Author Topic: What should I do with $40K?  (Read 1342 times)


  • 5 O'Clock Shadow
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What should I do with $40K?
« on: March 09, 2019, 07:33:52 PM »

I am new to this forum and could really use some help. I have $40K of "unassigned" savings and I am not sure what to do with it. Here is my situation. I am 37, government employee making $160K, and my finances are as follows:

Retirement: $385K
TSP: $374K
Roth IRA: $11K
I will also have a pension (currently over $20K/year but will grow)

Index Funds: $63K
VFIAX (S&P 500): 33%
VTSAX: 33%
VSIAX: 17%
VTIAX: 17%

Cash: $132K
Emergency Fund: $20K
House Down Payment: $70K (currently looking at buying a house)
"Unassigned Cash": $42

I have only been investing in index funds since 2017 and I am concerned that all of my investments have been during a bull market. I am worried about investing the additional $42K in this market especially given speculation of a potential crash this year which would obviously be a much better time to invest. However, I am also worried I am missing a huge opportunity by leaving it in savings. I would love any advice on what I should do with the additional cash? Is there a good way to invest it? Thanks in advance for any advice or thoughts you all have!


  • Handlebar Stache
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Re: What should I do with $40K?
« Reply #1 on: March 09, 2019, 08:01:17 PM »
Depending what the housing market was like where you are, if I were you I would certainly look into purchasing a rental property/properties along side buying a place to live in with that much extra income.  You've rightly pointed out you already have a lot in the market, perhaps real estate would be a good way to diversify with the extra cash
« Last Edit: March 09, 2019, 08:09:25 PM by JAYSLOL »


  • Walrus Stache
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Re: What should I do with $40K?
« Reply #2 on: March 09, 2019, 10:27:12 PM »
An emergency fund is typically 6 months of expenses: are your expenses over $3.3k per month?

Since you are looking to buy a house right now, I'd leave the $42k alone for the moment.  What happens if you see a house for $520k instead of $450k?  It would be better to have extra money for the down payment in cash.  And depending on where you buy, the closing costs can add up, too.  Finally I'd suggest doing nothing yet because your mortgage might be higher than rent (plus you'll need home insurance, and pay property taxes).  That could increase your spending, which translates to needing more cash in your emergency fund.  Once you've bought the house and know your monthly expenses, then it makes sense to use the rest for investment.

Regarding the investments, since you're buying small cap value, I wouldn't buy the S&P 500.  I'd shift that money into the total stock market.  If you buy the S&P 500, it's like subtracting out small caps - and then you're adding small caps elsewhere.  They kind of cancel out.  If you instead use a total stock market fund for 66%, small caps are included in that.  And then you add more small caps in addition.  So I'd suggest merging your S&P 500 into the total stock market, so that all of your U.S. holdings include small cap stocks.

As you approach retirement, you'll want to add bonds as well.  Most target date funds allocate 10% bonds when retirement is far away.


  • Handlebar Stache
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Re: What should I do with $40K?
« Reply #3 on: March 09, 2019, 10:56:28 PM »
Ha! Surprised no one mentioned the fallacy of trying to time the market. Itís to give advice on this because it depends on how you like to manage your money. If you like real estate and the work with it, get an investment property. If you want it easy, put it all in the index account and donít worry about it for 20 years at least. Youíre young and set up well. I donít think you need more than $20k EF, but since youíre buying a house (sure you need to?), not exactly sure. Congrats on all your savings to date!


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