Is this too much cash, or is it appropriate?

[Anonymous]

I have about $270,000 in cash. My total net worth is around $1 million, in the form of paid-off $700,000 apartment, a paid-off $50,000 car, and the cash.

I am self-employed in a rapidly-changing industry and my income feels very shaky. Last year, I made $140,000, and my income over the last decade has ranged between $50,000-$170,000 .

I only spend about $35,000 per year, so $270,000 represents close to eight years of expenses. However, my rationale is that I want an emergency fund of $100,000 so I can handle anything that comes along (that’s probably a conservative amount, but I am very conservative and risk-averse).

I also think I need another $150,000 in case my business fails or is meaningfully affected to the point that I need to do something else. Almost all businesses need some start-up capital and I think that gives me a good buffer since I have no idea even what the new business would be, let alone how much capital it would require.

That leaves $270,000 - $250,000 = $20,000 that I do feel comfortable investing in stocks (though, I would prefer to do that in a regular brokerage account instead of a 401(k) so I can access it if needed – again, as mentioned, I’m risk-averse).

So my question is if this seems reasonable or if I am being overly conservative? Truthfully, I don’t mind if I have to work five extra years because my approach is conservative. I am much more scared of having a major disruption or financial squeeze somewhere along the way.

[Anonymous]

If conservative lets you sleep at night, then good

[Anonymous]

How come you only spend $35k per year?

I think your approach is too conservative, but I know that I have a very high tolerance for risk.

[Anonymous]

I lean very conservative. 8 years of expenses is a LOT, especially with a paid off home and car, and, I assume, no other debt.

How old are you? From what I am reading, you have zero invested in stocks - just all cash and the home equity, yes?

You may really come to regret having zero in your retirement. I think you might just about quality to do a Roth IRA incomewise - you can pull the principal out without penalty, anytime, so you should at least max out a Roth every year instead of doing an individual brokerage.

For the cash, is it in a bank making 1%, or is at least in a HYSA? Fidelity's SPAXX gives, I think, 5%, and you can look into buying Treasury Bonds or CDs for the money you don't need immediately.

[Anonymous]

Anonymous wrote:How come you only spend $35k per year?

I think your approach is too conservative, but I know that I have a very high tolerance for risk.

I'm single, no kids, no mortgage, and work from home, so my expenses are pretty low. Keeping expenses low is in line with my general conservative approach, but I actually don't feel that I am depriving myself of anything.

[Anonymous]

Anonymous wrote:How come you only spend $35k per year?

I think your approach is too conservative, but I know that I have a very high tolerance for risk.

+1
It's very conservative, but for now with cash earning 5%+, if it helps you sleep, not a bad plan.

[Anonymous]

Anonymous wrote:I lean very conservative. 8 years of expenses is a LOT, especially with a paid off home and car, and, I assume, no other debt.

How old are you? From what I am reading, you have zero invested in stocks - just all cash and the home equity, yes?

You may really come to regret having zero in your retirement. I think you might just about quality to do a Roth IRA incomewise - you can pull the principal out without penalty, anytime, so you should at least max out a Roth every year instead of doing an individual brokerage.

For the cash, is it in a bank making 1%, or is at least in a HYSA? Fidelity's SPAXX gives, I think, 5%, and you can look into buying Treasury Bonds or CDs for the money you don't need immediately.

I'm 42. Yes, no stocks or retirement currently, though looking to change that with at least $20K. I should have clarified that the "cash" is in T-bills earning 5.3% - that's partly why I haven't been in a hurry to make other investments.

[Anonymous]

Anonymous wrote:I have about $270,000 in cash. My total net worth is around $1 million, in the form of paid-off $700,000 apartment, a paid-off $50,000 car, and the cash.

I am self-employed in a rapidly-changing industry and my income feels very shaky. Last year, I made $140,000, and my income over the last decade has ranged between $50,000-$170,000 .

I only spend about $35,000 per year, so $270,000 represents close to eight years of expenses. However, my rationale is that I want an emergency fund of $100,000 so I can handle anything that comes along (that’s probably a conservative amount, but I am very conservative and risk-averse).

I also think I need another $150,000 in case my business fails or is meaningfully affected to the point that I need to do something else. Almost all businesses need some start-up capital and I think that gives me a good buffer since I have no idea even what the new business would be, let alone how much capital it would require.

That leaves $270,000 - $250,000 = $20,000 that I do feel comfortable investing in stocks (though, I would prefer to do that in a regular brokerage account instead of a 401(k) so I can access it if needed – again, as mentioned, I’m risk-averse).

So my question is if this seems reasonable or if I am being overly conservative? Truthfully, I don’t mind if I have to work five extra years because my approach is conservative. I am much more scared of having a major disruption or financial squeeze somewhere along the way.

I'm confused, do you have a retirement account on top of the cash, or is this it?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I lean very conservative. 8 years of expenses is a LOT, especially with a paid off home and car, and, I assume, no other debt.

How old are you? From what I am reading, you have zero invested in stocks - just all cash and the home equity, yes?

You may really come to regret having zero in your retirement. I think you might just about quality to do a Roth IRA incomewise - you can pull the principal out without penalty, anytime, so you should at least max out a Roth every year instead of doing an individual brokerage.

For the cash, is it in a bank making 1%, or is at least in a HYSA? Fidelity's SPAXX gives, I think, 5%, and you can look into buying Treasury Bonds or CDs for the money you don't need immediately.

I'm 42. Yes, no stocks or retirement currently, though looking to change that with at least $20K. I should have clarified that the "cash" is in T-bills earning 5.3% - that's partly why I haven't been in a hurry to make other investments.

PP. Not having any retirement is concerning. I'm conservative, and have overheld in cash in the past, which I regret, but I also have a pension coming and finally let go and started investing in index funds. I completely understand that feeling of not wanting to lose what you have built, and rationalizing why you need the money available, but if I were you I would be looking for a local or federal government job with a pension.... how are you realistically going to grow that 270k into enough to live off for the rest of your life, especially if you are also considering using it to start a business?

[Anonymous]

What do I know - but I would put it a high yield savings account which can get around 4.3 - 4.7 rn.

[Anonymous]

I won't give investment advice, but I will say you should think about whether your decisions are driven by rational financial concerns or miserliness and anxiety.

[Anonymous]

Anonymous wrote:I have about $270,000 in cash. My total net worth is around $1 million, in the form of paid-off $700,000 apartment, a paid-off $50,000 car, and the cash.

I am self-employed in a rapidly-changing industry and my income feels very shaky. Last year, I made $140,000, and my income over the last decade has ranged between $50,000-$170,000 .

I only spend about $35,000 per year, so $270,000 represents close to eight years of expenses. However, my rationale is that I want an emergency fund of $100,000 so I can handle anything that comes along (that’s probably a conservative amount, but I am very conservative and risk-averse).

I also think I need another $150,000 in case my business fails or is meaningfully affected to the point that I need to do something else. Almost all businesses need some start-up capital and I think that gives me a good buffer since I have no idea even what the new business would be, let alone how much capital it would require.

That leaves $270,000 - $250,000 = $20,000 that I do feel comfortable investing in stocks (though, I would prefer to do that in a regular brokerage account instead of a 401(k) so I can access it if needed – again, as mentioned, I’m risk-averse).

So my question is if this seems reasonable or if I am being overly conservative? Truthfully, I don’t mind if I have to work five extra years because my approach is conservative. I am much more scared of having a major disruption or financial squeeze somewhere along the way.

I stopped reading when I read the OP spent $50K on a car. LoL. You paid a $15k premium to save $10K in gas.

[Anonymous]

Anonymous wrote:I won't give investment advice, but I will say you should think about whether your decisions are driven by rational financial concerns or miserliness and anxiety.

Anxiety I'll admit to, but miserliness??

[Anonymous]

Anonymous wrote:I have about $270,000 in cash. My total net worth is around $1 million, in the form of paid-off $700,000 apartment, a paid-off $50,000 car, and the cash.

I am self-employed in a rapidly-changing industry and my income feels very shaky. Last year, I made $140,000, and my income over the last decade has ranged between $50,000-$170,000 .

I only spend about $35,000 per year, so $270,000 represents close to eight years of expenses. However, my rationale is that I want an emergency fund of $100,000 so I can handle anything that comes along (that’s probably a conservative amount, but I am very conservative and risk-averse).

I also think I need another $150,000 in case my business fails or is meaningfully affected to the point that I need to do something else. Almost all businesses need some start-up capital and I think that gives me a good buffer since I have no idea even what the new business would be, let alone how much capital it would require.

That leaves $270,000 - $250,000 = $20,000 that I do feel comfortable investing in stocks (though, I would prefer to do that in a regular brokerage account instead of a 401(k) so I can access it if needed – again, as mentioned, I’m risk-averse).

So my question is if this seems reasonable or if I am being overly conservative? Truthfully, I don’t mind if I have to work five extra years because my approach is conservative. I am much more scared of having a major disruption or financial squeeze somewhere along the way.

You may as well shove your money in a mattress. The S&P rises at about 8%/yr. You’re missing out on a lot of gains. You can always access that if you absolutely have to. If I were you I would put 20k in a high interest savings account or a money market fund. Then take a 60/40 split of the remaining between bonds and stock. Since you are conservative do index funds like the S&P. Get a 401k and max it out. Not doing this at your income only guarantees that you will not retire comfortably - as the saying goes - pay yourself first.

[Anonymous]

Curious if you would be eligible for social security when you hit full retirement age. If not, you should definitely consider a Roth IRA to save more deliberately for retirement. It is easier to access Roth funds (especially the principal) in a pinch.