up on my account every week.

[iamlindoro]

Wow most of these numbers seem really high to me. I'm curious if most of you with 5k+ use credit cards at all?

Yes.  Everything that can go on credit cards does go on credit cards.  However, those bills are paid in full every month, and that's where the cash comes in.

[amberfocus]

Wow most of these numbers seem really high to me. I'm curious if most of you with 5k+ use credit cards at all?

Yes, we've got plenty of credit cards that we use whenever possible for rewards points and cash back. For us, having a larger EF is not about about actually needing the money, but about being properly prepared for anything. Perhaps we're being excessively paranoid (although 6 to 12 months of expenses is hardly unreasonable by most metrics), but at the end of the day, the tendency towards over-funding the EF is consistent with why we're Mustachian in the first place -- we don't like dangling close to the edge, and much prefer to be financially secure and independent.

[postvmvs]

Way too much. For those familiar with those DirecTV commercials, I would be "2-years-living-expenses-in-cash" Rob Lowe. Don't be like me.

[Sunnymo]

In physical cash it is generally no more than $20 - $40 at once. My cash spending needs are low so why have more in case the wallet gets lost.

Accounts it is about $50k. While this is large it covers:
$500 - $800 in my primary transaction account. When it gets above $800 dollars I siphon money off to home loans and investments.
$2,000 in a share buying fund. I collect dividends in cash and then buy more shares when the balance hits a certain point.
$10,000 in sinking funds for bills that come up on an annual basis and to meet expenses and potential repairs for 2 investment properties.
$25,000 saved for medical expenses in the next 12 months that insurance will not cover.

Plus some e-fund money in there as well. My husband works in an industry that has been going through significant downsizing that can happen with little notice and I don't work. If he lost his job we would need to survive for up to 6 months before he got another job. So this amount meets the 'sleep at night' test.

[MustachianMD]

$2,000 in a share buying fund. I collect dividends in cash and then buy more shares when the balance hits a certain point.

I do the same with my dividends but transfer them to my online savings acct for a higher interest rate while I wait to purchase additional funds/stocks.

[Trimatty471]

One income household.  So I keep $20K.

[spokey doke]

I'm too embarrassed to tell...its too much.

[Davids]

I admit I have more cash than I need, $40K ($10K in checking and $30K in Captial One 360 Savings) but it is a compromise as my wife wants to maintain that cash balance. We still MAX Roth, HSA, 401K and put extra into after tax Vanguard brokerage account, 529 account...

[SaintM]

The other day, I counted up the cash in all my accounts and came up with about $80k.  I was amazed it was so high.  Of my cash, $15k makes 4.1%, $15k that makes 1.5%, my spending account has a couple thousand, and $7k is set aside for Uncle Sam.  The other ~$40k needs to find a better home.

I have to ask, how are you getting 4.1% on cash? 1.5?

http://www.gibslandbank.com/personal/checking/reward-checking.html

To earn your rewards, simply do the following activities and transactions in your REWARD Checking account each monthly qualification cycle:

Have at least 15 debit card purchases post and settle
Have at least 1 direct deposit or recurring ACH payment post and settle
Be enrolled and receive E-Statements

I use my debit card and Square Cash (no fee) to pay my kids' allowance to meet the requirement.