4 ms·

If you aren't investing your money then you are letting the bank invest for you and they keep the proceeds. When my latest bank offered me .1% savings account I

by yardie 5y ago

If you aren't investing your money then you are letting the bank invest for you and they keep the proceeds. When my latest bank offered me .1% savings account I just closed it and put everything into cash management investment account. The APY on savings is so low you might as well keep it under the mattress.

scruple 5y ago
Do we no longer advise people to maintain emergency funds, etc.? I don't feel comfortable, or maybe the word I am looking for is secure, without at least 6 months of expenses in a savings account.
- yardie 5y ago
  I advise everyone to talk to a licensed financial advisor. Do you really foresee needing 6-months expenses in cash? In my case, I keep 1-months expenses in cash. And everything else is shoveled into funds, stocks, and securities. Then I have 30 days to figure out how to balance my expenses and converting stocks to cash (~2-3 days). A .1% APY is losing money everyday in a 6% inflation economy.
  - toolz 5y ago
    I do the same, losing out on 5 months of savings gaining interest is likely to be a very significant amount of lost potential. Compared to a doomsday scenario where I might lose half of my investments and job at the same time, which would mean most of the world is suffering from the same and I would just have to buckle up for the ride, leaving as much of my investments alone as humanly possible and wait for _maybe_ a year or two for the market to recover, as a somewhat realistic worst case scenario.
  - 88913527 5y ago
    If you have an unexpected large expense, like some needed home repair, it can easily be a few months of ordinary expenses. The fact that I normally live off of $3.5k/month is untethered from the cost of a roof replacement. You do pay a price for keeping the additional months of liquidity, but to some it's still worth it.
    - yardie 5y ago
      I'm trying to imagine a large unexpected home repair >$3000 that isn't covered by typical planning or insurance and nothing comes to mind. Emergency roof replacement is managed by insurance (you're paying for it). And a scheduled, expensive, non-emergency, usually involves months of planning and permit pulling. Except for a bail money, how many high-ticket items aren't covered by insurance?
- boardwaalk 5y ago
  Investment accounts still have a core position where you’d probably keep that. It makes nearly nothing in interest (like being in the bank) but at least there’s less friction in getting it invested.
- andreilys 5y ago
  If you work in tech chances are you have a high six figure salary and a large line of credit. You may even have a passive income source via rental income, stock dividends or side projects. It doesn’t really make sense to have 6 months of expenses which lose value in a bank account vs. earning you money in the market. If something were to happen you can usually pay it off with your pay cheque/passive income source or use a credit card to bridge you over.
  - maxerickson 5y ago
    On the other hand, the foregone earnings will not be huge relative to assets and income. Especially if you make the 6 months as necessary expenses vs typical normal expenses.
  - JaimeThompson 5y ago
    That mirrors what a lot of companies turned just in time manufacturing into and it really didn't hold up well over the past few years due to shocks in the system.
  - indemnity 5y ago
    Maybe I’m old fashioned, but despite having a paid off HELOC that can cover 42 months of current monthly expenditures, and several zero balance credit cards… I don’t want to be relying on that if I lose my job. Lines of credit can be taken away, and usually at the worst time. So I’m happy to forego some returns on a moderate sized emergency fund in exchange for peace of mind.
  - yardie 5y ago
    Outside of SV and NYC I can assure you the majority of tech is not high six figures. Most are barely high five figures.
samvher 5y ago
Not sure there is a silver bullet here other than investing everything 18 months ago. Cash is at risk of inflation. Bonds are at risk of interest rate increases. Stocks and real estate are looking like they might be overvalued. Crypto... yeah. Maybe the best alternative is to just spend less time on work and more on leisure + personal/professional development? Skills and memories will be valuable for a while still.
scottLobster 5y ago
That being said if you know you're going to use the money soon/are willing to pay via inflation for security, cash/bonds make a lot of sense. If the market goes to shit and the knock-on economic effects come for you, cash is nice to have. What's worse, losing 5%/year or losing 30-50% all at once while simultaneously losing your job? My security fund is currently in 60/40 bonds/stock portfolio for precisely this reason, even if the stocks decline by half and the bonds dip a little with them I'll still have a good margin. My 401k that still has 30+ years to run is 100% stocks. Also my wife is pregnant, so I converted the entirety of our HSA to cash (most of it had been invested up this point) as we're going to need most of that money in the next few months (and that's just for what we can foresee) and losing half of it to potential market perturbations is unacceptable.
deleted 5y ago
[deleted]

by yardie 5y ago

scruple 5y ago

Do we no longer advise people to maintain emergency funds, etc.? I don't feel comfortable, or maybe the word I am looking for is secure, without at least 6 months of expenses in a savings account.

yardie 5y ago
I advise everyone to talk to a licensed financial advisor. Do you really foresee needing 6-months expenses in cash? In my case, I keep 1-months expenses in cash. And everything else is shoveled into funds, stocks, and securities. Then I have 30 days to figure out how to balance my expenses and converting stocks to cash (~2-3 days). A .1% APY is losing money everyday in a 6% inflation economy.
- toolz 5y ago
  I do the same, losing out on 5 months of savings gaining interest is likely to be a very significant amount of lost potential. Compared to a doomsday scenario where I might lose half of my investments and job at the same time, which would mean most of the world is suffering from the same and I would just have to buckle up for the ride, leaving as much of my investments alone as humanly possible and wait for _maybe_ a year or two for the market to recover, as a somewhat realistic worst case scenario.
- 88913527 5y ago
  If you have an unexpected large expense, like some needed home repair, it can easily be a few months of ordinary expenses. The fact that I normally live off of $3.5k/month is untethered from the cost of a roof replacement. You do pay a price for keeping the additional months of liquidity, but to some it's still worth it.
  - yardie 5y ago
    I'm trying to imagine a large unexpected home repair >$3000 that isn't covered by typical planning or insurance and nothing comes to mind. Emergency roof replacement is managed by insurance (you're paying for it). And a scheduled, expensive, non-emergency, usually involves months of planning and permit pulling. Except for a bail money, how many high-ticket items aren't covered by insurance?
boardwaalk 5y ago
Investment accounts still have a core position where you’d probably keep that. It makes nearly nothing in interest (like being in the bank) but at least there’s less friction in getting it invested.
andreilys 5y ago
If you work in tech chances are you have a high six figure salary and a large line of credit. You may even have a passive income source via rental income, stock dividends or side projects. It doesn’t really make sense to have 6 months of expenses which lose value in a bank account vs. earning you money in the market. If something were to happen you can usually pay it off with your pay cheque/passive income source or use a credit card to bridge you over.
- maxerickson 5y ago
  On the other hand, the foregone earnings will not be huge relative to assets and income. Especially if you make the 6 months as necessary expenses vs typical normal expenses.
- JaimeThompson 5y ago
  That mirrors what a lot of companies turned just in time manufacturing into and it really didn't hold up well over the past few years due to shocks in the system.
- indemnity 5y ago
  Maybe I’m old fashioned, but despite having a paid off HELOC that can cover 42 months of current monthly expenditures, and several zero balance credit cards… I don’t want to be relying on that if I lose my job. Lines of credit can be taken away, and usually at the worst time. So I’m happy to forego some returns on a moderate sized emergency fund in exchange for peace of mind.
- yardie 5y ago
  Outside of SV and NYC I can assure you the majority of tech is not high six figures. Most are barely high five figures.

samvher 5y ago

Not sure there is a silver bullet here other than investing everything 18 months ago. Cash is at risk of inflation. Bonds are at risk of interest rate increases. Stocks and real estate are looking like they might be overvalued. Crypto... yeah. Maybe the best alternative is to just spend less time on work and more on leisure + personal/professional development? Skills and memories will be valuable for a while still.

scottLobster 5y ago

That being said if you know you're going to use the money soon/are willing to pay via inflation for security, cash/bonds make a lot of sense. If the market goes to shit and the knock-on economic effects come for you, cash is nice to have. What's worse, losing 5%/year or losing 30-50% all at once while simultaneously losing your job? My security fund is currently in 60/40 bonds/stock portfolio for precisely this reason, even if the stocks decline by half and the bonds dip a little with them I'll still have a good margin. My 401k that still has 30+ years to run is 100% stocks. Also my wife is pregnant, so I converted the entirety of our HSA to cash (most of it had been invested up this point) as we're going to need most of that money in the next few months (and that's just for what we can foresee) and losing half of it to potential market perturbations is unacceptable.

deleted 5y ago

[deleted]