Five months of net pay in cash, a couple more in stock. That’s counting both my take home and my wife’s. Because my wife is a public school teacher with more than 20 years in the district, it is extremely unlikely that she would lose her job, and, if she became disabled or died, disability insurance, life insurance, and/or her pension would replace most of her income for a good while. My job is somewhat less secure, but I have the out of being legally blind and thus more or less immediately qualified for SSDI, which would replace perhaps 1/3 of my take home pay once you take into account the immediate reduction in our tax burden.
I can’t think of a likely emergency that we couldn’t deal with from cash on hand (combined with insurance), but two major emergencies in a row would force us into some uncomfortable choices regarding dipping into retirement and home equity (which are substantial).
I’m retired, so I don’t have any take-home pay – but I do have several pensions. However, relative to my highest take-home pay while working, and excluding retirement/superannuation accounts, I have more than a year’s worth in savings.
I think more than 12 months, but I’m old enough to take money out of my IRA without penalty, so it doesn’t matter.
Including retirement accounts, lots more.
Most of the savings account is inheritance. I’ve done house repairs and plan to do more. I’ll probably eventually pay the mortgage down and invest a chunk of the rest. For now, it’s letting me crank up the retirement deductions on my paycheck.
Over 12 months, I need to find something better to do with it. Maybe index funds.
It is nice having money in the bank because regular expenses are not a hassle. Car repairs, buying electronics, home updates/repairs, etc. are not an issue. However a medical bill insurance refuses to cover could wipe it all out, so there isn’t a ton of security that comes with it. However I think I could weather most financial stresses with my cushion.
Threads like this always bring out mostly the side that thinks it’s made the better, less popular decision. In this case it’s a genuinely good thing to have more savings than the average person, but the smaller side showing up in droves to talk about their virtue is basically the same thing that happens in threads about cell phones, manual transmissions, and television.
More than 12 but that is mostly because its August. Ask me again next June 1 and it will be more like 6-10. I do a lot of odd but high-paying jobs during June and July in the history field. Enough that with investments and other things I could basically rest the rest of the year. I don’t – but in theory I could. But when you divide that amount by 12 and realize the next “rain day” may not be that wet ------- its not as impressive as it sounds.
I wonder what the OP meant. Was he trying to differentiate between:
Money that’s tied up in legally restricted accounts like 401k & IRA that can’t be withdrawn until an age older than you are, versus money you could legally withdraw now without penalty.
OR
Money that you intend to preserve for retirement versus money you intend to spend sometime before retirement, but just not yet. e.g. the folks saving for a car or house down payment or kids’ college.
OR
Money that’s not at risk and could be withdrawn with no concern for loss of principle like savings or money markets where you’re “assured” to get your full value out versus money in things like stocks or bonds that you can quickly sell to release cash, but perhaps with a loss of principle if your timing / luck is bad.
OR
Money that’s tied up in a long term investment like a CD or illiquid bond that you can’t redeem quickly for full current value versus investments you can promptly redeem for full current value like stocks, liquid bonds, mutual funds, savings, etc.
OR
Completely liquid cash or cash equivalents (checking account, savings account, stashed greeenbacks) versus anything else.
How does “Not your 401k or retirement accounts but in cash in the bank, under your mattress, buried in mason jars in the back yard.” not sound like #5 to you? Granted, it could use a comma after cash, but it’s pretty clear what’s meant.
I agree that this part “… cash in the bank, under your mattress, buried in mason jars in the back yard” sounds a lot like split #5.
But this part “not 401k or retirement accounts but …” sounds mostly like split #1.
But he completely excluded the middle ground of all assets that aren’t cash & aren’t tax-advantaged retirement savings. Such as non-qualified holdings of CDs, stocks, bonds, mutual funds, rare coins, real estate, art. Plus whole life insurance, defined benefit retirement plans, annuities, trusts, etc. I don’t know whether he intended to include or exclude them since they’re not in either half of his dichotomy. I suspect you don’t either.
I sorta suspect the OP was coming at this from a pretty working-class POV and his audience doesn’t have any of these things or maybe even know what they are. But I didn’t want to accuse; just ask for clarification and see what came back. Oh well; my cover is blown.
We’ll have to wait and see what he says he’s asking about.
I wasn’t purposefully trying to be obtuse about the different classes of investments one might have, but trying to be rather simplistic. If you want to include your less liquid types of investments, that aren’t restricted until you retire, then please do so, but be careful to apply the appropriate liquidity discounts.
We don’t have much cash in our bank accounts because we have money borrowed on a line of credit for my wife’s business. It makes more sense to pay down the line of credit when we have extra money and then draw on it if we need to buy something.
