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Savings Accounts, Checking Accounts, and Investing
Posted on 7/27/21 at 11:17 am
Posted on 7/27/21 at 11:17 am
At what point financially, did you feel secure investing money instead of just letting it sit in savings? Grew up lower middle class, money was always an issue. Worked in the O&G sector the last 11 years, been laid off a few times, and mid 30s. I've always been more concerned about saving as much as I can, rather than investing but as I grow older, I realize how much potential income I'm missing out on. So is it $20k between your checking and savings? 50k? 100K?
7
Posted on 7/27/21 at 11:42 am to BadatBourre
Start yourself a Roth IRA and max out every year, you can take your contributions out without penalty if you hit hard times. I only keep about $5k in my savings and $1,500 in checking and invest the rest.
No use in letting good money sit without the opportunity to make some additional money. There are other options out there where you can invest and take your money out if you need it but it may take a coupole of days.
No use in letting good money sit without the opportunity to make some additional money. There are other options out there where you can invest and take your money out if you need it but it may take a coupole of days.
Posted on 7/27/21 at 12:01 pm to LSUGrad2005
quote:
I only keep about $5k in my savings
Way too little
Posted on 7/27/21 at 12:04 pm to LSUGrad2005
I’m going to get crucified but I have one year of expenses in savings. I like security. I’m plenty risky in my investments.
ETA- I am single and cheap though so it’s not like I have a wife and kids.
ETA- I am single and cheap though so it’s not like I have a wife and kids.
This post was edited on 7/27/21 at 12:05 pm
Posted on 7/27/21 at 12:14 pm to BadatBourre
Things were tighter for me in my 20s, but very early 30s started to have a good bit of excess. I've never had much in a savings account because the rates are always so bad it just seems pointless. A "good" rate right now is what, 0.5%, yet inflation over 5% 
The way my wife and I make it work is we have 2 checking accounts, a primary and secondary. The primary is where all the bills and such flow through as well as most our paychecks. The secondary checking account is for $500/mo to go into from our paychecks and is there to fund the primary account as needed for certain more expensive months (we also have 2 checking account because venmo needs 2 different accounts for 2 different people and we both use venmo, so there's that). The primary account I have no issues taking down to $1k or so. The secondary varies but usually no more than a few thousand sits in it.
Anything over that goes to investments. I have 2 taxable accounts, 1 where it's a defined stock portfolio and the other is a selling cash secured puts portfolio.
Unlike most people, I keep our emergency fund essentially "backed up" in these portfolios. I dont just leave our $14k emergency fund sitting as cash in a checking/savings account. There's obviously a risk involved there but the accounts in total are way above $14k so the risk is fairly minimal there. We have roth IRAs where technically we also have the emergency fund backed up with cash basis there if we really really needed it basically.
Typical wisdom would say keep in checking pretty bare minimum, keep an emergency fund in a savings/money market account, invest the excess beyond that. I think it's fine to have an emergency fund invested, so long as you know the risk involved and also have a good bit above what you deem necessary for you emergency fund there to protect yourself. I.E. if you need $10k for an emergency fund, dont start out with that invested or a few thousand above that. Make sure you have a buffer because you'd feel pretty bad if you put $10k invested somewhere, we have a crash where it's only worth $7k suddenly, and then you lose your job and you have only 70% of your fund there. Also try not to put it in stupid risky investments like buying gamestop when its in the hundreds or any stock that has sharply risen without good reason. If all this is too much, just leave an emergency fund in a savings/checking account like most.
The way my wife and I make it work is we have 2 checking accounts, a primary and secondary. The primary is where all the bills and such flow through as well as most our paychecks. The secondary checking account is for $500/mo to go into from our paychecks and is there to fund the primary account as needed for certain more expensive months (we also have 2 checking account because venmo needs 2 different accounts for 2 different people and we both use venmo, so there's that). The primary account I have no issues taking down to $1k or so. The secondary varies but usually no more than a few thousand sits in it.
Anything over that goes to investments. I have 2 taxable accounts, 1 where it's a defined stock portfolio and the other is a selling cash secured puts portfolio.
Unlike most people, I keep our emergency fund essentially "backed up" in these portfolios. I dont just leave our $14k emergency fund sitting as cash in a checking/savings account. There's obviously a risk involved there but the accounts in total are way above $14k so the risk is fairly minimal there. We have roth IRAs where technically we also have the emergency fund backed up with cash basis there if we really really needed it basically.
Typical wisdom would say keep in checking pretty bare minimum, keep an emergency fund in a savings/money market account, invest the excess beyond that. I think it's fine to have an emergency fund invested, so long as you know the risk involved and also have a good bit above what you deem necessary for you emergency fund there to protect yourself. I.E. if you need $10k for an emergency fund, dont start out with that invested or a few thousand above that. Make sure you have a buffer because you'd feel pretty bad if you put $10k invested somewhere, we have a crash where it's only worth $7k suddenly, and then you lose your job and you have only 70% of your fund there. Also try not to put it in stupid risky investments like buying gamestop when its in the hundreds or any stock that has sharply risen without good reason. If all this is too much, just leave an emergency fund in a savings/checking account like most.
This post was edited on 7/27/21 at 12:18 pm
Posted on 7/27/21 at 12:27 pm to BadatBourre
Grew up lower middle class with hard working father and stay at home Mom. Watched them provide wonderful life for me but struggle financially, often paycheck to paycheck, and have little to no options when chit hit fan (ie, Home AC breaks).
My Dad sat me down in High School and put a VHS tape (1980s!) on Mutual Funds basics. I was hooked.
Realized then and there that time and diversification will heal investing fear. Sounds like you have plenty of time so get that emergency fund where it needs to be, Roth IRAs, and invest in passive (low cost) index funds that represent the whole stock market, bond market, and international market.
Your time value of money growth will more than compensate your fears.
I would recommend starting w/Vanguard, has all three of these (mutual funds or ETFs, you will have to decide). They are basically the same in terms of diversification, but MF allow you auto investing but don't provide control of when you buy and sell (ie, experience capital gains), whereas ETF gives much greater control but does not allow auto investing. There are other differences, but those are the big ones for me.
Go for it, you have plenty of time! Good luck.
My Dad sat me down in High School and put a VHS tape (1980s!) on Mutual Funds basics. I was hooked.
Realized then and there that time and diversification will heal investing fear. Sounds like you have plenty of time so get that emergency fund where it needs to be, Roth IRAs, and invest in passive (low cost) index funds that represent the whole stock market, bond market, and international market.
Your time value of money growth will more than compensate your fears.
I would recommend starting w/Vanguard, has all three of these (mutual funds or ETFs, you will have to decide). They are basically the same in terms of diversification, but MF allow you auto investing but don't provide control of when you buy and sell (ie, experience capital gains), whereas ETF gives much greater control but does not allow auto investing. There are other differences, but those are the big ones for me.
Go for it, you have plenty of time! Good luck.
Posted on 7/27/21 at 12:36 pm to Paul Allen
quote:
I only keep about $5k in my savings
Way too little
Depends on your expenses and where you have other money.
Posted on 7/27/21 at 2:19 pm to BadatBourre
For the average person that isn't very financial savvy, 6-12 months of all bills in an "emergency" savings account. The rest goes into the market. You should never have more than that in savings since your savings are losing money every year to inflation.
This post was edited on 7/27/21 at 2:20 pm
Posted on 7/27/21 at 3:50 pm to BadatBourre
I keep under $1k across savings and checking and invest the rest. I have access to a HELOC if I need more cash.
Posted on 7/27/21 at 4:04 pm to BadatBourre
Very little in checking/savings. In the event of an emergency I'd just put it on a credit card and withdraw from Roth IRA or brokerage to pay off the CC before interest hit.
Posted on 7/27/21 at 4:49 pm to BadatBourre
After I got to 30k I dumped everything but 5k into a taxable brokerage and invested in total market funds. Any extra money I had at the end of the month I’d add to the fund. Currently sitting at 110k in the brokerage.
Posted on 8/6/21 at 1:44 am to PhiTiger1764
quote:
I have access to a HELOC if I need more cash.
Since I’ve known more than a few people who had to find out the hard way in SHTF times, just remember that the bank(s) are in control of that access, not you.
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