Leverage your 60 Day Age of Money with Investing

Hey Everyone - 

First time post. We have been using YNAB for ~1 year or so, and we finally have a solid 60 day age of money.  Most of this a large static amount in a savings account. 

I am looking at ideas on how to better leverage this asset, well better then the $0.49 of interest a month. My thought is to invest half in a low risk investment and keep the account as a budget.

I think the key is the liquidity of the investment. Life will happen, and the half that remains in the savings account should cover 85% of emergencies, but quick access (<7 days) to the invested funds will cover any catastrophic emergencies. 

Thoughts on this? Well thought out, or full of giant red flags?  

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  • The market goes down as well as up, and the likelihood of a catastrophic income emergency tends to go up at the same time that the stock market goes down. 

    But  if you’re only getting $.49 a month on your savings account, get a better savings account. It’s still won’t pay a lot, but that’s not the point. 

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  • And then the following post, which is that you should not be using age of money to make any financial decisions. It’s not useful for that (or for much of anything, really.)

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  • Having an AOM of 60 days does not mean that the money in your accounts will last you 60 days. AOM is a backward looking metric that only looks at past spending, not at your current financial health. AOM can go up or down when you are in a bad financial position. It can go up or down when you are in a good financial position.

    For most people, investments should be an off budget tracking account (I'm saying most, not all). If you think you are going to need any of the funds in less than 5 years, it generally shouldn't be in an investment account. Savings account yes. Possibly a CD with a 1-3 month interest penalty (except rates are pretty crap right now, so it's just simpler to leave in a savings account). What if the market tanks causing your company to lay you off? You'd likely need access to your invested funds right as the market was at a low point.

    Nothing wrong with investing - that's why I have a category that I fund every month for investments. Because my investment account is a tracking account, it is an expense in my budget. I have an auto transfer set up from my checking account on the last day of the month. Because it is a tracking account, I can handle market drops with aplomb - how will you feel to see your investment account drop $10,000 in one day?

    If you, unlike me, are willing to jump through some hoops (no way I'm doing 12 debit card transactions a month), you can get better interest rates on checking and savings that at your average bank: https://www.doctorofcredit.com/high-interest-savings-to-get/

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  • Thanks everyone. Not sure which way I'll go.

    I understand the market goes up and down. I have other investments.

    I also get that 60 days of money is backwards looking. I budget 2.5 months ahead every month.

    I can invest safely some of this, and it can weather the storm. The market may go down, but it doesn't go to zero in under 8 hours. I could put it in Acorn on a moderate risk category, and not need the hassle of another account. I can sell all shares pretty quickly, and get my cash in ~5 days for emergencies. I have an account I play with, and in the same month I made $0.49,  I could have safely made ~$90. This is with the current downturn. 

    If something does happen, and the market falls through the floor, we divert our financial goals back to building our reserves.

    There has got to be a better easier way to making your money work for you, even on a small scale. If you are budgeting months ahead, there is cash that can work for you. 

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  • It's very simple. You decide how much cash you want on hand and then invest the rest. But your AOM has nothing to do with it.

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  • Salesman. Gil said:
    I understand the market goes up and down. I have other investments.

     Are these in a taxable account or tax-advantaged account? If taxable, how big is this account compared to the current size of your budget? Is it invested seriously for the long-haul or are you gambling on sectors or specific companies? What does your tax-advantaged portfolio look like?

    Salesman. Gil said:
    This is with the current downturn.

     What downturn? The market was at an all time high earlier in the week.

    If you have a simple asset allocation that you can implement across all investment accounts, I can tell you the best way to handle investing your budget money in a tax efficient manner. But if you're going to put excess money into speculation, then it won't work.

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  • Open a Roth at fidelity or schwab. Or check into a money market account. With a Roth you can withdraw without penalty as long as it is within a certain time period. Just keep adding to it. Those two investment companies do not charge fees to buy and sell in an IRA. You can choose a single balanced fund that is safe. Mine is aggressive. It has had swings but Hasnt lost enough to freak out about. This is also a strategy for HSAs but I would be more conservative.  You need to shop around for a money market. My CU offers one that has higher than a savings account which isn’t saying much. But it is something. 

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