If you’re employed, receiving a pension, or living off investments, you might find yourself with more cash at the end of the month than normal. In my case, a substantial amount normally used for travel / entertainment is accumulating. Nor am I driving as much, meaning fuel savings and less auto maintenance. And ... there was the $1200 government check.
- Food prices have gone up, but haven’t consumed all the cash buildup.
- I’m making monthly contributions to the Pres. candidate of choice.
- Contracted for a new deck. So far the builder hasn’t been able to obtain materials. Meanwhile, lumber prices have gone through the roof and I’m committed to pay material costs at the time work is done.
- Just had some landscaping done in the form of some magnificent boulders. Even rocks are hard to obtain this summer, so I feel lucky.
- Toyed with paying off a small 3.3% mortgage (or paying it down), but can’t bring myself to sacrifice all that liquidity. Normally my investment returns well exceed the mortgage rate. But that option is still on the table if these bazooka markets keep climbing.
- Reinvested some of the cash last March / April at lower prices. Might reinvest more.
Comments
Stay safe, Derf
Saving the rest for traveling when things open up safely.
I just have several thousands in my bank. If you have bond funds why would you be in cash? Long term, my bond funds always do better than cash.
An emergency fund or 1-2 years of living expense is another idea I don't understand. I can always pay with the cash I have which I never did and if I need more I have several credit cards and if I need even more I can sell some shares from my mutual funds and the money will be available in 1-2 days. The only time you need real cash is for ransom or illegal drugs and I never experienced that
But, sometimes I go to cash as part of my goals. Since 2018 (retirement) 1) Make at least 6% average annually + be positive annually 2) never lose more than 3% from any last top. Example: at the end of 02/2020 I sold over 90% and the rest in the beginning of 03/2020. Bought again on 04/2020.
So, I did have several projects this year as I do annually. I used my credit cards most times. One contractor want cash, so I used Zelle to transfer money to his account.
I also have Fidelity 2% cash back. Any time I see $50-100 in my account I immediately added to my mutual funds.
The only time I regret that approach is when pulling an unusually large sum from the IRA (for example: perhaps a new vehicle purchase) when doing so while keeping all the various types of invested assets in their normal proportions becomes a pain.
I still have over 20% of my money in taxable so no problem for years to come.
I always purchase big items on credit. Furniture at 0% for years and vehicles at 0 to 1.6% is still a good choice. I actually found out I get a better price when the car dealer do the finance than paying cash. I prepare my own finance first but the dealer always was eager to beat it.
Loans at low % are attractive for someone like me. I can cover them immediately if I need to but never had to do it
Another myth: your investment distributions must cover your expenses and why higher paying stocks are better. Nope, buy the best risk/reward investments and then worry about higher distributions. These investors missed the FAANG+MSFT
When stock dive your bond funds (at least some) should be a ballast, that's the time you use bonds for expenses. When stocks are up, you use stocks. Problem solved.