How much do you keep in true cash vs cash equivalents?
-
- Posts: 1939
- Joined: Fri Jun 21, 2019 7:06 pm
Re: How much do you keep in true cash vs cash equivalents?
When I was still employed, I kept 7 months in checking & saving combined and everything else in the stock market.
-
- Posts: 27
- Joined: Sat Mar 25, 2023 11:42 am
Re: How much do you keep in true cash vs cash equivalents?
I agree with this, but to the original question, I see no problem with keeping it in cash equivalents like a money market mutual fund.
If you have sufficient income and job stability, I'd argue you can even keep a chunk of it in a short-term bond fund of some kind.
Re: How much do you keep in true cash vs cash equivalents?
Personal finance is personal. You don't need to optimize down to the last penny as some do on Bogleheads. I keep 2/3 months of spend in my checking account.
-
- Posts: 42
- Joined: Sun Dec 21, 2014 10:00 pm
Re: How much do you keep in true cash vs cash equivalents?
Because in zero-rate environment people have been living in forever, $20K excess carry per month is only $8.33 peace of mind for no active optimization trying to avoid overdraft. In the current environment, that carrying cost goes up to $71 a month and may be worth more peoples' time. It takes time for people to adjust.UpperNwGuy wrote: ↑Wed Mar 29, 2023 7:40 pm I am absolutely astonished that so many folk keep so much excess idle cash in their accounts. How is this consistent with a boglehead approach to personal finances?
- dogagility
- Posts: 3237
- Joined: Fri Feb 24, 2017 5:41 am
Re: How much do you keep in true cash vs cash equivalents?
+1 Although I only keep a couple months of expenses in FZDXX.I have a Fidelity CMA account set up with a 12 month e-Fund 100% in FZDXX with a Compounded Yield of 4.73%.
Fidelity treats this as cash and auto liquidates as needed to cover debits.
Make sure you check out my list of certifications. The list is short, and there aren't any. - Eric 0. from SMA
Re: How much do you keep in true cash vs cash equivalents?
A few years of projected expenses in brokerage money market now earning about 4.75%. Funds get moved to bank checking account as needed to pay bills.
Dave
Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
Re: How much do you keep in true cash vs cash equivalents?
I'm quite extreme because my cash cushion has very little to do with my expenses and more to do with whether I can find things I want to invest in. At one point, I was probably the only high net worth person on earth without the $8 in cash I needed for a haircut.
I've grown quite comfortable selling investments if I really need to if I need cash in a jiffy, but oftentimes it's not necessary. I can just live more simply for months on end, or take out an interest-free cc loan which I pay off at the end of the period, etc. In other words, if I can find something very compelling I want to invest in, I've found it impossible to leave cash sitting there doing nothing. If I have to sell something to convert to cash when I don't want to, then I'll initiate a LEAPs call options position that has the effect of replicating my original position.
I can do this only because I have very few fixed costs and ongoing commitments. I'm quite sure I spend less than people who earn less than 10% of what I do most months.
I've grown quite comfortable selling investments if I really need to if I need cash in a jiffy, but oftentimes it's not necessary. I can just live more simply for months on end, or take out an interest-free cc loan which I pay off at the end of the period, etc. In other words, if I can find something very compelling I want to invest in, I've found it impossible to leave cash sitting there doing nothing. If I have to sell something to convert to cash when I don't want to, then I'll initiate a LEAPs call options position that has the effect of replicating my original position.
I can do this only because I have very few fixed costs and ongoing commitments. I'm quite sure I spend less than people who earn less than 10% of what I do most months.
Re: How much do you keep in true cash vs cash equivalents?
Interest rates go up for a few months and suddenly everyone acts like they are missing out on a Bitcoin rally if they leave a few extra grand in checking.
Re: How much do you keep in true cash vs cash equivalents?
There is no right or wrong answer here. It's what you feel comfortable with. A year is about the most I have kept in checking in the past, but your plan sounds good.aboose wrote: ↑Wed Mar 29, 2023 6:14 pm I was thinking of sending 50-75K of cash to my vanguard brokerage settlement fund which, if I understand correctly, is by default a money market fund. Seems pretty braindead and easy to do, and it's essentially completely liquid except the time it takes to transfer back to my checking.
+1. We also keep between 3-6 months in checking that earns 3.00% and the rest in a higher yielding MMF.Marseille07 wrote: ↑Wed Mar 29, 2023 6:27 pm It's personal but what I recommend is 3~6 months of expenses in checking, then the rest in MMF.
What Goes Up Must come down -- David Clayton-Thomas (1968), BST
-
- Posts: 16054
- Joined: Fri Nov 06, 2020 12:41 pm
-
- Posts: 352
- Joined: Sat Oct 09, 2021 3:50 pm
Re: How much do you keep in true cash vs cash equivalents?
5%, around $110,000 in bank savings. I am newly retired.
Re: How much do you keep in true cash vs cash equivalents?
For cash, I do a combination of:
Local savings or checking - whatever amount makes you feel comfortable. Mine is way down at the moment <$5k
HYSA - not really competitive at the moment, IMO
MM fund at a brokerage - easy, good yields right now
T bills at a brokerage - might be beneficial, if you have a state income tax.
Series I bonds - might be beneficial, if you have a state income tax. Tax deferred. Purchase limits. 12 month hold - best to have a long term strategy, if you want to get into I bonds.
I personally don't do CDs, but that would be another option. Some of those rates are over 5% now.
Lots of good options - you just need to figure out what works best for your situation. A MM fund would be a great, easy way to start.
Local savings or checking - whatever amount makes you feel comfortable. Mine is way down at the moment <$5k
HYSA - not really competitive at the moment, IMO
MM fund at a brokerage - easy, good yields right now
T bills at a brokerage - might be beneficial, if you have a state income tax.
Series I bonds - might be beneficial, if you have a state income tax. Tax deferred. Purchase limits. 12 month hold - best to have a long term strategy, if you want to get into I bonds.
I personally don't do CDs, but that would be another option. Some of those rates are over 5% now.
Lots of good options - you just need to figure out what works best for your situation. A MM fund would be a great, easy way to start.
- anon_investor
- Posts: 15122
- Joined: Mon Jun 03, 2019 1:43 pm
-
- Posts: 8626
- Joined: Wed Apr 08, 2015 11:31 am
- Location: West coast of Florida, near Champa Bay !
Re: How much do you keep in true cash vs cash equivalents?
BHs also like to SWAN (sleep well at night). Cash on hand often helps, it would seem. Some see cash as their emergency fund. Younger investors subject to job loss are encouraged to have an emergency fund.UpperNwGuy wrote: ↑Wed Mar 29, 2023 7:40 pm I am absolutely astonished that so many folk keep so much excess idle cash in their accounts. How is this consistent with a boglehead approach to personal finances?
I SWAN with virtually no cash on hand. It's all personal finance, and we all have our preferences.
Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
Re: How much do you keep in true cash vs cash equivalents?
I keep about 1.25 months expenses in my checking. It largely turns over within the month but doesn’t cause me any worry about credit card payments or other withdrawals bouncing.
-
- Posts: 8421
- Joined: Tue Aug 06, 2013 12:43 pm
Re: How much do you keep in true cash vs cash equivalents?
Much depends on portfolio size and in my case my cash amounts to 0.6% of the total so what I do with that will make little overall difference.
-
- Posts: 2045
- Joined: Thu Apr 02, 2020 11:14 pm
Re: How much do you keep in true cash vs cash equivalents?
When I set up my CMA, it asked whether I wanted to link a brokerage account for overdrafts. If I linked more than one, it asked me in what order I preferred the accounts be accessed. It stated the CMA would only draw from money markets, not bond funds or equity funds.I am confused by how Fidelity CMA handles overdrafts. I had understood it to be through Cash Manager, but that seems to be for transfers from different brokerage accounts, not for going to MM funds in the CMA instead of the core cash holding of the CMA.
. . . .
And in any of these, how does it decide which money market mutual fund to liquidate, if there are multiple ones?
Re: How much do you keep in true cash vs cash equivalents?
Our checking account might have $4k at most at any time. The rest of our cash is in our brokerage account at fidelity in spaxx. It is a no brainer.
1 fund
Re: How much do you keep in true cash vs cash equivalents?
If you have a paycheck that you direct deposit into your checking account every month or every 2 weeks, then you can move excess funds to your VTSAX and your money market each month. Then you can feel comfortable about not running low in your checking account. Keeping no more than $10K in your checking account should be very comfortable at your spending level.aboose wrote: ↑Wed Mar 29, 2023 7:21 pmIn my mind I create scenarios where I forget to transfer in cash for a few months and overdraft. That would never happen, I'm just being silly. But it gives me peace of mind so hey.exodusNH wrote: ↑Wed Mar 29, 2023 7:12 pm
$25k seems like a lot. I keep 2 months in my local bank, which amounts to about $4000. (I've been in my house for 18 years.) That's enough to pay my mortgage, utilities, and minimums on my credit cards. I figure if I'm ever locked out of online accounts, I don't have to panic.
I have another 10 months, between a HYSA, Treasuries, and CDs that comprise my emergency fund. I also have a big slug in a Treasury maturing in October that I'm going to use to pay off a 0% card that expires in November.
Re: How much do you keep in true cash vs cash equivalents?
Does Vanguard have equivalent? They have cash plus which is FDIC insured, but no checks/ATMs.anon_investor wrote: ↑Sat Apr 01, 2023 8:20 am+1.
This is the best of both worlds. Get money market fund interest rates on your checking.
-
- Posts: 15368
- Joined: Fri Dec 31, 2010 8:53 am
Re: How much do you keep in true cash vs cash equivalents?
We generally have ~$800 in our checking account, the rest (~$110k now as we are slowly stowing cash for a house upgrade) is in "cash equivalents" (VMFXX, Ally HYSA, I-bonds). We only keep that much in checking to avoid an overdraft fee if I forget that a specific bill will be pulled (it's never happened).
- anon_investor
- Posts: 15122
- Joined: Mon Jun 03, 2019 1:43 pm
Re: How much do you keep in true cash vs cash equivalents?
Nope. I don't think any other brokerage offers this. You can hold whichever Fidelity money market fund you want and it will auto liquidate.muel87 wrote: ↑Thu Apr 20, 2023 9:31 amDoes Vanguard have equivalent? They have cash plus which is FDIC insured, but no checks/ATMs.anon_investor wrote: ↑Sat Apr 01, 2023 8:20 am+1.
This is the best of both worlds. Get money market fund interest rates on your checking.
- Bernmaster
- Posts: 158
- Joined: Tue Feb 18, 2020 1:29 pm
- Location: Germany, Bavaria
Re: How much do you keep in true cash vs cash equivalents?
That's an amazing feature! Wish we had that in Europe! We hold roughly one month of expenses in our checking account.anon_investor wrote: ↑Thu Apr 20, 2023 10:04 amNope. I don't think any other brokerage offers this. You can hold whichever Fidelity money market fund you want and it will auto liquidate.muel87 wrote: ↑Thu Apr 20, 2023 9:31 amDoes Vanguard have equivalent? They have cash plus which is FDIC insured, but no checks/ATMs.anon_investor wrote: ↑Sat Apr 01, 2023 8:20 am+1.
This is the best of both worlds. Get money market fund interest rates on your checking.
"The unsophisticated investor who is realistic about his shortcomings is likely to obtain better results than the knowledgeable professional who is blind to even a single weakness” ― Warren Buffett