What happens to your cash-emergency-fund as your net worth grows?

A gai shan life recently was talking about how as her net worth has been growing, she’s realized she doesn’t need to have as much money in cash and CDs.

We’ve gone exactly the other direction — we now have well over a year of savings in savings accounts. It used to be that I only kept enough to get us through the unpaid summer plus a little cushion, so 1-4 months of expenses at any point in time, and I always thought having 6 months of expenses in savings was insane.  Who could afford to do that?  Back when we were in graduate school and I was getting paid 3x/year I would lock up money in CDs partly in order to lock in higher interest rates (we had 4.75% at one point!  Those were different days!), and partly so the money would be there when we actually needed it.  I am less likely to spend if I can’t see the money in checking.  I would not have done that if I’d been being paid monthly or biweekly.  We would put in money for retirement and then there just wouldn’t be that much left, so it seemed like the obvious next place for cash would be more retirement or the mortgage.  Not cash savings or taxable stocks.

Now, for no real logical reason (maybe I just like round numbers), my target for savings is much higher.  There was sort of a loose logic– enough to replace a car + summer savings in case DH loses his job again + random money for other emergencies and slow reimbursements.  We probably wouldn’t keep it quite as high as it is if I hadn’t opened up a higher interest savings account online.   And it definitely wouldn’t be as high if Trump weren’t president, what with fascism and all.  But we’re maxing out our retirement, the mortgage is gone, and we’re saving in 529s at a reasonable clip, so why not pay the opportunity costs to get a bit more peace of mind?

Which is more logical for what to do with your cash as your net worth grows?  You could go either way– you could be like Revanche and realize you’ll be ok even if there’s a crash, or you could go like me and realize that you can afford to lose the gains you’re losing by not picking riskier investments.

What has happened to the amount you keep in cash vs. stocks as your income grows?

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My iphone 6 is dying

I got my first smartphone 3 years ago when we were on leave in Paradise.  Not wanting to spend a zillion dollars, we got a new iPhone 6 instead of an iPhone 7 or whatever the latest model was at the time.

When I was at a conference this summer, it started eating the battery quickly every time I unplugged it, pretty much after it updated to the latest IOS 11.4 something.

I don’t have many apps.  I don’t even use my iphone that much except for hangouts, surfing the internet, calling my senators, and google maps.  I don’t have a whole lot of apps installed.

I went through all the online things about how to figure out what’s going wrong and how to save power.  I turned lots of switches from green to not-green.  I noted that my analytics was constantly updating the required things like amdd, whereas DH’s updated them rarely.  I put myself on battery saver mode most of the time.  The problem seems worst when there’s trouble with internet or cell coverage, so it may be something there, but the last two hot and hard crashes were in my bedroom where service is not usually a problem.

The only remaining possible software problem, the internet suggested, was IOS 11.4.  The IOS 12 update should fix that problem.

I waited for the IOS 12 update.  It never came.

My phone battery life dropped to 94%.  Then 92% after a major crash in which it heated up and then blacked out.  Then it dropped to 78% after another major crash while on safari that didn’t involve overheating.  Now it says it needs to be serviced.  Right before a trip that requires 4 hrs of driving, of course.  (I will take my laptop and the garmin and the ipad, so I won’t be completely stuck.)

The nearest certified apple services are over an hour away (and sadly not in the same place as my roadtrip).

So, do I get a new phone and then get this one serviced and hand it down to DC1 after it has a new battery?  Or do I go phoneless for however long it takes to send it some place and get it back?  Or is there a different option I should pursue?  We can afford a new phone, but I really don’t need one, except that I need a phone, preferably one that runs google maps.  Plus the battery alone is ~$80 (the iphone 5 didn’t get a discount for the throttling thing they were doing a while back), and labor is probably more.  Update:  Actually it is an iPhone 6 and it is covered under the discount thing.  So I should just send it in or spend a weekend in the future at an apple store in the city, though I’m not sure I can wait that long.

what should I do?  What would you do?

What do you do when your local library is going to be closed for 7 months?

It’s not a great library, but it’s better than nothing!  The closest other library in the system is 30 min away in the next town, which we only go near when I have to drop off voter registration forms.  (That will drop off a lot once students settle in.)

DC1 will be ok because hir school library is already better than the local library for hir reading needs (they have multiple copies of popular YA books, unlike our local library which has long wait lists and series gaps that take a long time to replace when a kid loses a book).

What would you do?  Where do you and yours get reading material?

RBOMoney

  • The private school that DC1 went to for K-4 went out of business.  Luckily DC2 seems to be enjoying dual language in the public schools.  I switched my amazon smile account over to the Planned Parenthood in the nearest city.  I’m not sure what DH will be switching his over to (I suggested ACLU).
  • I got some summer money so now our emergency fund has been completely refilled.
  • DH has gotten into the idea of buying a new mattress and has been investing more time in it than I would, which for now means I’m not immediately rage buying one online.  Last week during a lunch break he went to a local mattress store and tried a bunch of mattresses (he likes tempurapedic memory foam) and wrote down how firm he thought they were.  Next he went online and tried to find firmness levels for those specific mattresses.  He’s hoping to be able to use that information should we decide to buy a bed in a box online.  [update:  it did not help because mattresses sold in stores exist nowhere else, apparently]
  • I was talking to a finance professor at a conference this summer and he told me that upper-middle-class people such as myself should be invested in 100% stocks until age 45 or so because the variation between stocks and jobloss isn’t close enough to make it worthwhile to invest in bonds.  I’m not sure how I feel about that, but something worth thinking about.  I should probably purge my retirement accounts of bonds and shift any bond over to taxable, if I’m going to have bonds.  But I will probably put all of this off.
  • In the end we decided to take the king bed plunge and went with Loom and Leaf.  Sadly they didn’t have a platform bed option (and the place we got our last platform bed no longer sells them!) So we ended up getting a Best Price Mattress Model E from Amazon.  There is some concern that Amazon may send the wrong item, but Walmart was out of king-size and Target doesn’t carry this brand.  We went with Overstock.com for new sheets and mattress pads.  We haven’t actually *gotten* the mattress yet because we need a two week window in which we can guarantee one of us will be home to let them in to take away our old mattress and box springs.  But we did order the bed and sheets…
  • DH’s employer bought everyone new laptops, and the result is equivalent to his four-year old desktop for the same price (except for a better monitor and graphics card).  The price was the same.  So the price of portability is about 4 years of technological progress.

What do you have your amazon smile account linked to?

Ask the grumpies: Why don’t you speculate?

Jjiraffe asks:

What do you think about cyber currency/bitcoin? Are you investing? Why or why not?

Short answer:  I think it’s a speculative bubble and I’m not into either gambling or effort.  I’m not into gambling because I’m risk averse.  I’m not into effort in terms of stock picking of any kind because I’d rather keep my time and match the market (plus on average people who try to pick individual stocks on average do worse than people who just match the market).  So there’s a lot of things I could do that I don’t– I don’t try to time the market, I don’t try to pick the next hot thing, I don’t try to tax harvest, I don’t set up my portfolio in order to sell losers for tax purposes.  I’m only just now starting to think about which kinds of investments should go in tax-advantaged vs. taxable funds.  I don’t get any joy from gambling and I don’t think I’d get enough additional happiness from being a big winner (given the probability of winning) to justify the additional sadness from losing money which I would inevitably do because I tend to buy and hold until there’s nothing left to hold just because dealing with taxes is such a pain.  Set and forget is ideal for me.

So… I think cyber currency is not a long-term investment, it’s more gambling than investing.  I’m not a gambler, so I’m not “investing”.  What other people do with their money is their business.  Some people will win big and lots of people will lose their shirts.  I don’t need to be in either category.

There’s a lot more stuff across the internets on bitcoin and why it’s not a great idea to invest.  (And lots of stuff from people caught up in the hype.)  Here’s Mr. Money Mustache on the topic.  He has an excellent economic and cyber analysis of it– it really isn’t a good currency.  He also has some good links on his post if you want to read more about the details.

The perils of single stock investing in action: Or, #1 complains about PG&E

Back in the 1980s, from what I understand, Ronald Regan made it beneficial for investors to set up gift trusts for their children.  Apparently my father took advantage of this tax loophole and bought some PG&E stock.

http://investor.pgecorp.com/shareholders/dividend-information/default.aspx

Sometime in 2001, right before or shortly after PG&E had declared bankruptcy, he transferred that PG&E stock to me and I found out I would have to pay taxes on the dividends it had put out that year despite not having had the benefits of those dividends.  For Christmas that year I demanded at the very least the money to pay the taxes, because we didn’t have the money to pay them (note:  today that probably wouldn’t be an issue because we would have been in the 0% tax bracket for dividends, but taxes were different back then), and he handed over one of the final dividend checks.  PG&E would not spit out another dividend until 2005, at which point I was no longer on a graduate student salary.

Maybe I should have sold the stock the minute it was transferred, but it had lost so much value and I didn’t really know how to go about selling, that other than dealing with that year’s taxes, I pretty much just pretended that I’d never gotten the stock.

When it started throwing dividends again, it was a lovely surprise.  I have two types of stock:  regular stock and preferred stock.  I set up the preferred stock to drip into the regular stock and then the regular stock would deposit a few hundred dollars into my savings account every quarter.  By the end it had gotten up to around $800/quarter which was a nice treat.  I used to do mental calculations about how much we’d need to have invested in order for the quarterly dividends to pay all of our monthly expenses.

And then PG&E discovered it might be found liable for California wildfire damages and all dividends stopped.  Thankfully we don’t need the quarterly returns, and if I’m not going to be paying taxes to an administration, this is a good one to not be paying taxes to.  But imagine if I were fixed income and this were a large part of my portfolio?  Diversification of income streams is so important!

I’m not getting rid of this stock… all the online things say it’s a bargain right now for people who are willing to be patient.  And it never really felt like my money to begin with.  But we’re definitely keeping all our own invested money in broad-based low-cost index funds.

Do you own any single stocks, or are you sticking to index funds like a smart person?

Fear of running out of money

This July a bunch of bloggers gave retrospectives of their time after achieving financial independence and leaving The Man.  I think I missed a couple, but here are three of them: mrtakoescapes , our next life , and retire by 40 .

And in these uncertain times, I just can’t.

****

Let me back up a bit.  We have had enough money for a while that we could retire to DH’s home town where his parents still live, buy a decent house for under 100K (or a nice one for under 200K) and live off our savings.  We would have nothing to buy and nothing to do.  There wouldn’t be money for frills or travel, but we’d see his family a lot.  The library isn’t very good.  The hospitals are neither near nor great.  (DH’s mom is a healthcare professional and is adamant about going to the city several hours away for anything important.)  This is really a non-starter for either of us, especially with kids.

Right now, and only recently, I think we have enough money to retire in place where we are right now using the 4% rule.  We’d have to cut out city trips, eating out, donations etc. and we’d have to drive to DH’s parents’ instead of fly.  But we could do it.  Most of our money is locked into retirement savings, but some of that is Roth principal and some of that is 457, so I think we could access it.  I would get bored or extremely upset here (because I would throw myself into political action which would be frustrating and unpleasant) with nothing to do.

We do not have enough money to move to paradise and live indefinitely.  There’s so much free stuff to do in paradise.  We have so many friends living in paradise.  Politics are so much less brutal in paradise.  (There’s no job for me in paradise that allows me to keep my professional identity or we’d move in a heartbeat.)  We can’t afford to buy a house in Paradise in a decent school district even using our current house’s proceeds as a downpayment.  If we’d bought a house 10 years ago, sure, but then we’d have gotten a million dollars in appreciation and would be even richer.

So that’s where we are, working someplace that’s not great to live and could be worse, wishing we were somewhere else, but not enough to actually move there because we’re not willing to make those trade-offs.

****

Lately I’ve been thinking– what would be the number that would allow us to live in Paradise without income?

And then I worry about the future.  What if health care costs continue to skyrocket and Paradise doesn’t have enough wherewithal to keep the ACA going state-wide?  What if property taxes or rental costs go way up?  What if the US becomes dangerously fascist and starts targeting people like me and we need to flee?  What if we start regressing in the next generation so that our kids don’t have the ability to move up without a trust fund?  What if we regress to being even less like the American Dream and more like those regency England books that I read where it is truly dangerous not to come from a family with money?

And I start understanding the impulse to leave a monetary legacy for my kids and their kids.  So they have more second chances.  Screw the millionaire next door.  We’re living in a different world now.  Maybe.  And there’s plenty of families that don’t just piss away their parents’ legacy on luxuries.

And if I can continue earning an upper-middle-class salary and saving it for doing meaningful work, why would I stop?  Even if I’d prefer to spend my days hiking and trying out new farmers markets and chatting with other highly educated liberals in a state that believes in bringing the bottom up.

Maybe there’s still a number I could retire at, but it would have to be one in which my salary is trivial compared to my investment income.  Not just one where I count on being able to not quite spend down before I die.  And I don’t see us ever getting there.  The future is too uncertain.

****

This fear is new and entirely caused by our political landscape starting to resemble dictatorships with wide inequality.  It is more important than ever to be a “have” because it is getting harder than ever to move out of “have not”.  The American Dream may have already been mostly a myth, but I still benefitted from it.  It will be harder for those in my children’s generation.

Have your beliefs about retirement and leaving a legacy changed?  At what point could you say goodbye to The Man?