What if I have *too much* money?!

Sorry, this really isn't meant to be a humble brag.

When I started with YNAB4 years ago it was a revelation. I've always felt uncertain about what I could actually spend versus what I knew I needed to save for, and what I didn't know I needed to save for but knew could get sprung on me any time, and YNAB gave me the control I needed. I definitely turned my finances around.

I've used it mostly their way, a little bit my own way (e.g. putting some side-gig cash in categories named for the side-gig, and just never spending it, rather than giving it a 'proper' job/category) but years and years later I'm now in the position of shifting over to nYNAB, starting over, and wondering what the hell to do with all the cash I've got saved up.

I know I need to make some investments with it so I'm researching that. But even so, for now I could easily just go through the next six months to a year, if not more, and budget for absolutely every category. 

Or I could just stick with budgeting for next month at the start of this month, and keep all the rest of the cash in a 'to be invested' category or something, and try to live off income like I'm 'supposed to'?

Alternatively, I could just whack an entire predicted years-worth of funding into every category right now, and then never fund them for the next year. But that seems dangerous. 

Advice and suggestions welcome!

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  • It sounds like you need to be more intentional with your money.  As you said, you are not giving every dollar a job.

    Both my wife and I are in sales, so we have very variable, but also great income. We have a designated amount set aside as an emergency fund. We also have a fixed amount we call "buffer", for the rare case that both of us have a bad sales months.

    Beyond that, the cash gets used for something. Right now, it's going to both extra payments on our mortgage, and investing in post-tax items.  

    Having too much cash is an issue. You are losing opportunity to either pay less interest on debt, or make money on investments. 

    Long story short... Decide how much cash you need to keep around, then be intentional with every dollar beyond that. 

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    • Navy Blue Foal Yeah, I do need to be more intentional... I just don't know what to do with it! It's actually a serious issue, I had tens of thousands in cash sitting in crappy borderline 0% 'savings' accounts that I'm just now sorting into some *marginally* better interest rate accounts. But I'm freelance in my mid-40s, and really most of this money needs to go towards retirement in some way.

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      • jenmas
      • jenmas
      • 3 wk ago
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      Blue Harvest then you should be looking into a Solo 401(k) or a SEP IRA. If you still have money left over after that, try some taxable investing.

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      • jenmas
      • jenmas
      • 3 wk ago
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      Blue Harvest oops, just saw you were in the UK so those won't work! But my understanding is that there are self-employed pensions in the UK.

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  • 1. Budget next month in it's entirety

    2. Put the remainder in an Income Replacement fund

    3. Ongoing: As income arrives during the current month, stash it in a temporary holding category, then release it all at the end of the month to budget next month.

    Strive for a nominal budget that is your Plan A each month. As "life happens", allocate within the month of course, but Plan A is typically more slowly varying. (E.g., when bill amounts change or priorities change.) Put these amounts in the category name for reference or Goals to allow populating the month with a couple clicks.

    Consider whether your income replacement is excessive and that money would be better served going out of the budget and being invested. Budget to an Investment category and send it off.

    On a larger note, are your retirement contributions in various avenues maxed out each year?

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    • dakinemaui thanks. I'm freelance so I don't really have any official avenues into which to contribute retirement funds. I actually have no idea what to do about retirement, other than to max out my annual ISAs in some kind of stocks and shares ISA, for now anyway. I'm in the UK btw so if you're USA or elsewhere we likely have very different retirement avenues!

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    • Blue Harvest There's no reason why you can't start investing in a SIPP (Self Invested Personal Pension). True it's locked in and you can't touch it until you retire (earliest you can access this money without penalty is age 55), but it does qualify for tax relief. If you're a basic-rate taxpayer, for every £100 you invest in the SIPP, you'll automatically get an extra £25 invested by the SIPP provider as they claim the tax relief on your behalf. If you're a higher rate taxpayer, the SIPP still claims the basic rate tax relief, and you can claim the remainder of the tax relief on your self-assessment tax return.

      As always, if you're unsure, get a consultation with a financial planner to investigate your options.

      Not financial advice here, but I have two SIPPs, one with Hargreaves Lansdown where I actively manage my pension in various stocks and shares, and one with WealthSimple (now in the UK) where they use a robo-tracker for the investment. I drip-feed each with £50 a month as I'm also paying into my employers pension scheme, so I don't need to throw lots at my SIPPs yet. If you decide to start looking at Wealthsimple, let me know as I can give you a referral code where we both will get a year of fee-free management for £5,000 of our portfolio.

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  • Blue Harvest said:
    Alternatively, I could just whack an entire predicted years-worth of funding into every category right now, and then never fund them for the next year. But that seems dangerous. 

    It's also a pain in the butt if your cell phone bill goes up $0.38/month and you have to go make that change in every future budgeted month. In theory, I could budget through at least August, but I don't want to have to deal with fiddly changes. I've fully budgeted February with January's income and that's good enough for now.

    Like 1
  • I read A simple path to wealth, which helped me a lot. I believe Jesse wrote things on investing as well. Then I researched “sustainable” funds and about a year ago I finally felt confident enough to start investing.

    We still have a lot of money in 0% accounts, though. Quite some in an income replacement category, some more for our next car, but all with a job. I haven’t found an other place for it where it would be easily accessable and which is prefably with a bank with good ethics.

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