How much do you keep in true cash vs cash equivalents?

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carminered2019
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Re: How much do you keep in true cash vs cash equivalents?

Post by carminered2019 »

When I was still employed, I kept 7 months in checking & saving combined and everything else in the stock market.
DavidInMaryland
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Re: How much do you keep in true cash vs cash equivalents?

Post by DavidInMaryland »

:arrow:
gtrplayer wrote: Wed Mar 29, 2023 10:29 pm Only keep what’s needed for monthly expenses in checking. Emergency fund should be in a separate account that earns interest.
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.
gotoparks
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Re: How much do you keep in true cash vs cash equivalents?

Post by gotoparks »

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.
snowblinded
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Re: How much do you keep in true cash vs cash equivalents?

Post by snowblinded »

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?
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.
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dogagility
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Re: How much do you keep in true cash vs cash equivalents?

Post by dogagility »

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.
+1 Although I only keep a couple months of expenses in FZDXX.
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Dave55
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Re: How much do you keep in true cash vs cash equivalents?

Post by Dave55 »

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
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Caduceus
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Re: How much do you keep in true cash vs cash equivalents?

Post by Caduceus »

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.
the_wiki
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Re: How much do you keep in true cash vs cash equivalents?

Post by the_wiki »

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. :P
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enad
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Re: How much do you keep in true cash vs cash equivalents?

Post by enad »

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.
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.
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.
+1. We also keep between 3-6 months in checking that earns 3.00% and the rest in a higher yielding MMF.
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Marseille07
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Re: How much do you keep in true cash vs cash equivalents?

Post by Marseille07 »

enad wrote: Thu Mar 30, 2023 11:58 pm +1. We also keep between 3-6 months in checking that earns 3.00% and the rest in a higher yielding MMF.
Yeah, I mostly use HYSA but it's the same idea, since I can transfer money instantly between checking and HYSA.
Houdini563
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Re: How much do you keep in true cash vs cash equivalents?

Post by Houdini563 »

5%, around $110,000 in bank savings. I am newly retired.
Jeep512
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Re: How much do you keep in true cash vs cash equivalents?

Post by Jeep512 »

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.
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anon_investor
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Re: How much do you keep in true cash vs cash equivalents?

Post by anon_investor »

guanonics wrote: Wed Mar 29, 2023 6:17 pm I switched my checking account over to a Fidelity cash management account. It's basically a checking account that can also hold money market funds. Simple.
+1.

This is the best of both worlds. Get money market fund interest rates on your checking.
Broken Man 1999
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Re: How much do you keep in true cash vs cash equivalents?

Post by Broken Man 1999 »

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?
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.

I SWAN with virtually no cash on hand. It's all personal finance, and we all have our preferences.

Broken Man 1999
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riverant
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Re: How much do you keep in true cash vs cash equivalents?

Post by riverant »

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.
placeholder
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Re: How much do you keep in true cash vs cash equivalents?

Post by placeholder »

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.
Kookaburra
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Re: How much do you keep in true cash vs cash equivalents?

Post by Kookaburra »

aboose wrote: Wed Mar 29, 2023 6:14 pm
Now that money market funds are earning 4-5% and my checking account is 100K, I feel that I am leaving value on the table.
As Boston would say, this is “more than a feeling.” You are losing 4K-5K per year by not having those in a MMF.
swak
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Re: How much do you keep in true cash vs cash equivalents?

Post by swak »

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?
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.
dru808
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Re: How much do you keep in true cash vs cash equivalents?

Post by dru808 »

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
swak
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Re: How much do you keep in true cash vs cash equivalents?

Post by swak »

aboose wrote: Wed Mar 29, 2023 7:21 pm
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.
In 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.
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.
muel87
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Re: How much do you keep in true cash vs cash equivalents?

Post by muel87 »

anon_investor wrote: Sat Apr 01, 2023 8:20 am
guanonics wrote: Wed Mar 29, 2023 6:17 pm I switched my checking account over to a Fidelity cash management account. It's basically a checking account that can also hold money market funds. Simple.
+1.

This is the best of both worlds. Get money market fund interest rates on your checking.
Does Vanguard have equivalent? They have cash plus which is FDIC insured, but no checks/ATMs.
stoptothink
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Re: How much do you keep in true cash vs cash equivalents?

Post by stoptothink »

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).
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anon_investor
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Re: How much do you keep in true cash vs cash equivalents?

Post by anon_investor »

muel87 wrote: Thu Apr 20, 2023 9:31 am
anon_investor wrote: Sat Apr 01, 2023 8:20 am
guanonics wrote: Wed Mar 29, 2023 6:17 pm I switched my checking account over to a Fidelity cash management account. It's basically a checking account that can also hold money market funds. Simple.
+1.

This is the best of both worlds. Get money market fund interest rates on your checking.
Does Vanguard have equivalent? They have cash plus which is FDIC insured, but no checks/ATMs.
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.
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Bernmaster
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Re: How much do you keep in true cash vs cash equivalents?

Post by Bernmaster »

anon_investor wrote: Thu Apr 20, 2023 10:04 am
muel87 wrote: Thu Apr 20, 2023 9:31 am
anon_investor wrote: Sat Apr 01, 2023 8:20 am
guanonics wrote: Wed Mar 29, 2023 6:17 pm I switched my checking account over to a Fidelity cash management account. It's basically a checking account that can also hold money market funds. Simple.
+1.

This is the best of both worlds. Get money market fund interest rates on your checking.
Does Vanguard have equivalent? They have cash plus which is FDIC insured, but no checks/ATMs.
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.
That's an amazing feature! Wish we had that in Europe! We hold roughly one month of expenses in our checking account.
"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
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