Author Topic: Which accounts to include when calculating AA (emergency funds, P2P)  (Read 1148 times)

HeadedWest2029

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It seems the consensus is to exclude savings outside of retirement and brokerage accounts when calculating asset allocation.  In general I go for a lazy 3 fund portfolio with 70% U.S. total market, 20% International total market, 10% fixed income.  I also keep 6 months of expenses in an online savings account (I know, I know...wimpy scaredy cat).  My question, does anyone include their EF / savings account in the fixed income portion when calculating their AA? I'm pretty consistent about keeping at least 6 months of expenses in that account so if I include it I'm over 10% fixed income, if I exclude it I'm under 10%.  I suppose it's not too important either way, just curious how others handle this.  Also, I exclude my P2P lending account.  I consider P2P lending to be at least as risky as stocks.  I suppose I could just make an "other" category.  I do include P2P when calculating FIRE though.

Heckler

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Re: Which accounts to include when calculating AA (emergency funds, P2P)
« Reply #1 on: January 06, 2016, 10:30:39 AM »
I have two AAs- one investments plus cash and one which also includes house equity.   Of course I cant rebalance house equity, but it's good to know.

Really, it doesnt matter if you include EF or not - just make a plan and stick to it.  My EF is $5200 HIS cash plus $21K short term bonds, to be spent in that order if needed.  My 30% fixed income allocation includes the short term bonds, but not the cash.  When I have more than $8200 cash, it gets invested.


HeadedWest2029

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Re: Which accounts to include when calculating AA (emergency funds, P2P)
« Reply #2 on: January 06, 2016, 10:44:28 AM »
I guess the SEC thinks cash should be included in AA.  Good enough for me
http://www.sec.gov/investor/pubs/assetallocation.htm

Heckler

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Re: Which accounts to include when calculating AA (emergency funds, P2P)
« Reply #3 on: January 06, 2016, 10:54:18 AM »
Quote
savings deposits, certificates of deposit, treasury bills, money market deposit accounts, and money market funds - are the safest investments,

If the cash is invested, or even in your investment account, then absolutely its included.  Thats not the question though.