So how much is "too much" to have in the bank?

Javery

Javery

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Is it a certain percentage of your yearly income? Is it enough to pay your bills for a certain period of time? I know you can really never have enough but at what point should you feel comfortable spending some hard earned money on some big ticket items? Or maybe moving your savings into something that will "work" for you? Just curious.
 
Well I think a good rule of thumb is to have 6 months of expenses easily at hand in an account that you're not touching for random purchases etc.

I'm in my first year out of grad school so I'm finally trying to build up some savings.

My strategy so far has been to keep my checking around $10K. When I get paid and it's above that I transfer some over to savings--have $5K over there now after paying down some debt etc last fall. So should grow pretty steadily from here on. Though downside of academic job is not always having full salary for the 3 summer months (have 2 months covered this summer)--so I have to have a rainy day fund for that as well.

Retirement account takes care of itself as I get 5% of my salary put in a 401K like plan, with employer putting 9.24% of my salary.

I'll eventually start dumping more into an IRA etc. a couple years once the savings account is built way up (down payment for a house etc.).
 
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I dont know ask the idiot " Fire_Thief " looks like he always has the funds to pay for random/stupid/pointless shit all the time.

BEWARE :
He is a fucking idiot
 
It's really up to the individual and applies on a case by case basis. There is no real right answer.

I'm in the same boat as you Javy. I see x dollars in my liquid accounts and I get to the point where I ask myself, "when can I spend this and still feel comfortable with the amount left over?" I'm easily able to provide for myself, and have no immediate wants. The amount currently is just some number. It's all just a mental numbers game when you get to that point.
 
Enough to cover 3-6 months of monthly expenses.. depending on how skeptical you are about your job security, financial emergencies, etc.
 
[quote name='dmaul1114']Well I think a good rule of thumb is to have 6 months of expenses easily at hand in an account that you're not touching for random purchases etc.
[/QUOTE]

i was just going to post this. clark howard says 6 months income is what youd have ideally at all times. after that, time to invest.
 
Like dmaul was saying, I think it would be based more on expenses than income. 6 months worth would be a minimum I'd think, but the more you have the better, obviously (though like RAM said, after a certain point you should be investing). Right now I'm just planning on getting up over $10k so I can put that money in a higher interest account. ~$12-$13k could pay my (and my gf's) necessary expenses (rent, bills, food, gas) for 6 months.
 
[quote name='mtxbass1']"when can I spend this and still feel comfortable with the amount left over?" [/QUOTE]

This sums it up exactly. 6 months of salary is a lot of money to have saved up, IMO. I have no debt other than my mortgage but I don't have 6 months of salary saved. I do have 6 months of living expenses saved though. Just for the hell of it I paid off my Rav4 that I bought last year - I bought it at 4 years with 5.99% and didn't feel like spending the extra money in interest so I just wrote them a check for the balance.

I am also considering an addition to my house which is what prompted this question. We refinanced last year and it knocked $900 off of our monthly payments - I feel like I could add that much back and still be able to pay the bills (because we were doing so prior to the refinancing) which would allow me to add on to my house and make it into something kick-ass. We don't need the extra space but it would be nice since our house is quite small. I'm just debating how smart of a move this would be financially (moving is out of the question since we love the town we are in and in order to upgrade our house we would be looking at about double what it would cost to add on to our existing house). I guess it's just a matter of personal comfort as far as the savings goes...
 
[quote name='javeryh']This sums it up exactly. 6 months of salary is a lot of money to have saved up, IMO. I have no debt other than my mortgage but I don't have 6 months of salary saved. I do have 6 months of living expenses saved though. Just for the hell of it I paid off my Rav4 that I bought last year - I bought it at 4 years with 5.99% and didn't feel like spending the extra money in interest so I just wrote them a check for the balance.

I am also considering an addition to my house which is what prompted this question. We refinanced last year and it knocked $900 off of our monthly payments - I feel like I could add that much back and still be able to pay the bills (because we were doing so prior to the refinancing) which would allow me to add on to my house and make it into something kick-ass. We don't need the extra space but it would be nice since our house is quite small. I'm just debating how smart of a move this would be financially (moving is out of the question since we love the town we are in and in order to upgrade our house we would be looking at about double what it would cost to add on to our existing house). I guess it's just a matter of personal comfort as far as the savings goes...[/QUOTE]

Be careful not to improve your house out of family for your neighborhood. What I mean by that is that it would have a going price much higher than the rest of the places around you. Of course, this is only an issue if you ever plan to sell, but you never know if you'll be forced to move.
 
If I didn't really need more space I wouldn't build any additions, then I'd just want to buy more unnecessary shit to stick in that space :p. I'd just save/invest the extra money. If you've gotten over 6 months expenses saved then you can just put half of what you would normally save in an IRA or some other investment and save the remaining half like normal, or something like that. And then just not feel bad spending some portion of your savings as long as you have your 6 months at least in there.
 
[quote name='Anexanhume']Be careful not to improve your house out of family for your neighborhood. What I mean by that is that it would have a going price much higher than the rest of the places around you. Of course, this is only an issue if you ever plan to sell, but you never know if you'll be forced to move.[/QUOTE]

I've thought about this... my house is currently in the 30% of houses on my block that does NOT have some sort of addition so I think I'd be OK in that department. My neighborhood is not really typical because it is very old (my house is over 100 years) in that the house on the corner probably would go for 3x what my house would go for. Every house on the block is different - my next door neighbor's house would probably go for $100k less than mine. It's weird.

Also, if we do get the addition, we are basically conceding that we will be in this house until the kids go to college at least.

[quote name='SpazX']If I didn't really need more space I wouldn't build any additions, then I'd just want to buy more unnecessary shit to stick in that space :p. I'd just save/invest the extra money. If you've gotten over 6 months expenses saved then you can just put half of what you would normally save in an IRA or some other investment and save the remaining half like normal, or something like that. And then just not feel bad spending some portion of your savings as long as you have your 6 months at least in there.[/QUOTE]

We don't need the space but we kind of do - we have one bathroom which is fine now but when the kids get older it is going to be a problem. We also don't have any extra rooms and my TV room is only 7.5 feet wide and isn't suitable for having company over. An addition would do us a lot of good... I don't know. I'm just afraid to pull the trigger on something like that yet I have friends that have no problem spending more than they make and being in debt up to their eyeballs.
 
sucks noone pays good interest anymore..

my account only pulls in like 42.50 per month (on a 50k savings)

Thinking about taking 20k of that and buying a house up the road from the place they are staying (they want 30k but its been on the market for over a year and maybe they take 20)

earning 1% just sucks anymore
 
[quote name='javeryh']We don't need the space but we kind of do - we have one bathroom which is fine now but when the kids get older it is going to be a problem. We also don't have any extra rooms and my TV room is only 7.5 feet wide and isn't suitable for having company over. An addition would do us a lot of good... I don't know. I'm just afraid to pull the trigger on something like that yet I have friends that have no problem spending more than they make and being in debt up to their eyeballs.[/QUOTE]

Well if you think you might need it in X years for the kids then I'd just give it X-1 years or so. If you think you can swing it now you'll only be in a better position further down the line. You could have more money saved and pay that much less in interest for it.

Of course you shouldn't think like your friends. Even if you could handle more debt you're only that much better off for not doing it. The only debt I have now are my student loans and I'm really looking forward to killing that off in 5 or so years. I'll feel much better without it. I'll have more debt eventually I'm sure (for a house), but I'm sure as hell not going to aim for it. Being in debt is not one of my life goals or something.
 
[quote name='dmaul1114']Retirement account takes care of itself as I get 5% of my salary put in a 401K like plan, with employer putting 9.24% of my salary.

I'll eventually start dumping more into an IRA etc. a couple years once the savings account is built way up (down payment for a house etc.).[/QUOTE]



just had to say... that's a very nice employer match.


I do just have to be a bit nosy tho... it their match a set % or is it based off what you put in?



My first job the company matched half of what we put in up to 5% meaning the company would match a maximum of 2.5%.

My current employer matches up to 6% but I actually put in 12%. Which actually seems a lot like my first job but I just put in the extra because I wanted to, I doubled up back when the markets crashed.

Definitely jump at the IRA's as soon as ya can ... can never start those too early.
 
At least a year worth of living expenses, plus more for future education, children, uncovered health problems, etc. Anyone who is spendthrift and lives from paycheck to paycheck deserves to become a homeless bum once they get laid off (and can't find a replacement job) instead of leeching off friends and family.
 
[quote name='rumblebear']At least a year worth of living expenses, plus more for future education, children, uncovered health problems, etc. Anyone who is spendthrift and lives from paycheck to paycheck deserves to become a homeless bum once they get laid off (and can't find a replacement job) instead of leeching off friends and family.[/QUOTE]

Hey, if you put it that way, what about people who haven't been able to find a job after a year? There's plenty of people who are qualified but can't get work in the current economy, so it's unfair to say they should be a homeless bum.

I've always been told 6 months of living expenses for savings. I'm aiming for 3 months of salary myself, because I still have student loans, so the more I save now, the more I pay in the long run. Since graduating, my debt's been steady going down, so I'm personally not too worried about my savings.

But honestly, I came in here to post $100,000.01, a cent over FDIC insurance =P
 
If I could have enough to pay my bills, buy me some toys and have little left over to put in the bank I would be perfectly content.
 
[quote name='Anexanhume']100,001.[/QUOTE]

[quote name='detectiveconan16']FDIC limit +1 that's also my answer.

But I try to save a good deal of what's leftover for another day... or year... or decade...[/QUOTE]

The FDIC limit cause of the bank bailout is $250,000 now instead of $100,000.

I say build the addition cause it will help improve the neighborhood and you can probably get some tax breaks in the process.
 
[quote name='cdeener']The FDIC limit cause of the bank bailout is $250,000 now instead of $100,000.

I say build the addition cause it will help improve the neighborhood and you can probably get some tax breaks in the process.[/QUOTE]

FYI, That limit expires on Dec 31, 2013.
 
[quote name='Afflicted']just had to say... that's a very nice employer match.


I do just have to be a bit nosy tho... it their match a set % or is it based off what you put in?
[/QUOTE]

It's set. And the 5% I put in is set--I can't go up or down from that. It's the higher education (I'm a professor) equivalent of a 401K--forget the exact name of the fund class.

It's set, but it can be variable. From older colleagues it used to be higher a few year back (10.xx) but got dropped as state budget problems arose. Still a nice match so I can't complain.
 
[quote name='rumblebear']At least a year worth of living expenses, plus more for future education, children, uncovered health problems, etc. Anyone who is spendthrift and lives from paycheck to paycheck deserves to become a homeless bum once they get laid off (and can't find a replacement job) instead of leeching off friends and family.[/QUOTE]

Not really a fair assumption considering not everyone has shared the same experience as you. Coming from a college grad, it was a struggle to find a job in my field at all in the area and the jobs that are being offered pay squat for someone who lives on their own and is paying back student loans. :whistle2:#
 
Too many years of RPGs have made me a stat whore, I save for no practical purpose other than to make the number bigger, numbers can never be too big
 
[quote name='dmaul1114']It's set. And the 5% I put in is set--I can't go up or down from that. It's the higher education (I'm a professor) equivalent of a 401K--forget the exact name of the fund class.

It's set, but it can be variable. From older colleagues it used to be higher a few year back (10.xx) but got dropped as state budget problems arose. Still a nice match so I can't complain.[/QUOTE]



very nice imo... I've seen too many people that don't put anything in 401K's so I kinda like the idea of having things fixed.
 
[quote name='Afflicted']
Definitely jump at the IRA's as soon as ya can ... can never start those too early.[/QUOTE]

Definitely will. Already have a Roth IRA I put $1K in a few years ago--just haven't had the funds to build it up.

Need to roll it into something at TIAA/Cref--both to have all my accounts in one place, and because the fund it's in has sucked for the 6 years or so I've had it.
 
[quote name='Afflicted']very nice imo... I've seen too many people that don't put anything in 401K's so I kinda like the idea of having things fixed.[/QUOTE]

Yeah it's a good system. I'd like to be able to up my contribution, but there's other optional retirement accounts I can opt into down the road when I can afford it if I don't want to stick with this and IRAs.
 
I maxed out my Roth IRA contributions a few years ago... I think... I was putting the max every year in for both me and my wife but I think we hit some sort of limit a few years back. I also have been maxing out my 401k for about 10 years now and I own a few stocks (which are underwater at the moment). I don't really count retirement funds and stocks as money in the bank though...
 
[quote name='javeryh']I maxed out my Roth IRA contributions a few years ago... I think... I was putting the max every year in for both me and my wife but I think we hit some sort of limit a few years back. I also have been maxing out my 401k for about 10 years now and I own a few stocks (which are underwater at the moment). I don't really count retirement funds and stocks as money in the bank though...[/QUOTE]

I imagine at your income you're excluded from contributing to either traditional or Roth IRA's. Wonderful system we have in place, isn't it?
 
What would Dave Ramsey say?

1. $1000 in the bank.
2. All debts except mortgage paid.
3. 6 months of expenses saved.
4. 15% of your gross pay going to 401K.
5. College tuition paid for any kids.
6. Mortgage paid off.
7. Give money away.

Since you have spare money laying around, you need consider if you have contingencies such as disability and death covered for yourself and your spouse.

If your wife dies, wouldn't it be nice if you never had to work again?

Once you have a paid off mortgage and all of your kids can go to any college up to and including medical school, work fewer hours and do charity work.
 
[quote name='mtxbass1']I imagine at your income you're excluded from contributing to either traditional or Roth IRA's. Wonderful system we have in place, isn't it?[/QUOTE]

yeah - it doesn't exactly make sense to me. Also, I just looked it up and the threshold isn't that high if you are married.

[quote name='fatherofcaitlyn']Since you have spare money laying around, you need consider if you have contingencies such as disability and death covered for yourself and your spouse.

If your wife dies, wouldn't it be nice if you never had to work again?[/QUOTE]

You mean like a will and life insurance? We've got that stuff in place. It is depressing to think about.
 
[quote name='javeryh']You mean like a will and life insurance? We've got that stuff in place. It is depressing to think about.[/QUOTE]

A disability is more likely to happen than death. If you got injured somehow akin to Sammy Jankis in Memento, you're going to live a long life, but you'll never work again. Or let's say you lose an arm or a leg in some sort of an accident. Sure, you can still lawyer around, but why bother if you have a few million or so payday headed your way?

So, you should prepare for that possibility.

As far as being depressed at the thought of life insurance, the reality of a dead spouse and no money is far more depressing than its thought.

That and stop being happily married.
 
[quote name='eldergamer']I'm lucky if I have anything over $50 left between paychecks.[/QUOTE]

Before saving anything? What are your monthly costs?

I don't have kids, so I guess that's the biggest thing saving me money :p.

My gf and I together make about $3400 a month now after taxes, but we save at least $750 a month and still have over $800 after that including rent, ultilities, car/renter's insurance, parking, groceries, gas, and student loans.

Starting in the fall we'll be making about $400-450 less a month though (and rent goes up $30 in about a month), so we're going to have a lot less extra money. Hoping to keep up saving $750 a month, but it's going to take our spending money down a lot. My gf's stipend goes up almost $1000 for June and July though, so having that extra $2k will be awesome. Gotta save at least half of it, then maybe get a new couch and some bikes or something.
 
[quote name='eldergamer']I'm lucky if I have anything over $50 left between paychecks.[/QUOTE]

I've been Captain of that ship for a while. A few more months and I might be sailing under a new flag.
 
[quote name='detectiveconan16']FDIC limit +1 that's also my answer.

[/QUOTE]

Which I believe they raised from $100K to $250K.

Edit: Didn't see post #23. What I'm uncertain about is does that only cover $250K in one single account, or multiple accounts adding up to that amount?
 
[quote name='shieryda']Which I believe they raised from $100K to $250K.

Edit: Didn't see post #23. What I'm uncertain about is does that only cover $250K in one single account, or multiple accounts adding up to that amount?[/QUOTE]

Single accounts. You can however have multiple beneficiaries on that account, which allows 250k (until 2013) per benefactor.
 
[quote name='SpazX']Before saving anything? What are your monthly costs?

I don't have kids, so I guess that's the biggest thing saving me money :p.


And therein lies my problem. It's just me working. I bring in around $50k a year but nearly half of each paycheck goes to mortgage.

Then $100 or so a week for groceries. $100 or so every other week for target. Gas bill, water bill, phone/cable/internet bill etc. Add in one trip to McDonalds a week and then we're down to our last $50-$100 before the next paycheck.

And if something comes up (like numerous eye doctor appts like last month) and we're headed straight to overdraft country.
 
[quote name='eldergamer'][quote name='SpazX']Before saving anything? What are your monthly costs?

I don't have kids, so I guess that's the biggest thing saving me money :p.


And therein lies my problem. It's just me working. I bring in around $50k a year but nearly half of each paycheck goes to mortgage.

Then $100 or so a week for groceries. $100 or so every other week for target. Gas bill, water bill, phone/cable/internet bill etc. Add in one trip to McDonalds a week and then we're down to our last $50-$100 before the next paycheck.

And if something comes up (like numerous eye doctor appts like last month) and we're headed straight to overdraft country.[/QUOTE]

Have you thought about a refi or moving to a different house? 50% of your check towards a mortgage is a lot...
 
[quote name='mtxbass1']Have you thought about a refi or moving to a different house? 50% of your check towards a mortgage is a lot...[/QUOTE]

Yea, you're not supposed to spend more than 40% of your paycheck on housing, as a general rule of thumb.
 
[quote name='slidecage']sucks noone pays good interest anymore..

my account only pulls in like 42.50 per month (on a 50k savings)

Thinking about taking 20k of that and buying a house up the road from the place they are staying (they want 30k but its been on the market for over a year and maybe they take 20)

earning 1% just sucks anymore[/QUOTE]

At least the mystery is solved where all of this came from:

http://www.cheapassgamer.com/forums/showthread.php?t=261911

If you buy that house SC, make sure you keep your sidewalks clear.
 
My husband and I have over a year's worth of salary saved in the bank, which is much more than our actual annual expenses. But we are too afraid to put it in the stock market since we plan to get a house or condo in the next few years and make a nice big downpayment with a lot of that money. Even after we get a mortgage we still plan on having a sizeable amount in the bank for emergencies and retirement purposes (we do contribute to a 401(k) and a Roth IRA as well).
 
[quote name='MrBoss']You never have to much.
FDIC insured up to $250k.
Keep saving past this or look to invest it.[/QUOTE]

1. Just to be sure everyone's clear, as mtxbass1 pointed out earlier, the $250K limit on FDIC insurance expires in 2013. So unless there's another law change etc., it will be back at $100K in January 2014.

2. I'd look to invest well before the FDIC limit. Have 6 months to a year of living expenses saved up and in a savings account so you have a readily accessible emergency fund. Build up more if you're saving up for a down payment on a house etc.

But after you go that, get to maxing out your 401K, IRAs and other retirement accounts, kid's college funds etc.. Get that money working for you and building up compound interest as you work towards retirement. Not languishing in a low interest savings account.
 
[quote name='Dead of Knight']My husband and I have over a year's worth of salary saved in the bank, which is much more than our actual annual expenses. But we are too afraid to put it in the stock market since we plan to get a house or condo in the next few years and make a nice big downpayment with a lot of that money. Even after we get a mortgage we still plan on having a sizeable amount in the bank for emergencies and retirement purposes (we do contribute to a 401(k) and a Roth IRA as well).[/QUOTE]

If the money is going to be spent on something required such as housing in the near future, there is no real point in investing it beyond savings or a CD.
 
[quote name='fatherofcaitlyn']If the money is going to be spent on something required such as housing in the near future, there is no real point in investing it beyond savings or a CD.[/QUOTE]

Yep, that's the best bet for that.

Especially if they're already maxing out the 401k and Roth IRA.

Otherwise, for more long term investing there are always things like money market funds if you're too risk adverse to get into stock heavy funds. Or pretty conservative funds that are 80-85% money market, bonds etc. and 15-20% stocks.

Best bet is to get a mutual fund that starts aggressive and adjusts to be more conservative as you get closer to your stated retirement year goal. Especially if you have a lot of savings already. Playing it conservative your whole life risks not being able to keep up with inflation and having a very tight budget in retirement.
 
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