How much is too much in liquid savings - debate with husband.

[Anonymous]

My spouse and I are early 30s, make ~$315K a year combined. Between the two of us, I make ~$50K more a year and both jobs are relatively stable but his definitely more so (think nurse or police officer). No children but currently TTC. We own a home valued at $700K with $500K to pay off, and all housing costs (utilities, mortgage, property taxes, HOA) come to about $3300 a month. $500K in retirement, pretty even split between accounts, and $100K in liquid savings currently parked in a HYSA.

I think this is way too much in liquid savings and have started pulling some of my contributions to the savings account into a brokerage. We aren’t planning to buy a new home until our hypothetical children are school age, and the ‘big’ expenses we’re anticipating in the next couple of years are a new HVAC and hot water heater. My husband disagrees and says he prefers to keep the money liquid in case of home repairs or job loss.

What do you think?

[Anonymous]

Anonymous wrote:My spouse and I are early 30s, make ~$315K a year combined. Between the two of us, I make ~$50K more a year and both jobs are relatively stable but his definitely more so (think nurse or police officer). No children but currently TTC. We own a home valued at $700K with $500K to pay off, and all housing costs (utilities, mortgage, property taxes, HOA) come to about $3300 a month. $500K in retirement, pretty even split between accounts, and $100K in liquid savings currently parked in a HYSA.

I think this is way too much in liquid savings and have started pulling some of my contributions to the savings account into a brokerage. We aren’t planning to buy a new home until our hypothetical children are school age, and the ‘big’ expenses we’re anticipating in the next couple of years are a new HVAC and hot water heater. My husband disagrees and says he prefers to keep the money liquid in case of home repairs or job loss.

What do you think?

I don't understand why either you thinks a taxable brokerage account isn't "liquid". Perhaps it means you sell some stocks at a loss because of timing, but it's all liquid.

[Anonymous]

I think 100K is too much.

I like budgeting with buckets - targeted amounts for different uses. I do it with different savings accounts at my credit union - it's easy to do.

What about setting a limit on the cash - 6 months expenses. That's your main untouchable bucket/account.

THEN, what about setting up a "life happens" account. Set a target there - maybe it's 20K for you (given your husband's caution). You put a certain amount in life happens a month, and when you need a new hot water heater or whatever you have an account dedicated to thse stype expenses.

I did pause on new HVAC. That's a big expense. So maybe you have another account (or dedicated amount in your life happens - another 20K or more?) for that big expense.

When your husband sees specifically that these categories are covered he may be more able to see that a brokerage account is a smart strategy.

[Anonymous]

I'd keep $100k in money market earning 4 percent and start investing any future dollars in index funds or stocks.

[Anonymous]

Invest as much as you can, OP. You're still young enough. You have to live leanly and maximize investments do you have a nest egg in a few decades. Don't be tempted to live large now. Emergencies can be put on credit cards until you can sell some stocks. It's all "liquid", except one of them makes you money and the other does not.

[Anonymous]

I think it depends a little on how your retirement funds are invested. If you were all stock in retirement funds and you think $50k of the HYSA is really long term savings then your long term asset allocation is close to 90% stock which is reasonable.

Or you could start putting up to $20k a year into ibonds. I like ibonds for this kind of money you might need but might not need because they are 1) tax-deferred, 2) very liquid after the first year, and 3) guaranteed to keep up with inflation (and never lose money; in practice that means they usually do a bit better than HYSA).

It’s nice to have some inflation-indexed investments so putting $50-60k there is a way you can both feel good about saving long term but not be worried about losing money or difficulties accessing the money (after 12 months).

[Anonymous]

Anonymous wrote:I'd keep $100k in money market earning 4 percent and start investing any future dollars in index funds or stocks.

yeah at least put in SGOV.

But honestly maybe you should put $50k of it in SGOV. Then the other $50k in a split of EMEQ, FRDM, EWY and UGL. Make some actual money from that excess emergency fund.

[Anonymous]

I'd be alittle hesitant to pour too much in the US market right now. Seems liek we're in for a correction considering every $1 a custoemr spends on AI costs $1.40-1.60 to provide. $100k in a HYSA isn't crazy these days.

[Anonymous]

How much are your expenses per year? I can understand wanting to have a year of expenses in safe savings given the current job market/general insanity.

[Anonymous]

The HYSA preserves capital. Stocks etc do not in the case of a downturn.
I don't see the problem with $100k there to ride out downturns, job losses, medical emergencies, big repairs. Credit cards will cost more.

[Anonymous]

Same income as you but less stocks and 100k in bank we are comfortable with for emergencies and job loss and we have little kids. A good number for us.

[Anonymous]

We do SGOV for "cash."

[Anonymous]

What your husband seems to be describing is an emergency fund. That number is different for each person due to comfort level and expenses.

If you both lost your jobs today and had no income, how much money do you need each month? How many months do you feel comfort having in reserve?

[Anonymous]

We have the same disagreement. The issue is that he makes 3x my income, and our mortgage is based on our combined income. No way I could afford our mortgage and other expenses if something happens to his income (death, disability, divorce, job loss, etc). So, I keep 1 year of our cost of living in cash equivalents in my own separate account. He doesn't see it, so he doesn't harp about how it's not working for us, blah blah blah. It is working for me - it allows me to sleep at night. That's how I resolved this fight.

[Anonymous]

Anonymous wrote:Invest as much as you can, OP. You're still young enough. You have to live leanly and maximize investments do you have a nest egg in a few decades. Don't be tempted to live large now. Emergencies can be put on credit cards until you can sell some stocks. It's all "liquid", except one of them makes you money and the other does not.

This is our approach, in our early 30s. OP if you haven’t already do some scenario modeling on investment returns in a broad index fund over 20-30-40 years. It’s staggering how much the compounding adds up when you start in your 20s/early 30s. And you have the time to ride out any dips and bumps.