Money invested vs cash on hand?

[FiguringItOut]

I am struggling with finding my comfort level between keeping cash on hand vs investing it. 

I am very new to this.  40 y.o. with only about $120K net worth. 

Right now I have aprox $43K in cash, projecting to have about $47.5K in cash at the end of the year ($1.5K savings per month). I also expect to have about $18K saved next year in cash (excludes HSA and 401k). 
 I use YNAB to manage my cash and right now it is sitting these buckets:
$33.6K - 8-10 months emergency fund in case of job loss.  Could probably be stretched to 12 months.
$3K - medical deductible and co-insurance for next year.  My plan has $3K deductible and $5K max out of pocket. 
$2.4K - kids summer camp for 2016.
$1.2K - designated for summer 2016 travel
$2.8K - general savings/emergency fund.

My 2015 HSA contributions will be only $3,240 (started HSA in Aug of this year).  This leaves $3,310 of space available for additional contribution.  Also, I haven't yet contributed to 2015 tIRA.  That's another $5,500.

If I max both of these out for 2015, that's almost $8.8K out of my cash savings.  I am having hard time pulling the trigger and can't decide what is the best course of action here. I'm very afraid to be left with no cash reserves and quick way to access my money in case of a true emergency (single mom with two kids here). 

Also, I don't have any long term plans right now, but I may want to look into some real estate in the future, 4-6 years from now and will need down payment for it as well. 

Right now my projections show that I will be able to save about $18,000 in cash in 2016 after maxing out 401k and HSA.  If I contribute to tIRA in 2016, that will reduce my cash savings and possible future down payment fund to $12,500 per year. 

What would you recommend I do?  Or more to the point, how do you think I should weigh all these options and find a balance between invested assets and cash on hand.

Considering am I 40 years old and just now started to get my financial house in order, RE is not really an option to me.  So I am looking at this for the next 10-15-20 years (10 preferable to 20 of course).

[FrugalFan]

I struggle with this too. We usually have way too much cash, used to be around 100k, now down to 58k, but like you, it all has a purpose (only about 10k in emergency funds now, but also savings for a future car, sabbatical, other travel, house repairs and furnishings, play money, etc). The main thing I've cut back on is saving for future cars, our emergency fund, our house maintenance fund, and our play money which kept piling up because we weren't using it. My reasoning on the emergency fund is that DH and I both have secure jobs and that if we were in a true emergency, we could easily take money out of those other buckets since none of those things would be important in the case of a true emergency. Also, our savings rate has increased so much recently which itself provides a big cushion in case of a short-term emergency, and also means we could cash flow an expensive purchase like a car or roof in just a few months if need be. I've also been planning to open a HELOC as an extra security measure in case we need short term cash in the future. Some 0% credit cards could also tide you over for a short while. Some of our investments are also relatively accessible, so we could tap into them in less than a month if need be, and thus we really only need to worry about short-term emergencies. As a single mom, I would probably lean on them more cautious side as well, but maybe some of these things apply to you too?

[FrugalFan]

I also think 140 k net worth is a great place to be in your position! Depending on your expenses, I don't think RE in 10-15 years is out of the question at all.

[runningthroughFIRE]

How much to keep in emergency savings is largely personal preference.  There are those on these forums who keep almost no emergency fund at all, and those who keep relatively large funds like you seem to be doing.  Personally, I think 8 months of emergency savings is too much money to be kept in an unproductive account.  You might benefit from a change of perspective: Who says that an 'emergency fund' needs to be entirely in liquid cash?  I keep about two months of expenses in cash to cover any costs that might arise from a minor event like a bank error delaying my payroll deposit, or being double-charged on a bill until these issues are corrected.  If it's really an 'emergency', then the response is "holy shit, I need to alter my plans to fix this" and I draw on my investment accounts.  Real emergencies don't happen all that often, and it's more worthwhile to have the money in productive accounts for the >95% of the time it's not needed.

But that's how I think about it, and I don't have children to be concerned about.  If you're feeling anxious about not having cash, I'd recommend using a Roth IRA instead of a Traditional, as you've mentioned.  You can pull your principle out of the Roth account anytime you want with no penalty, and if you don't need it then it sits in a tax-advantaged account.

[tomq04]

It seems like pulling the trigger on the IRA and the HSA are no brainers, but I could understand wanting to wait on the rest.

[FiguringItOut]

It seems like pulling the trigger on the IRA and the HSA are no brainers, but I could understand wanting to wait on the rest.

Agree on HSA.  IRA I'll have to wait till February probably to figure out what I am eligible to contribute.  2015 taxes will filed Married Filing Jointly, so I need to see what the joint AGI will be before I know how much and to which IRA I can contribute. 

It should be much easier next year filing as Head of Household and being able to control all my inputs and data.

[Retired To Win]

I am struggling with finding my comfort level between keeping cash on hand vs investing it. 

I am very new to this.  40 y.o. with only about $120K net worth. 

Right now I have aprox $43K in cash, projecting to have about $47.5K in cash at the end of the year ($1.5K savings per month). I also expect to have about $18K saved next year in cash (excludes HSA and 401k). 
 I use YNAB to manage my cash and right now it is sitting these buckets:
$33.6K - 8-10 months emergency fund in case of job loss.  Could probably be stretched to 12 months.
$3K - medical deductible and co-insurance for next year.  My plan has $3K deductible and $5K max out of pocket. 
$2.4K - kids summer camp for 2016.
$1.2K - designated for summer 2016 travel
$2.8K - general savings/emergency fund.
...

In your shoes, I would plan to top out my emergency fund at around $45,000 (one year's worth of expenses).  I would also drop the general savings/emergency fund and just plan to draw from that $45K if necessary and backfill as required.  But you can do all this using that $18K to come from 2016 money.

Right now, I would direct current cash to fund my HSA and my tax-deferred accounts.  These are "use it or lose it"  investment/tax deferral opportunities... so I would make sure I did not lose them.  The $9000 in current funds that this would take up will be replaced incrementally by mid-2016.  In the meantime, I would still have a minimum of $36,000 in liquid cash to address any contingencies that might come up.

Go ahead.  It's safe. :)

[lackofstache]

One easy change, if income allows, is to contribute to a Roth vs. tIRA. That would allow you access to the principal if needed, but also allow it to be in the market now.

[gt7152b]

Personally I think it's way too much to keep liquid but we all have different risk tolerances. I only keep enough in my bank account to cover known expenses. I try to project out expenses over the next few paychecks to make sure I don't bottom out but don't worry about an emergency expense at all. I can't think of anytime that I needed more than $3000 for an expense that had to be taken care of immediately. In one case many years ago I needed to replace a dead A/C unit which is a debatable necessity anyway and I didn't have the cash so I put it on a 0% credit card. I made steady payments that had it paid down right before the interest rate jumped but I'm not sure if these teaser rates even exist anymore.

If I did need the cash I could just sell some taxable investments and if it was a true emergency it wouldn't matter what the market was like at the time. I think it actually creates a nice barrier for deciding what is a true emergency and what can wait. I think the returns I can make now will offset any potential loss from an emergency happening during a market decline that doesn't seem likely to happen anyway.

If you want to save it for real estate or another investment that's great but make your plans now. If you sit on this cash for another few years and then decide to invest you may be disappointed in the potential gain that you missed out on.

[FiguringItOut]

Personally I think it's way too much to keep liquid but we all have different risk tolerances. I only keep enough in my bank account to cover known expenses. I try to project out expenses over the next few paychecks to make sure I don't bottom out but don't worry about an emergency expense at all. I can't think of anytime that I needed more than $3000 for an expense that had to be taken care of immediately. In one case many years ago I needed to replace a dead A/C unit which is a debatable necessity anyway and I didn't have the cash so I put it on a 0% credit card. I made steady payments that had it paid down right before the interest rate jumped but I'm not sure if these teaser rates even exist anymore.

If I did need the cash I could just sell some taxable investments and if it was a true emergency it wouldn't matter what the market was like at the time. I think it actually creates a nice barrier for deciding what is a true emergency and what can wait. I think the returns I can make now will offset any potential loss from an emergency happening during a market decline that doesn't seem likely to happen anyway.

If you want to save it for real estate or another investment that's great but make your plans now. If you sit on this cash for another few years and then decide to invest you may be disappointed in the potential gain that you missed out on.

I am a single mom with $2,400 monthly rent payment.  I think that alone requires a much more substantial liquid fund. 

The second bolded statement I agree with.  As for risk tolerance, I am still figuring out what I'm comfortable with, hence this post.

[zephyr911]

Your cash is loafing! Get those employees to work!

I rarely keep more than a grand lying around. I have good credit, disposable income and unemployment/disability insurance. If a huge surprise hits, I have 30-60 days after putting it on the card to pay it off by earning money, cashing out savings, or lining up follow-on financing. I have any number of options that all cost less than what I'd lose by not having that money in the market.

[runningthroughFIRE]

Personally I think it's way too much to keep liquid but we all have different risk tolerances. I only keep enough in my bank account to cover known expenses. I try to project out expenses over the next few paychecks to make sure I don't bottom out but don't worry about an emergency expense at all. I can't think of anytime that I needed more than $3000 for an expense that had to be taken care of immediately. In one case many years ago I needed to replace a dead A/C unit which is a debatable necessity anyway and I didn't have the cash so I put it on a 0% credit card. I made steady payments that had it paid down right before the interest rate jumped but I'm not sure if these teaser rates even exist anymore.

If I did need the cash I could just sell some taxable investments and if it was a true emergency it wouldn't matter what the market was like at the time. I think it actually creates a nice barrier for deciding what is a true emergency and what can wait. I think the returns I can make now will offset any potential loss from an emergency happening during a market decline that doesn't seem likely to happen anyway.

If you want to save it for real estate or another investment that's great but make your plans now. If you sit on this cash for another few years and then decide to invest you may be disappointed in the potential gain that you missed out on.

I am a single mom with $2,400 monthly rent payment.  I think that alone requires a much more substantial liquid fund. 

The second bolded statement I agree with.  As for risk tolerance, I am still figuring out what I'm comfortable with, hence this post.

Personal risk tolerance isn't something anyone else can give you.  The only thing you can really do to gauge yours is learn what options are out there and fiddle with your allocation until you're comfortable with it.