Uh oh - savings | TigerDroppings.com

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nelatf
Louisiana Tech Fan
NELA
Member since Jan 2011
1350 posts

Uh oh - savings



Maxing out my employer sponsored 401k - stashing away to my Roth....also have purchased way too much in individual stocks in a regular broker account.....

...I don't have enough cash set aside. What is the norm...1 year living expenses? Also, sink it into a CD or MM?

No debt except for roof over head - still driving my 05 Toyota - only spend money on stocks and my golf club membership




This post was edited on 4/24 at 6:57 pm



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Cmlsu5618
McNeese State Fan
Destin, FL
Member since Sep 2010
2878 posts

re: Uh oh - savings


quote:

What is the norm...1 year living expenses?


My rule of thumb:

3-6 months of your living expenses. Anything beyond is probably unnecessary, unless you have a big purchase planned.

I say stick in in a MM. Neither a MM or CD is going to make you any real return. As such, I would focus more on having every bit of your non-emergency cash invested.






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Vols&Shaft83
Georgia Tech Fan
Member since Dec 2012
18522 posts

re: Uh oh - savings


quote:

I don't have enough cash set aside. What is the norm...1 year living expenses? Also, sink it into a CD or MM?


6 Months to 1 Year (1 year is a usually too much, unless you are self employed), and in a MM account. MM's are liquid (with few restrictions), and get the same interest rates CD's do.

Emergency funds should be liquid, but cumbersome. Some people will say use your Roth as your emergency fund, I Think this is just a dumb idea.



This post was edited on 4/24 at 5:51 pm


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Teddy Ruxpin
LSU Fan
New Orleans, LA
Member since Oct 2006
20018 posts

re: Uh oh - savings


quote:

I Think this is just a dumb idea.


If you lack self control I agree, completely. Some people need to create obstacles to reach their savings goals and I applaud them for doing so.



This post was edited on 4/24 at 5:52 pm


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Vols&Shaft83
Georgia Tech Fan
Member since Dec 2012
18522 posts

re: Uh oh - savings


quote:

If you lack self control I agree


Even if you have self control, I think it's a lot less painful to pay for an emergency with cash from a low interest account than it would be to pay for an emergency with tax advantaged investment funds.

You can only contribute $5,500 to a Roth annually, and you cannot replace it. So if you pull the money for an emergency, you lose the money AND the opportunity ( And just in case somebody wants to use this fact to argue with me: YES, I KNOW THERE IS NO frickING PENALTY, THAT'S NOT THE frickING POINT).

But if use my MM account cash for an emergency, I only lose the cash. I can replace emergency cash as much as I want. And Everybody, at some point, WILL have an emergency, so you are going to need the cash at some point, consider emergency funds as already spent.






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Teddy Ruxpin
LSU Fan
New Orleans, LA
Member since Oct 2006
20018 posts

re: Uh oh - savings


We went over this before, but the issue was in the scenario where you have just enough cash to either put it in your ROTH (say for tax year 2012 in March 2013) or let it sit in the account outside.

Since you can only do one or the other, the ROTH is better because you can contribute to it and if the emergency doesn't happen, you are good. If the emergency happens, you're still good. If you just put it in the Emergency fund outside the ROTH and the emergency doesn't happen, you lost out.

I can actually speak on this issue because it literally just happened to me



This post was edited on 4/24 at 6:38 pm


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Vols&Shaft83
Georgia Tech Fan
Member since Dec 2012
18522 posts

re: Uh oh - savings


quote:

Since you can only do one or the other, the ROTH is better because you can contribute to it and if the emergency doesn't happen, you are good. If the emergency happens, you're still good. If you just put it in the Emergency fund outside the ROTH and the emergency doesn't happen, you lost out.


In this scenario, yes I agree. But 1 is not a replacement for the other, you should do both if you are able.






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Teddy Ruxpin
LSU Fan
New Orleans, LA
Member since Oct 2006
20018 posts

re: Uh oh - savings


Ya, I was in my first full year of employment in 2012 so I'm starting the building process. Being almost 28, I figured I had good odds.

Then I broke my damn finger playing in a flag football game I didn't even know about an hour earlier until they needed a guy. Such shitty luck.






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jimbeam
USA Fan
University of LSU
Member since Oct 2011
33673 posts
 Online 

re: Uh oh - savings


MM and CD can be withdrawn at any time right?





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Vols&Shaft83
Georgia Tech Fan
Member since Dec 2012
18522 posts

re: Uh oh - savings


quote:

MM and CD can be withdrawn at any time right?



MM can, CD cannot without paying a penalty. CD's suck giant rhino dick






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jimbeam
USA Fan
University of LSU
Member since Oct 2011
33673 posts
 Online 

re: Uh oh - savings




ETA what are the average rates right now?



This post was edited on 4/24 at 8:01 pm


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Vols&Shaft83
Georgia Tech Fan
Member since Dec 2012
18522 posts

re: Uh oh - savings


quote:

ETA what are the average rates right now?



Compare Money Market and Savings account rates


Not gonna be much of anything above 1% right now






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jimbeam
USA Fan
University of LSU
Member since Oct 2011
33673 posts
 Online 

re: Uh oh - savings


crap.

and that video scares the hell out of me






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
30530 posts

re: Uh oh - savings


quote:

you should do both if you are able.


If you are able to max your Roth and max your 401, you probably don't need an emergency fund that badly b/c you can borrow $50K against your 2% HELOC without a problem. Keeping money in cash may still not be your best option.

But yes, using your Roth as an emergency fund is clearly better than keeping it outside a Roth, since the taxman won't take a slice off your returns.






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tylercsbn9
LSU Fan
Tomball, TX
Member since Feb 2004
55525 posts

re: Uh oh - savings


6 months is what I have set aside in case my fiancé and I both lose our jobs. Our monthly expenses total to about 6k per month, so,I have that set aside. That is accounting for no unemployment.....you might want to add that into you calculation if need be. I really don't know what it would be, but I would guess a person gets like a grand a month for a year, so if you want deduct that amount from your monthly expenses and you'll have a lower 6 month total.

Just recent paid off my wife's credit card and will be loading up on the house to get my 15 year mortgage paid off in 10 if I only average paying $300 extra a month....can probably get it done sooner but things always happen. We also want to,renovate the bathroom, hardwood floors, pool, etc so,that will put a ding in the bank account.

I'm planning on gradually moving money that I just have sitting in a checking account....my 6 months of savings...into a Roth. I think I'll probably plan to keep about two months expenses completely liquid in a checking account.



This post was edited on 4/24 at 11:16 pm


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Siderophore
LSU Fan
Member since Nov 2010
3335 posts

re: Uh oh - savings


While you are right, not everyone maxxes out their Roth, which is the only time you scenario applies.

Also, not everyone is in a tax bracket where it is adventagous to put money in a Roth for retirement.....and it only takes precedence again when you have already maxxed out your 401k.






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Poodlebrain
LSU Fan
Way Right of Rex
Member since Jan 2004
15733 posts

re: Uh oh - savings


quote:

Not gonna be much of anything above 1% right now
What about Bitcoins? All the cool people are investing in them.






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LSUBrad5277
LSU Fan
North Louisiana
Member since Jan 2011
12632 posts

re: Uh oh - savings


you can't take it with you spend it all and enjoy live let the next generation take care of you.




























Seriously I try to have 6 months salary available thats all with a family I'm supporting. I would like to save more but I'm heavily invested in family owned land with alot of timber and mineral leases.

oh and my 401K at work is maxed out to the extent of what my employer matches plus.



This post was edited on 4/25 at 4:21 am


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Vols&Shaft83
Georgia Tech Fan
Member since Dec 2012
18522 posts

re: Uh oh - savings


quote:

LSUBrad5277



For a second I thought you worked in Congress






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GoCrazyAuburn
Auburn Fan
Staring up at Vulcan's ass
Member since Feb 2010
15615 posts

re: Uh oh - savings


quote:

Vols&Shaft83



I'm with you on this one. Not a fan of using a Roth for emergency fund.
I've got 5 months of living expenses saved up in my emergency fund. Anywhere 3-6 is adequate, but it just depends on what makes you feel comfortable.



This post was edited on 4/25 at 2:21 pm


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