Author Topic: Day-to-day cash buffer  (Read 13721 times)

NoStacheOhio

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Day-to-day cash buffer
« on: October 27, 2016, 01:42:22 PM »
It's come up before, but I can't find the thread.

Our monthly spending is fairly stable around $4,000.

I get paid every two weeks, and my wife gets paid every Friday. We're also trying to pay down some debt, and I'm struggling with how much cash buffer to keep in the primary checking account (as in, don't go below $xxxx balance). Intellectually, I know that we don't need a large buffer because we get paid so frequently, but I'm having trouble psychologically with setting a number below $1,000. Most of our bills are on autopay, and I don't want to get burned because I made a mistake with my payday math.

Mortgage money gets split from my direct deposit into a separate account, and that's basically all on automatic. We don't use the account for anything else, so it's not like we'd bounce a mortgage payment, but I also don't want to pay idiot taxes. As an aside, we decline overdraft coverage, but apparently bill pay is exempt from the revised overdraft rules that went into effect a few years ago.

Googling turned up some articles recommending a full month of expenses as a buffer, which just seems excessive, especially when we're paying down debt.

Some back-of-the-envelope calculations gave me a figure around $800, but I'm curious as to how other people are choosing their target number?

dandypandys

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Re: Day-to-day cash buffer
« Reply #1 on: October 27, 2016, 01:50:34 PM »
I generally have 1k. Then at the end of the month that 1k usually gets transferred into our savings account. My savings are getting too big now, so today I just put my contributions in my retirement fund up to 30% from 21% I think that will mean I have a buffer of 600$ I will just track like crazy and if I get low, I will transfer back some $$s.

Rubyvroom

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Re: Day-to-day cash buffer
« Reply #2 on: October 27, 2016, 01:51:03 PM »
At the end of the month I sweep funds out of checking into savings/investments but keep about $1,000 excess cash (above what bills I know are coming). Anything under $1,000 and I get nervous, but I'm not really sure why. We've never had an, "omg we need $1,000 we didn't know was coming," event, I just like the cushion.

I don't sweep money out mid-month, even when the balance grows above the $1,000 excess. I just don't like having to pay that much attention to managing cash throughout the month.

Edit: I should mention that I don't have bills set up to auto pay. I set them up myself each month through our banking portal that puts them all on one nice screen for me. I set up bills to pay the Friday before they're due, so I always know that money comes out on Fridays (my checks are Thursdays). It works out nicely that way. No surprises.
« Last Edit: October 27, 2016, 01:57:49 PM by Rubyvroom »

Syonyk

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Re: Day-to-day cash buffer
« Reply #3 on: October 27, 2016, 01:52:14 PM »
I float around $5k, but that's mostly for my mental sanity.  I have cards set to auto pay the full balance every month, and I don't want to have to think about it if we have a bigger purchase some month.

When I've been paying stuff down, I'll let it sag down to $2k or so, but that's reasonably rare.

nereo

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Re: Day-to-day cash buffer
« Reply #4 on: October 27, 2016, 02:11:15 PM »
perhaps I don't understand... are you adverse to using credit cards?

With paychecks coming in every Friday (your wifes) and every two weeks (yours) I don't really understand why you would want to keep more than the a few hundered$ in that account.

We pay for things with a cc and earn points.  Those purchases go directly into Mint, and we use our paychecks to pay the cc off in full each month.  Whatever is leftover gets swept into our investment accounts according to our IPS.  Lather rinse repeat.

note: our checking account is not our e-fund.

zephyr911

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Re: Day-to-day cash buffer
« Reply #5 on: October 27, 2016, 02:27:28 PM »
Credit card.

Blonde Lawyer

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Re: Day-to-day cash buffer
« Reply #6 on: October 27, 2016, 02:35:13 PM »
I go with $1000 but am considering upping it.  What burned me was a mistake that could not be undone.  I accidentally overpaid my extra student loan payment.  They couldn't refund it or turn off my usual monthly autodebit in time.  It dropped my checking account into the negative.  The bank waived the fee since it was our first issue and we were able to get cash at an atm from a different bank account to deposit to clear up the overdraft.  I also have overdraft turned off (it is supposed to reject the charge instead) but I guess that doesn't work for auto debits?

Much Fishing to Do

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Re: Day-to-day cash buffer
« Reply #7 on: October 27, 2016, 02:35:47 PM »
Given cash interest rates are so low (so there's no money to be made elsewhere) my "fairly likely needed" emergency fund sits there (like medical bill or car breaks down, not the oh crap out of work for a year kind).  Maybe a month of spending?  If you could make money in cash (like in 2000 when 1 year CDs were paying 5%) then I'd keep it tight, but now whats the point....BUt if you;re paying down debt (just noticed that) then I'd say half month.
« Last Edit: October 27, 2016, 02:37:37 PM by Strick »

NoStacheOhio

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Re: Day-to-day cash buffer
« Reply #8 on: October 27, 2016, 04:36:29 PM »
perhaps I don't understand... are you adverse to using credit cards?

With paychecks coming in every Friday (your wifes) and every two weeks (yours) I don't really understand why you would want to keep more than the a few hundered$ in that account.

We pay for things with a cc and earn points.  Those purchases go directly into Mint, and we use our paychecks to pay the cc off in full each month.  Whatever is leftover gets swept into our investment accounts according to our IPS.  Lather rinse repeat.

note: our checking account is not our e-fund.

All of our routine spending goes on rewards credit cards. This isn't emergency money, though it could reasonably be considered "unforeseen expenditure money."

It was down around $500 average when my wife wasn't working. I guess I'm just trying to figure out other peoples' decision-making process for where to keep it.

SeaEhm

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Re: Day-to-day cash buffer
« Reply #9 on: October 27, 2016, 07:31:51 PM »
So for people who keep $1,000 in your checking/savings.  What do you do when a big bill comes up?  Do you put it on the credit card and then sell the investments to fund the checking to pay the bill?


nereo

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Re: Day-to-day cash buffer
« Reply #10 on: October 27, 2016, 07:42:20 PM »
So for people who keep $1,000 in your checking/savings.  What do you do when a big bill comes up?  Do you put it on the credit card and then sell the investments to fund the checking to pay the bill?

Well, we keep much less than $1k
If a big bill comes up we just put if on our card. We have a month to pay it off, and we run a cash surplus so it's no biggie.  We could certainly handle an unanticipated $2k expense this way, probably more.  For larger expenses we migh use our HELOC, but I've yet to encounter a big bill where I wasn given several months to pay in full. We could als sell investments if needed, we keep 5% in a bond fund for basically this reason.

Mmm wrote a post about squish debt several years ago. http://www.mrmoneymustache.com/2011/04/22/springy-debt-instead-of-a-cash-cushion/

Blonde Lawyer

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Re: Day-to-day cash buffer
« Reply #11 on: October 28, 2016, 07:41:23 AM »
So for people who keep $1,000 in your checking/savings.  What do you do when a big bill comes up?  Do you put it on the credit card and then sell the investments to fund the checking to pay the bill?

The only problem with this approach is home repairs.  I know many mustachians are DIY but if you need an electrician, plumber, carpenter, they might not take plastic.

Guesl982374

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Re: Day-to-day cash buffer
« Reply #12 on: October 28, 2016, 07:50:42 AM »
I float around $5k, but that's mostly for my mental sanity.  I have cards set to auto pay the full balance every month, and I don't want to have to think about it if we have a bigger purchase some month.

When I've been paying stuff down, I'll let it sag down to $2k or so, but that's reasonably rare.

+1 We are usually around $5-10K. We know its sub-optimal but it's piece of mind, especially because we do have large swings in spending from time to time and everything is autopay.

Schaefer Light

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Re: Day-to-day cash buffer
« Reply #13 on: October 28, 2016, 07:53:34 AM »
So for people who keep $1,000 in your checking/savings.  What do you do when a big bill comes up?  Do you put it on the credit card and then sell the investments to fund the checking to pay the bill?

The only problem with this approach is home repairs.  I know many mustachians are DIY but if you need an electrician, plumber, carpenter, they might not take plastic.
Yep.  That would be my main reservation about having so little cash readily available.  Sometimes home emergencies come up and you can't wait a few days for a transfer from another account into your checking account.

boarder42

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Re: Day-to-day cash buffer
« Reply #14 on: October 28, 2016, 07:58:51 AM »
what i owe on credit cards vs what i have in my bank is around net 0 i push my budget and pump more automated money into vanguard taxable than i actually bring in with my current job - expenses forcing me to side hustle alot.

frugalnacho

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Re: Day-to-day cash buffer
« Reply #15 on: October 28, 2016, 07:58:59 AM »
I like to keep an entire months worth of spending in the checking account as the minimum balance.  Just in case life gets busy and I don't deposit all my checks, and all the autopays come out at the same time while I am absorbed in work or a project.  Has happened quite a few times but I've avoided running negative because of the buffer.

boarder42

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Re: Day-to-day cash buffer
« Reply #16 on: October 28, 2016, 08:00:10 AM »
So for people who keep $1,000 in your checking/savings.  What do you do when a big bill comes up?  Do you put it on the credit card and then sell the investments to fund the checking to pay the bill?

The only problem with this approach is home repairs.  I know many mustachians are DIY but if you need an electrician, plumber, carpenter, they might not take plastic.

if you live in the united states you're hard pressed to find anyone not taking plastic now adays.

nereo

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Re: Day-to-day cash buffer
« Reply #17 on: October 28, 2016, 08:03:45 AM »
So for people who keep $1,000 in your checking/savings.  What do you do when a big bill comes up?  Do you put it on the credit card and then sell the investments to fund the checking to pay the bill?

The only problem with this approach is home repairs.  I know many mustachians are DIY but if you need an electrician, plumber, carpenter, they might not take plastic.
Yep.  That would be my main reservation about having so little cash readily available.  Sometimes home emergencies come up and you can't wait a few days for a transfer from another account into your checking account.

This is a problem I've never encountered and, frankly, I think it based more in fear than reality.  We always have a few hundred$ of "float", and I've yet to encounter a vendor (plumber, carpenter, etc) that demands cash-up-front for jobs (exceeding ~$300), who won't take a check from my brokerage, who won't use cc or paypal. Frankly, I'd be weary of dealing doing a large business with such an individual.

lamil

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Re: Day-to-day cash buffer
« Reply #18 on: October 28, 2016, 08:13:12 AM »
So for people who keep $1,000 in your checking/savings.  What do you do when a big bill comes up?  Do you put it on the credit card and then sell the investments to fund the checking to pay the bill?

The only problem with this approach is home repairs.  I know many mustachians are DIY but if you need an electrician, plumber, carpenter, they might not take plastic.


if you live in the united states you're hard pressed to find anyone not taking plastic now adays.

I've ran into quite a few who will take it but with a fee attached.

I keep 1-2 months expenses in cash for the bigger purchase buffer.

NoStacheOhio

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Re: Day-to-day cash buffer
« Reply #19 on: October 28, 2016, 08:21:55 AM »
if you live in the united states you're hard pressed to find anyone not taking plastic now adays.

Anecdotally, we had some unplanned plumbing work come up in July. The (independent) plumber we called just had a reader attached to his smart phone. I broke out the Capital One 360 debit card and used the $500 LOC, then transferred money from savings later that day (I don't normally keep any money in that account).

I guess that sort of answers my own question, too. Typically, that's how I've handled minor unexpected expenses.

We'll cut down to $500 and see how that feels.

:)

frugalnacho

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Re: Day-to-day cash buffer
« Reply #20 on: October 28, 2016, 08:22:42 AM »
So for people who keep $1,000 in your checking/savings.  What do you do when a big bill comes up?  Do you put it on the credit card and then sell the investments to fund the checking to pay the bill?

The only problem with this approach is home repairs.  I know many mustachians are DIY but if you need an electrician, plumber, carpenter, they might not take plastic.


if you live in the united states you're hard pressed to find anyone not taking plastic now adays.

I've ran into quite a few who will take it but with a fee attached.

I keep 1-2 months expenses in cash for the bigger purchase buffer.

And often those that don't attach a fee will give you a discount if you pay cash, so they are effectively still charging you a fee without directly charging you a fee.  It pays to ask and do the math yourself to see which is truly cheaper for you.

robartsd

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Re: Day-to-day cash buffer
« Reply #21 on: October 28, 2016, 08:40:48 AM »
I'm in the one month's expenses camp, but I keep it in my online savings account rather than checking. Pay is direct deposited into the online savings and a recurring transfer moves one month's expenses into checking before the first bill pay scheduled each month. By the 15th the online checking should have paid all the bills and have a very low balance. I do a monthly check near the time of the monthly transfer to ensure that it is enough or decide if the checking balance is growing too much.

I also keep accounts at a local credit union for convenience - usually a few hundred in checking and a thousand in savings. We use the local accounts for writing paper checks, withdrawing cash, and depositing funds that are not direct deposited. I occasionally schedule a transfer between the local checking and online savings to keep the local balances on target.

boarder42

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Re: Day-to-day cash buffer
« Reply #22 on: October 28, 2016, 08:47:52 AM »
So for people who keep $1,000 in your checking/savings.  What do you do when a big bill comes up?  Do you put it on the credit card and then sell the investments to fund the checking to pay the bill?

The only problem with this approach is home repairs.  I know many mustachians are DIY but if you need an electrician, plumber, carpenter, they might not take plastic.


if you live in the united states you're hard pressed to find anyone not taking plastic now adays.

I've ran into quite a few who will take it but with a fee attached.

I keep 1-2 months expenses in cash for the bigger purchase buffer.

so to prevent a 3% fee you let say 5-10k sit idle and decrease with inflation.  how often are you actually tapping this.  lets assume every 5 years and its 5k sitting idle.  you're forgoing 3k in profit to avoid a 3% fee and lock in deflation.  and that assumes a lot:
1. that you have a large expense every 5 years - which seems high
2. that you cant find an affordable service that will take a credit card

and dont give the the 5 year returns arent predictable crap b/c if you use this philosophy for the life of your money you will come out ahead. b/c its the full sample of your money over your life not each individual 5 year instance.
« Last Edit: October 28, 2016, 08:49:51 AM by boarder42 »

Syonyk

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Re: Day-to-day cash buffer
« Reply #23 on: October 28, 2016, 08:58:53 AM »
if you live in the united states you're hard pressed to find anyone not taking plastic now adays.

That depends heavily on where in the United States you live.

The contractors who did work for my house (foundation concrete work, septic system) took cash or checks.  It felt a bit weird writing that large a personal check and they were happy with it, but I suppose they know where I live...

I'm not anywhere near a large city, though.

RWD

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Re: Day-to-day cash buffer
« Reply #24 on: October 28, 2016, 09:23:59 AM »
When I sweep out funds I keep about $1k + <sum of minimum balances> + <current sum of credit cards> + <car payment> + <mortgage payment> in our checking accounts. This usually ends up as $6-10k in our checking accounts. I keep about six months expenses (~$20k) in our checking and savings accounts combined.

zephyr911

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Re: Day-to-day cash buffer
« Reply #25 on: October 28, 2016, 09:28:28 AM »
So for people who keep $1,000 in your checking/savings.  What do you do when a big bill comes up?  Do you put it on the credit card and then sell the investments to fund the checking to pay the bill?

The only problem with this approach is home repairs.  I know many mustachians are DIY but if you need an electrician, plumber, carpenter, they might not take plastic.
Yep.  That would be my main reservation about having so little cash readily available.  Sometimes home emergencies come up and you can't wait a few days for a transfer from another account into your checking account.
No, you use the 30-60 days of float @ 0% to cash flow the expense. If you have a typical Mustachian savings rate, no selling of investments is required... you just don't buy as much that month.

Blonde Lawyer

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Re: Day-to-day cash buffer
« Reply #26 on: October 28, 2016, 09:33:35 AM »
if you live in the united states you're hard pressed to find anyone not taking plastic now adays.

That depends heavily on where in the United States you live.

The contractors who did work for my house (foundation concrete work, septic system) took cash or checks.  It felt a bit weird writing that large a personal check and they were happy with it, but I suppose they know where I live...

I'm not anywhere near a large city, though.

I recently had work done in my house.  The handyman took cash or check only.  He was far cheaper than the competition and had better reviews.  We now have a rapport with him so he might do work without up front payment in the future but as a new customer, he wanted cash in hand before he so much as bought supplies.  Between the electrician and the plumber, one took a credit card, the other did not.  Can't remember which was which.

I don't keep large sums of cash around but at least $1000-$2000. 

The other thing I will do is use my cash that's set aside for gas and groceries towards the expense and then put all those other expenses on the credit card for the month to increase the buffer. 

lamil

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Re: Day-to-day cash buffer
« Reply #27 on: October 28, 2016, 09:44:49 AM »

I've ran into quite a few who will take it but with a fee attached.

I keep 1-2 months expenses in cash for the bigger purchase buffer.

so to prevent a 3% fee you let say 5-10k sit idle and decrease with inflation.  how often are you actually tapping this.  lets assume every 5 years and its 5k sitting idle.  you're forgoing 3k in profit to avoid a 3% fee and lock in deflation.  and that assumes a lot:
1. that you have a large expense every 5 years - which seems high
2. that you cant find an affordable service that will take a credit card

and dont give the the 5 year returns arent predictable crap b/c if you use this philosophy for the life of your money you will come out ahead. b/c its the full sample of your money over your life not each individual 5 year instance.

I used it last month on a driveway purchase with cash.  There was a 3% fee he was going to charge which he waved because cash, and also gave me a 200 discount because cash on top of that.

Expenses ~3k /mo so im floating at most around 5k usually in a checking account.

So last month I saved 350 dollars on a sub 5k expense by floating that 5k cash in a checking account.  I'm okay with those numbers (and while I do appreciate numbers as I would assume everyone on here does, am not entirely sure if you're being hostile or not with youre 'don't give me that crap' response... makes it seem like your reasoning is the only acceptable one in your eyes).
 

Edit - adding to this as well.  the contractor I went with was also the lowest quote and was the only one who was upfront about discounts for cash. the others were in the 6-8k range for the same work (and yes, they did take plastic with a fee as well).
« Last Edit: October 28, 2016, 09:55:02 AM by lamil »

TheOldestYoungMan

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Re: Day-to-day cash buffer
« Reply #28 on: October 28, 2016, 10:06:14 AM »
After I read the MMM post on having "springy debt" instead of a cash cushion, I tried that for a year.

I wanted to give it a good honest go, very strictly monitoring all my cash flow and making sure a maximum amount was invested at all times and keeping as little cash around as possible.

It was 12 months of nervousness and anxiety, and one mistake did have my checking account show a negative balance (-$43.00) for about four hours, which was a lifetime first for me and led to some interesting conversations with my bank about when exactly the reconciliation has to show negative before I get hit with fees (it was payday and so I had plenty of money, the paycheck just wasn't showing yet).

So while yes, everything worked fine, the micromanagement wasn't worth it to just have a little bit extra invested.

I've gone back to the way I used to do it, which is I try and keep $1,000 in my checking account, I don't have the right temperament.  I'd rather work the extra two weeks it'll take me to makeup for the lifetime cost of having that buffer.

Slee_stack

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Re: Day-to-day cash buffer
« Reply #29 on: October 28, 2016, 10:10:50 AM »

I've ran into quite a few who will take it but with a fee attached.

I keep 1-2 months expenses in cash for the bigger purchase buffer.

so to prevent a 3% fee you let say 5-10k sit idle and decrease with inflation.  how often are you actually tapping this.  lets assume every 5 years and its 5k sitting idle.  you're forgoing 3k in profit to avoid a 3% fee and lock in deflation.  and that assumes a lot:
1. that you have a large expense every 5 years - which seems high
2. that you cant find an affordable service that will take a credit card

and dont give the the 5 year returns arent predictable crap b/c if you use this philosophy for the life of your money you will come out ahead. b/c its the full sample of your money over your life not each individual 5 year instance.

I used it last month on a driveway purchase with cash.  There was a 3% fee he was going to charge which he waved because cash, and also gave me a 200 discount because cash on top of that.

Expenses ~3k /mo so im floating at most around 5k usually in a checking account.

So last month I saved 350 dollars on a sub 5k expense by floating that 5k cash in a checking account.  I'm okay with those numbers (and while I do appreciate numbers as I would assume everyone on here does, am not entirely sure if you're being hostile or not with youre 'don't give me that crap' response... makes it seem like your reasoning is the only acceptable one in your eyes).
 

Edit - adding to this as well.  the contractor I went with was also the lowest quote and was the only one who was upfront about discounts for cash. the others were in the 6-8k range for the same work (and yes, they did take plastic with a fee as well).

To be fair, that $5k invested at a return of 7% is $350 for one year.

Presuming you don't have more than one $5k expense per year, you are still better off not sitting on a pile of cash in an account.

Besides, how much delay is there on cashing in mutual funds and withdrawing cash?  Sure, some inconvenience on that delay and any fee associated with converting funds, but wouldn't it be worth it?


Personally, I do float around the $1k mark and the reason I do this is that I will see an incorrect draft or double withdrawal, or some other error, almost every year.  Essentially, I'm paying ~$70/yr to avoid the extra hassles and domino events that an overdraft causes.  That's my line in the sand.  I wouldn't pay $350 for that though...
« Last Edit: October 28, 2016, 10:17:00 AM by Slee_stack »

Syonyk

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Re: Day-to-day cash buffer
« Reply #30 on: October 28, 2016, 10:20:49 AM »
So last month I saved 350 dollars on a sub 5k expense by floating that 5k cash in a checking account.  I'm okay with those numbers...

Not bad!  Beats checking/savings account returns...

So while yes, everything worked fine, the micromanagement wasn't worth it to just have a little bit extra invested.

I agree entirely.  One of the things I value, more than a few extra dollars, is not having to think about money that much on a day to day basis.  Micro-managing balances doesn't excite me, and I'd rather have the time than the extra few hundred dollars.  Also, it's taken me years to get my wife to stop worrying about money (she's radically better at not spending money than I am, and it's taken some time to get her used the concept that an extra few dollars here and there doesn't affect us, and would you please buy better cuts of steak?).  Some of the grocery stores she shops at are cash or debit only, and I don't want to have to think about the impact of a large grocery run, and I don't want her to have to check with me before making that run.  She knows that even a large, several hundred dollar grocery run on debit isn't a problem, and to just let me know afterwards.

To be fair, that $5k invested at a return of 7% is $350 for one year.

Presuming you don't have more than one $5k expense per year, you are still better off not sitting on a pile of cash in an account.

Where are you getting 7% returns with no risk?  That seems like a pretty good win to me.

Slee_stack

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Re: Day-to-day cash buffer
« Reply #31 on: October 28, 2016, 10:53:13 AM »

To be fair, that $5k invested at a return of 7% is $350 for one year.

Presuming you don't have more than one $5k expense per year, you are still better off not sitting on a pile of cash in an account.

Where are you getting 7% returns with no risk?  That seems like a pretty good win to me.
I presume you have zero net investments outside of FDIC insured accounts and TBills?  That seems like a pretty bad strategy to me.

Syonyk

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Re: Day-to-day cash buffer
« Reply #32 on: October 28, 2016, 10:59:21 AM »
I presume you have zero net investments outside of FDIC insured accounts and TBills?  That seems like a pretty bad strategy to me.

I have investments that are risky, yes.

And if I could get a 7% no-risk return on a chunk of cash, I'd do that in a heartbeat.

I'm also focusing more on property improvements that offer long term value, though - solar, gardens, greenhouses, etc.  Those are solid returns that don't require the market to keep going up.

frugalnacho

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Re: Day-to-day cash buffer
« Reply #33 on: October 28, 2016, 12:34:47 PM »
Am I the only one that has 10k+ in checking earning 0 interest?  Bills including mortgage and CC spending total several thousand a month.

It's just part of my emergency fund that wouldn't earn much anyways.  I consider it a small cost of simplifying my life.  I never worry about not having enough in checking to cover a bill.

I follow the same logic, but I've never had even close to an unplanned 10k+ bill, so it's more like 1.5k for me.  My 2 mortgages, utilities, and CC spending usually total around 3-4k.  The cc bills are usually paid a couple times a month as I get the money though, so I just maintain the 1.5k balance for things that are on autopay.

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Re: Day-to-day cash buffer
« Reply #34 on: October 28, 2016, 12:51:05 PM »
After I read the MMM post on having "springy debt" instead of a cash cushion, I tried that for a year.

I wanted to give it a good honest go, very strictly monitoring all my cash flow and making sure a maximum amount was invested at all times and keeping as little cash around as possible.

It was 12 months of nervousness and anxiety, and one mistake did have my checking account show a negative balance (-$43.00) for about four hours, which was a lifetime first for me and led to some interesting conversations with my bank about when exactly the reconciliation has to show negative before I get hit with fees (it was payday and so I had plenty of money, the paycheck just wasn't showing yet).

So while yes, everything worked fine, the micromanagement wasn't worth it to just have a little bit extra invested.

I've gone back to the way I used to do it, which is I try and keep $1,000 in my checking account, I don't have the right temperament.  I'd rather work the extra two weeks it'll take me to makeup for the lifetime cost of having that buffer.

I've got the same story. Tried a zero balance checking account approach for 15 months, then collapsed into a fit of frugal fatigue. So I built a $1500 buffer back into my checking account, and my outlook is much sunnier.

Though, I was also churning 3 credit cards when I really started to feel harassed by the zero balance approach. I've since reduced back to a single card, and I'm eyeballing at extra money in the checking account. It's possible I might try springy debt again.

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Re: Day-to-day cash buffer
« Reply #35 on: October 28, 2016, 12:58:34 PM »
After I read the MMM post on having "springy debt" instead of a cash cushion, I tried that for a year.

I wanted to give it a good honest go, very strictly monitoring all my cash flow and making sure a maximum amount was invested at all times and keeping as little cash around as possible.

It was 12 months of nervousness and anxiety, and one mistake did have my checking account show a negative balance (-$43.00) for about four hours, which was a lifetime first for me and led to some interesting conversations with my bank about when exactly the reconciliation has to show negative before I get hit with fees (it was payday and so I had plenty of money, the paycheck just wasn't showing yet).

So while yes, everything worked fine, the micromanagement wasn't worth it to just have a little bit extra invested.

I've gone back to the way I used to do it, which is I try and keep $1,000 in my checking account, I don't have the right temperament.  I'd rather work the extra two weeks it'll take me to makeup for the lifetime cost of having that buffer.

I've got the same story. Tried a zero balance checking account approach for 15 months, then collapsed into a fit of frugal fatigue. So I built a $1500 buffer back into my checking account, and my outlook is much sunnier.

Though, I was also churning 3 credit cards when I really started to feel harassed by the zero balance approach. I've since reduced back to a single card, and I'm eyeballing at extra money in the checking account. It's possible I might try springy debt again.

Huh.  I guess I don't even think of it is work. Different approaches for different folks, I guess.  For us it's dirt simple; money comes in, bills get paid, at the end of the month we sweep the excess into our investment account, leaving $300-400. For no particular reason we make contributions into our investment accounts divisible by $50.  So there will be periods in the month when we'll have $300, and periods when we might have $2000.
  I think I only pay attention once or twice a month.
I've never had the energy to try churning cc for rewards.  Maybe someday.

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Re: Day-to-day cash buffer
« Reply #36 on: October 28, 2016, 01:00:12 PM »
I have the opposite problem. I've always kept too much cash around. Would rather ignore $ than micro-manage, know that I'm terrible at "hassle" follow-ups that keep tiny losses from bleeding into larger ones, and have had my expenses vary wildly enough at different points in my life before that I don't trust that any game plan now is "the" expense figures that will stick around beyond the next 6 months.

For me, the question is what # makes me feel bad when the cash dips below that amount and trying to accept lower $ amounts. It's somewhere between $5 an $10K right now, I'd say.

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Re: Day-to-day cash buffer
« Reply #37 on: October 28, 2016, 03:03:36 PM »
Pre-MMM I kept thousands in checking by what-ifing myself to death.  Now I keep my current month's spending plus one more month.  Nearly all my spending goes on credit cards which I pay off on the 1st.  I'm paid the exact same amount each month and my job is secure for at least the next three years.  If something big comes up it'll go on a credit card too, and come the 1st it gets paid using funds I would have invested since half of that is done manually.  Once I FIRE and my operating funds are a little more restrictive this may change.

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Re: Day-to-day cash buffer
« Reply #38 on: October 28, 2016, 03:37:26 PM »
So for people who keep $1,000 in your checking/savings.  What do you do when a big bill comes up?  Do you put it on the credit card and then sell the investments to fund the checking to pay the bill?

The only problem with this approach is home repairs.  I know many mustachians are DIY but if you need an electrician, plumber, carpenter, they might not take plastic.

if you live in the united states you're hard pressed to find anyone not taking plastic now adays.

I do, however, find plenty of people who give a discount if you pay in cash, in full.

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Re: Day-to-day cash buffer
« Reply #39 on: October 28, 2016, 03:52:37 PM »
I like to keep $1,000 in my checking account for a day-to-day buffer, and I also put $400 per paycheck into a separate account that pays my rent ($800/m).

I also have a low-interest line of credit of $10,000 that I could use in an emergency. But most emergencies I could imagine could be put on a credit card and cashflowed within a month.

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Re: Day-to-day cash buffer
« Reply #40 on: October 28, 2016, 06:19:04 PM »
 TBH, the investment return on 400 vs 1k vs 2k in cash all year long is fairly trivial. There's psychological impacts whichever approach, so you need to also learn how your thinking works. I personally found that: if I keep too much around I'm less motivated/hungry/more willing to buy expensive things I don't need. On the flipside, if it gets too low it is on my mind periodically which is also a negative.

I've found my preferred amount to be between 900 and 2k in my checking. Up to about 4k or so is fine too, but if I get much above 5k I've noticed that my thinking patterns change a little bit.

Since I'm self employed I realistically need to have a pretty large e-fund but by keeping that in a savings account and hidden from my cash column on Mint it ends up working out fine for me psychologically.

Just do whatever seems to result in good habits. Having to think about your balance periodically is a bad thing (imo) for overall happiness so if its low enough that you have to worry about it - it might be too low.

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Re: Day-to-day cash buffer
« Reply #41 on: October 29, 2016, 10:24:24 AM »

I do, however, find plenty of people who give a discount if you pay in cash, in full.

I have found that as well especially if it's an independent contractor doing emergency work on a weekend. 

This is a great thread. Personally for me, I feel stress and anxiety not having access to $10k in an easily accessible checking/savings account.  The idea of having to be forced to sell investments at an inopportune time to fund certain events adds unwanted worry. 

However, I plan to learn to deal with this and start skimming money and funding additional investments this year. 

Today, I will take a leap forward and deposit a couple thousand dollars in cash that I have sitting in a drawer and buy some stocks.

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Re: Day-to-day cash buffer
« Reply #42 on: October 29, 2016, 10:46:49 AM »
I'm in the 1 month of expenses camp. Well, 1 month of bills in the "bills" checking account (~$3k, including rental property mortgage). We have a separate spending account, and that usually gets down under $100 before we replenish it.

The pay structure can be weird at my job sometimes, and I know people who have had HR screw up their checks from time to time, so I like knowing that I can cover a month of expenses without having to scramble to move money around.

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Re: Day-to-day cash buffer
« Reply #43 on: October 29, 2016, 10:48:26 AM »

Today, I will take a leap forward and deposit a couple thousand dollars in cash that I have sitting in a drawer and buy some stocks.

Um... do you actually have thousands sitting in a drawer, or is that just a bit of hyperbole?  Is this common?
I know my grandparens hoarded cash in their house, but I can't fathom keeping more than a few hundred around, vulnarable to theft/fire/loss.  Maybe that's just me?

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Re: Day-to-day cash buffer
« Reply #44 on: October 29, 2016, 10:55:04 AM »
I have a lot right now for a house down payment, but prior to that I had been keeping $15,000 to use for savings account bonuses that are paired with some of the good checking bonuses.  Most of these offers make you keep the amount in savings for 90 days, so between my wife and I we can use this same $15,000 for 4 different offers a year.

In a year we could each do Chase checking + savings ($15,000 required for 90 days) for $400 total.
We could also do BMO Harris checking + savings ($10,000 required for 90 days) for another $400 total.

This is an $800 return on our $15,000 cash, or a 5.3% return.  This doesn't include the additional $1200 we get from the checking bonuses, but those don't require a bunch of cash.

SeaEhm

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Re: Day-to-day cash buffer
« Reply #45 on: October 29, 2016, 10:58:28 AM »

Today, I will take a leap forward and deposit a couple thousand dollars in cash that I have sitting in a drawer and buy some stocks.

Um... do you actually have thousands sitting in a drawer, or is that just a bit of hyperbole?  Is this common?
I know my grandparens hoarded cash in their house, but I can't fathom keeping more than a few hundred around, vulnarable to theft/fire/loss.  Maybe that's just me?

If I go out to eat with friends, I pay the bill using my credit card.  Then, they pay me back with cash.  I typically just put the cash in a drawer to hide the money from myself.  Like a piggy bank, the drawer slowly gets more full as time passes.  Most recently, I went to a birthday party and the bill was over $500. The others pull out cash and throw it on the table.  I quietly ask if I could pay on my credit card and collect the cash and they all agreed.  Easiest $15 I ever made. (well, kind of because I had to cover my cost of the meal too)

[Read with caution]We recently had a garage sale and sold many items. We ended up with about $400. A couple weeks go by and I couldn't find the money!  I searched nearly everywhere for that money.  Right when I was about to call it quits for that day's search, I looked inside of a shoe in the garage and found the money sitting inside!  I had hidden the money in the shoe as we went on a bike ride because I didn't want the money to fall out.  Oops! 

Also, any time my boss has an expense that can be reimbursed at work, I pay on my personal credit card.  Whenever I receive cash back, I just put it in the drawer.

So yes, I know I need to change that mentality and make the drawer my online brokerage account haha.

clarkfan1979

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Re: Day-to-day cash buffer
« Reply #46 on: October 29, 2016, 02:49:31 PM »
We usually have at least 20K in various checking accounts, but that is because we own 2 rental houses. Right now we are at 28K, but that is because we are saving to purchase another house. We currently rent.

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Re: Day-to-day cash buffer
« Reply #47 on: October 29, 2016, 05:24:59 PM »
Um... do you actually have thousands sitting in a drawer, or is that just a bit of hyperbole?  Is this common?
I know my grandparens hoarded cash in their house, but I can't fathom keeping more than a few hundred around, vulnarable to theft/fire/loss.  Maybe that's just me?

A fire safe, bolted to the structure, is a thing.

Far too many people here have remarkable faith that everything currently working will always be working, without interruption.

I usually carry enough cash with me on road trips for the expected round trip fuel expenses, just in case.

clarkfan1979

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Re: Day-to-day cash buffer
« Reply #48 on: October 30, 2016, 10:47:16 AM »
Um... do you actually have thousands sitting in a drawer, or is that just a bit of hyperbole?  Is this common?
I know my grandparens hoarded cash in their house, but I can't fathom keeping more than a few hundred around, vulnarable to theft/fire/loss.  Maybe that's just me?

A fire safe, bolted to the structure, is a thing.

Far too many people here have remarkable faith that everything currently working will always be working, without interruption.

I usually carry enough cash with me on road trips for the expected round trip fuel expenses, just in case.


Good point. We usually have $600 stashed in the house as a hurricane emergency fund. We have also been using it as an atm and put the money back at our convenience.

Syonyk

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Re: Day-to-day cash buffer
« Reply #49 on: October 30, 2016, 01:24:06 PM »
Good point. We usually have $600 stashed in the house as a hurricane emergency fund. We have also been using it as an atm and put the money back at our convenience.

Hurricanes are a great example of "stuff stops working on a regular basis."  Winter storms and widespread power outages also are solid examples of that.

Being able to ride through one of those without really noticing is a nice feature.  Cash on hand is part of that.