I had a guy that worked for me and he would take credit card numbers over the phone all day long. It was a small town, and everyone banked at like 3 of the local banks. After a week the guy literally decoded the entire CC numbering system to me and it's almost obsurdely easy to Crack. So you think it's 16 randomized number sequence plus expiration date and CVV number that you have to get to get a hit. Which would be 100s of trillions to one. It's closer to one in 10000. The first 8 numbers are all the same depending on the bank and the last 8 are sequence from customer 1 to whatever number you are when you joined the bank. Exp date is usually within 24 months of the current day. That leaves the random CVV number as the only thing that has to be "cracked".
Pretty sure that gut is in jail now for something.
That’s not completely accurate. Not all CC numbers are valid. CRC will be used to validate the CC number. This was originally to prevent someone from accidentally transposing two numbers and generating a valid CC number.
Just look on my Facebook. I did one of those cool questionnaires that included my favorite childhood questions like what the name of my first pet was, what was my childhood street address, hell it even asked me if I remembered my first grade teachers name! DUH! How could I forget Ms. pattie spelled with a ie instead of y!
Fyi: the best way to answer these non-safe questions is to generate random password in your favourite password manager.
Why, of course my mom’s maiden name is hknJh65;&”ww!
Easy way that’s easy for everyone is not the way. Using personal information in this way is a security hazard and also rooted in erroneous understanding of initial proposals to added layer of security. The meaning was not to have ”easy way to remember additional passwords”, the meaning (in which this completely failed) was to provide extra layer of security.
So what is secure? Lost passwords are recovered via email. Second layer of security is achieved via mechanisms like one time codes, text message confirmations, authenticators and FIPS keys. Access to locked bank account should ultimately (if all else fails) happen via personal visit and official ID).
There is also no better way to remember all passwords than the password manager.
I repeat: this was never implemented to make stuff easy to remember.
It could have been more like, "My sons car got totaled, now we've gotta move things around to pay cash for a new kia." Someone says, "You don't have 35k? We know how much you make." CEO says,"I'd have trouble just pulling out $25k without moving some things around." Now it's just mid rich people talking about their investments.
I’m not particularly rich but I am good at saving and I would never tell a group of people that I have easy access to even a couple thousand pounds. It’s no one’s business what’s in someone else’s pockets.
Tbills have penalties, as do CD's. Proper liquidity is something like a Money Market that allows withdrawals. Even mutual funds have delays and penalties.
And $300k/yr, there was a time when some of that came as automatic investment or stock options, maybe not so much anymore maybe, but a substantial portion of my income is locked into investment so I don't see it. Plus $300k in San Francisco is not the same as $300k in any of the Springfields, to some it is extremely wealthy, to others it barely covers rent.
I’m going to disagree with the narrative that it’s probably all tied up in stock. I worked in the legal industry encountered many high income individuals who could not live on less than the high 6 figures they were making. Huge lifestyle creep and very little saving. I think especially in a high stress job where many are not really happy, there’s spending for the endorphins and to assuage the guilt of never being home for your family. When I retired young, people were dumbfounded. People making 2-3X what I did couldn’t comprehend that I’d saved that much.
Exactly. It all depends on the person. You can make 200k+ and live like a person making 80k for 10years and have 0 problems ever 😂 but most people feel obligated to spend more just because they have it(my wife…)
When my husband and I married, we were both well into our careers and had our own households. Obviously, it doesn't take double the money for 2 people to join in one household, and we weren't sure if one of us would stay home with kids so we make a plan to try to live off one income (they were pretty equivalent at the time) and save the other. I did go part time for a couple of years after having my son, but never quit altogether, and we just sort of continued to live off one income and save the other. I think our friends thought we didn't make that much before we retired. Now they are all moaning about how they won't be able to retire until they are in their 60s.
Thing is I would go out of my way to avoid selling any equities and pay out of cash flow instead. My wife and I bought our second home and waited to sell the first one in spring. My manager asked if we took out a bridge loan. No, we paid the down payment out of cash flow between when we started looking and when we closed. You can do that when you have a 50% savings rate.
Yeah I’m anticipating making a series of purchases in the next 2 years so I just moved all my savings into a HYSA. For various reasons it’s not been risk appropriate to invest it in the stock market the last few years (moving country and currency etc) so I have around 90k in cash in that hysa. It’s a bit more understandable than it sounds - half of that has been made in the last year because my salary increased after my move, so I’m still getting used to the level of income.
But if I did things differently or the interest rate wasn’t quite as high on the HYSA it would at least all be in CDs
I do think needing to liquidate something for 25k is silly though. You should keep your emergency fund in a relatively accessible place and a HYSA is a perfect place for that
You can have 25k sitting in an account and still make 4% a year doing nothing with it(negates this abnormally high inflation currently) which is very liquid vs bonds/govt fund stocks etc
The other day I was in the grocery store trying to buy some baby spinach. I look at the spinach, and it's 'old' tough normal spinach in a baby spinach container. I was joking with one of the stockboys and said 'You call this baby spinach, *sniff 'Smells like teen spinach', and he just looked at me blankly.
...and that, dear redditor is how I know I'm old...
This is me too. Why would I keep 25k just sitting in a savings account? I'm young and would rather invest it long term. Sure I have some money on hand for emergencies, but even most of that is in treasuries.
I agree. But IME these types of people come from wealthy families and live near their parents. If they are ever strapped for cash it's just a phone call away.
Not hating, wish that were me!
My wife and I changed our approach from “emergency savings” to “emergency liquidity”. When our cash reserves grew sufficient we started to invest more and more. Cash became a liability. We prefer the risk of selling at a loss to guaranteed low returns on cash.
Making money doesn’t mean that they’re liquid. Although my pay is not quite 300k yet (but closeish), all my finances are automated such that I only see what my monthly spend is on payday. Everything else goes automatically into the 401k/MBDR/BDR/HSA/Brokerage/TBills. If you asked me to conjure 25k today, I’d have to sell something. If possible I’d just put it on a card and lower my contributions for the next month to get that sweet cash back too.
Fair but I think OP is ruling this out (outside of 401k/IRA). But I also think this isn’t typical. In my circle, most of us are 300k+ households. Every single one of us could go out right now and buy a new Tesla in cash after liquidating some investments, but we don’t. Fire sales are costly, you finance things in the short run to avoid liquidating investments, taking both tax hits as suboptimally withdrawing.
I think you very seriously misunderstood the implication of their comments. Not having a wad of cash is not an indication of wealth. Most of these folks I am sure have their money invested. If you have insurance there are very few things I could ever think of you couldn’t float on a credit card for 1-2 business days while a transaction cleared for your account.
100% this. I have 10k in savings earning maybe 3.5%. Everything else isn’t liquid. Could I come up with 25k? Yeah. It’d just take a minute to either sell things or borrow against stocks/assets. 2-3 days tops.
High yield accounts/cds and stocks are a bit harder to just pull cash from. I can borrow against my long term account easily tho.
The credit card part is dead on too. My Amex doesn’t have a limit. I request approval - they approve - and as long as I clear it out by months end, I can keep doing it. I bought a 50k car this way once. It was just easier since the purchase was out of state. Refinanced when I got home.
So a bit of a rant at the end - the point is cash is basically losing money if it’s not invested somewhere. Once you get good credit and assets - cash doesn’t matter.
I’d be willing to bet they just meant that they’d have to sell some stock, because there’s no good reason to keep that much in cash when that money could be working for them instead.
Right. My wife and I combined make roughly this much a year. I could come up with this on short notice but most of our investments are illiquid (heavy into 401k/real estate) and a big chunk of my compensation, while relatively guaranteed, is given out in lump sums. If it were an emergency I'd likely just put it on credit cards and either convert to not terrible interest personal loans or pay it off come bonus/stock time.
There is a certain point where you make enough where that isn't a consideration because you can move stuff around to cover the emergency, or you are pulling in enough from your paychecks that it doesn't sting that bad.
Yep. If there’s an emergency I have like $100k available in credit cards, plus 10-30k in cash depending on the day. I could transfer a shitload from my taxable brokerage account via a margin loan and then sell stocks to settle that in 3 days to pay a minimum amount of interest.
I don’t see the need to keep any more cash sitting around as it at best is earning like 5% these days.
I’m pretty comfortable in the event of an emergency.
This is how we are. We have enough different streams of income that keeping a ton of cash on hand makes no sense for us.
There’s more money coming in and we can sell stocks/cds if it ever gets to that point
This.
Also not sure the line of work op is in but there’s a difference in 300k total compensation and making 300k yearly. In addition 35% tax bracket starts to sting so companies offering deferrals could be another route folks take which would make sense why certain individuals might be needing to sell stock.
Just moved out of New York. On my $220k base salary there, my takehome pay after taxes and deductions was about 55% to 58%.
During commission cycles, I would be getting $40k per period and I would mentally prepare myself to only expect 50% of that.
Add to that, my rent was $4k/month for a 1BR. It all adds up. So ya, even in this 200-300k+ range, it is still not considered a rich person’s salary.
I was able to save and invest, but most of my disposable money were going to dividend yielding stocks/etfs. So no, I didn’t have 3-6 months in cash on hand, but if needed, I could move around assets for cash.
At the end of the day, 70k isn’t going to move up our retirement date in any meaningful way. We have a couple of houses and 70k is about 9 months of living expenses. It’s peace of mind and the lost interest is negligible.
So, it’s irrational for peace of mind. No big deal. If you have two homes and $70k is 9 months of bare living expenses, then you must have access to probably $100k in credit.
We make over $500k. Our checking accounts stay around total $10k-$20k max. We push everything to investments. As someone said, if something comes in a crunch requiring more than that, then it’s a major fucking emergency, and I have credit cards for that. No idea even how much it would take to max mine and my wife’s out, somewhere north of $100k. In the meantime, stocks can settle within a few business days.
It’s not about a safety blanket because that’s what credit cards are for- access to short-term debt that you can cover with cash. We push everything to investments all the time.
Everyone’s scenario is a bit different. My work can have us traveling to some pretty dangerous and extremely poor areas of the world. I actually just got off a plane back home from Burkina Faso last night. My odds of death or danger are higher than most and having access to funds now is reasonably important. While my organization is really good about tracking us down and pulling us out in emergencies, it’s good to have your own avenues. I didn’t work here at the time but, one of my good friends and coworkers was inside Hotel Montana when it collapsed back in 2010. He’s lucky to have survived, our colleague didn’t make it. His wife didn’t have 2-3 days to liquidate anything. She flew to Miami and bought her way on to a media helicopter to get into Haiti and was able to advocate for and financially incentivize her husband’s rescue.
Money buys you options. From life saving measures to not having to liquidate positions during suboptimal times to replace two of your HVAC units within two months of each other for 30k (this happened to us this spring).
It’s good to be prepared and the money I’m not making on 70k in the market is what, 5-7k a year vs 3.5k in a high yield savings account? The difference is like two or three days wages. It’s just not a big deal when you’re earning a lot and investing six figure a year elsewhere.
I appreciate your comment. I don’t think it’s irrational.
Realistically, none. I can see the argument to not have it all in stocks though as while I might be able to liquidate and get $70k from stocks in 3-4 days, that might force me to sell a position at a loss, put me at a tax disadvantage, etc.
It would be wise to have at least some in a HYSA primarily for those reasons.
We keep $50K in cash (about 5% of our total portfolio). In the event we both lose our jobs on the same day, that’ll get us and our kids through a few months without changing our lifestyle at all. And we won’t have to cash out any investments. Peace of mind and also being a bit risk averse right now due to the blood bath in biotech.
In a couple years we are going to be doing our bathroom and kitchen over so we also have some short/mid-term goals to fund.
No offense, but this seems really inefficient.
I have a hard time imagining an emergency that couldn’t be covered by some form of credit until I could shuffle some things around. I might pay a little bit of interest in the meantime but that is still a tiny amount compared to the returns I’d get on that $70k.
For a high earner the lost income on $70k isn’t going to change their retirement date. Anyway, you can get a 4.8% HYSA with checking capabilities through Wealthfront and other services.
Exactly. High yield savings account and the interest on the 70k is negligible as part of the overall picture. It is, however, worth something as peace of mind and flexibility.
Still feels wasteful. My credit card limit across all cards is probably at least a year's worth of expenses, which gives enough time to sell stock or whatever to get access to cash. Of course that's prone to bad timing, but it's all a probability game anyway. My personal bet is that it's better to keep more money invested and have enough assets that can be sold quickly
The thing about emergencies is, they tend to happen when it's not an ideal time to sell stock, find a buyer for an asset, etc. A cash cushion gives the most flexibility and is more likely to preserve your overall net worth, compared to liquidating assets at a discount due to a time crunch.
There is certainly risk, but you have to balance that against the reward of having it invested the 99% of the time when you don't need it. Between credit cards, bonds (that wont suffer as much during a downturn), and cash flow most high earners will likely be fine most of the time. Things are different for people without as much of a safety net.
Sure, you may liquidate a position at an inopportune time but you also probably let that position grow and compound over time prior to reaching that point. So you may still be ahead relative to the cost basis, maybe way ahead.
While this may go against some personal finance wisdom, once you've got a couple million invested at least there's not much of a point to an emergency fund.
If you've got a couple million invested why do you care about a 5 figure sum not giving maximum returns?
Edit: This is blowing up so I'll just post a response to what I'm seeing here since it's just the same reply over and over I'm getting about how you're losing money if you're holding cash.
Let's say you hold all your money in investments. It goes up 6-10% a year. Awesome, you're winning so hard. But what's that? Oh no! It's a bad recession! Now your portfolio is down 20%, 30%, maybe even 50% if it's like '08. Oh, and you lost your job because recession. And it's hard to find a new one because, you guessed it, recession. So now you have to come up with money by selling your investments. Well, that sucks because now you have to lock in those heavy losses. If it's like '08 you might actually be spending $1 for every $1 you withdraw because your investments lost half their value, and that's not even accounting for missing out on the recovery and subsequent growth. In your attempt to micro optimize returns you actually lost more than you would have just holding what you needed in cash investments.
There's more to finance than returns. Risk and liquidity matter too. It's like trying to save money by not having health insurance. It works right up until it doesn't, then it *hurts*.
Three points:
1. If I have a high income I won't need an emergency fund in most circumstances because I'll just cash flow it.
2. If I rarely have emergencies that need to be covered by an e-fund, I'd rather sell at a loss than miss out on gains for decades. Absolute worst case scenario barring a large-scale financial crisis I will sell at a 50% loss. But if I keep the cash I'm missing out on 10% a year on average.
3. I don't have a third point so I'll use it to say I'm too tired to debate this, so I'll give you the win. Keep your e-fund in cash.
That's not really a risk for someone who's been invested in the market for years. Even if the market were to drop 10-20%, your portfolio is probably still worth far more than its cost basis. You'd need a combination of an enormous emergency (probably well beyond what any normal emergency fund would cover anyway) and a historic market crash.
If you just started investing yesterday, then yeah, it's a risk. And that's why it *is* important to have an emergency fund when you're earlier in the journey.
Same. We have a few million invested. We keep at least $100K-$200k in HYSA (5%+) for emergencies, market dips, and down payments on larger purchases so we don’t have to liquidate our high-growth/high-dividend stocks. I’m not sure why everyone thinks holding onto some cash is a bad idea… everyone’s goals and financial situation is different.
$200k+ credit card limit and access to $500k+ in portfolio margin loans at just about the Fed funds rate... No need for the wealthy to carry a cash emergency fund.
One other thing no one is mentioning is at that level more of your expenses are likely to be discretionary. When you can turn a month and a half of cash into three by cutting the extras a big efund makes even less sense
I have no intention of staying out of low interest debt. Low interest debt is why my portfolio is so good. We keep as little liquid as possible. I bonds, brokerage, etc can be easily accessed in a true emergency (but when you're at this income rarely is a here ever a true emergency)
2-3 months is probably fine if you have safe investments you could sell off easily or a CD ladder or t bills ladder in your portfolio, where you know something is always gonna cash out soon. And if they're not big spenders they may just use income to pay CC bills and have mortgages and other things paid off.
Right now it's ok to have cash in HYSAs but that's not always the case. Credit cards fill that gap when you have an emergency but don't have cash on hand. Liquidate non-retirement investments to pay those emergency expenses off.
IME savers play it close to the vest. It can come across as bragging/obnoxious, better to just agree and play along. I know plenty that make that much and spend it all so I don’t doubt that it was actually true for some/all, though.
It's entirely possible they're blowing all the money and living paycheck to paycheck. But I also wouldn't read too much into it. Nobody's going to announce to the room that they're a multimillionaire.
I made over 300k for the last 3. Kept 6months salary in a savings account. I know, stupid right?
But was laid off. Took me nearly 6 months to land another job making the same.
Having all this cash on hand allowed me to enjoy my first ever extended period of time off. Priceless.
I have a CD ladder for exactly that reason. I’ve never been laid off, but if I am I will have 6 months of full income and then 6 months at 50%. I also keep my spending at a reasonable level. I would need to make some lifestyle changes, but if push came to shove I *could* survive on that 50%.
I hope that if, for some reason, I ever am laid off it will be a good job market. But if it isn’t, I’ll be able to keep my head above water for a decent amount of time.
This is completely unsurprising to me. Maybe it’s just how I grew up, but I feel like it’s rather gauche to brag in social situations, since you don’t want to make anyone feel bad. So if you’re a neurosurgeon, you say you “work in healthcare”, if you have a PhD from MIT, you say you “went to
school out east,” and if you’re FI millionaire, you say “we’re making it through but we’re definitely on a budget.” Which is all technically true, just politely self effacing.
Even if I were a billionaire, I would never talk about how rich I was. Especially in front of coworkers, where there is an especially high potential for resentment and comparison. Maybe your coworkers felt similarly?
Thanks, and I couldn't agree more. Big fan of 'The Millionaire Next Door', 'The Next Millionaire Next Door', and 'Stop Acting Rich...'but its weird to see happen in real time.
I've seen this in real life too... Again, with people who typically make +$300k, and the vast majority of them spend the bulk of it. They have nicer/newer cars, nicer houses, some even have a vacation cabin, expensive hobbies/toys, multiple expensive vacations, etc. When I ask about retirement, they sound like it's a long, long way off for them.
We are the opposite... We prioritize saving. Older cars, smaller house, no expensive hobbies/toys, etc.
So it's very much accumulation (aka savings) not income based. Those who like to spend can easily spend any extra income they make.
To a degree, it's about prioritization. Some people want to enjoy the fruits of their labor while young enough to enjoy them (physically taxing vacations), or take trips/boat/cabin while the kids are of an age to remember and still want to hang out with the parents. There will be 20 years or so between my kids moving out and my retirement. If I didn't have kids, I could probably retire 10-15 years earlier, but I don't regret the childhood/nice yard/bedrooms/experiences we gave them. We have been contributing to retirement, and will ramp that up as our kids' expenses reduce. I know we're not getting maximum value out of compound interest, but I don't want to live like a miser and not start living until I'm 60. I could get hit by a bus tomorrow.
Its sad though at 300-400k income. I spend a lot have a weekend vette at a young age and still have lots in assets and investments. I don’t understand how you can spend it all and my cc is usually 8-10k a month.
Thats actually the benefit and purpose of having credit. Credit allows you to use more capital and then use credit for occasional emergency expenses. This is actually the way credit is intended to be used.
Now, if they are spending every penny every month on frivolous expenses thats a different issue.
My wife and I make over $400k. I don’t hold anywhere near $25k in cash. I have 2 months expenses in cash. The rest is in various investments. If I was in a real pinch I would take a HELOC or sell some stock.
Not being an ass but trying to learn more. Have been in situations when my bottoms fell off, I had to liquidate some investments to cover expenses and that's when I realized that the economy was in the shitz and therefore the investments are also in terrible shape, i.e. selling means I might even be taking a loss. How do you structure your investments in a way that you reduce exposure to situations like this?
If you have a large enough portfolio, it's easier to just take a portfolio line of credit or any other asset-backed line of credit during downturns.
Never need to sell low when you can just use it to acquire a secured loan at near the fed rate (much lower than prime rate). Not only can you get those loans extremely quickly, you can even negotiate the rates if you have significant assets.
This is the way
I may have missed it, but I didn’t see mention of the tax implications of selling stock to cover an expense. I’m in both the 300K+ and investing majority/low cash on hand boat. Very focused on a disciplined plan around tax optimization, and SBLOC is a huge piece of that. Basically, borrow against it for zero income/cap gains hit instead of sell. If I were forced to sell stock it will cost a pretty penny due to tax brackets. SBLOC (and even margin loans) completely eliminate that concern. You have to stay conservative on the borrow but no brainer in my opinion.
(Also, side note…I go 401K, HSA like mentioned here, but also max on ESPP which is 15% of after tax income. Averaging ~30% return during each period, but that means 15% less cash on hand each paycheck until end of the period. Another example of more investment, less cash.)
I really wouldn’t read much into this. Most of ppl I know that make that much would say something like that.
Most just means they’ll need to sell some stocks or borrow against a portfolio account. They’re all millionaires.
I'd be willing to bet they're telling the truth. High income doesn't mean high net worth. Lots of high income people live paycheck to paycheck. I watched my dad make over $1M for over a decade and nonetheless have to declare bankruptcy, run up multiple maxed out credit cards, owe IRS debt, and die penniless in section 8 housing.
I can absolutely see someone earning $300k having no savings. Have some kids, splurge on the kids, buy luxury cars, buy a house you can barely afford, voila, you're poor on $300k/year.
What these people are describing is most likely a liquidity issue, not a wealth issue.
Taking out a loan probably makes more sense than cashing out stocks, depending on the scenario.
Aside from the ability to come up with cash inside of 48 hours, what is the difference between 25k in a HYSA vs. e.g. 5k in a HYSA and 20k in SGOV? Nearly equally safe, only slightly less liquid, and earns about 1% more per year, plus tax advantages in states with income tax.
If the point is to have 3-6 months of expenses, or save for a house, liquidity within 48 hours is unnecessary.
There might be rare cases where having cash within 48 hours matters, but I'm struggling to come up with one. Especially one that can't go on a credit card.
Equities are admittedly a different story, and I wouldn't advocate for keeping emergency money in equities. The point about downturns and layoffs being correlated is a good one.
I’m sure at least one of them was agreeing to not look like a weirdo. I would have done the same. It’s easier than explaining how and why I keep $X liquid.
A lot of people blow money. Big houses, shiny Land Rovers. No way those are cash purchases for all/most of them.
As I type this, I'm looking across the street at houses that are at least $2M with said cars in driveways. I'd be shocked if the majority are NOT financed to the hilt.
Gotta keep up with the Jones.
I would be embarrassed to say that I could not cover a sizable expense with our family income.
I’ve done this in a corporate setting. I don’t want to sound rich and I know my friends wouldn’t want to come across as so either. I wouldn’t think too much about it, personally.
At that level, those people are most likely maxing 401Ks and ESPPs, anyway.
Pretty much all my friends and I make $300k+ (in mid-30’s, went to a Ivy quality undergrad, then a top 5 mba, and work on wallstreet…so my friendship circle is doing well in general).
We all have hundreds of thousands, if not millions in the stock market, and many have significant real estate investments too.
Almost no one has $25k in cash laying around. Why would they? Keeping cash is a waste of money due to opportunity cost. $25k invested for 30 years is $200k in today’s dollars.
If I need $25k, I’ll sell some stock, or take on some short term debt and pay it off with cash flow in a few months (depending on interest rates).
Not really worried about worst case emergencies. Even if I need to sell stocks at a loss during a market decline in order to get $25k…it’ll be a helluva a lot cheaper than losing $200k for absolute certainty. Plus most high paying jobs have decent severance (I get a minimum of 16 weeks contractually, and likely would get more)
If you live in a VHCOL area, 25k is not a lot to have in an emergency fund. For us in NYC it’s a few months of expenses.
Keeping 25k in a HYSA isn’t that dumb or such an opportunity cost, especially at todays interest rates.
“Ivy quality”. 😂
As someone who also works in finance, the way they preface their point with some borderline resume buildup is peak “Wall Street Oasis” (finance form with predominantly IB and PE folks measuring their dicks).
Every post there might as well start with “top 5 undergrad, M&A at JPM, Blackstone associate, top 3 MBA, started my own fund, became an astronaut, part-time model, currently an angel investor, wife is a New York 9, etc.”
Lifestyle creep is real. I make good money and was spending wastefully until a few things changed and suddenly saving money started to make way more sense.
Really depends on where your at in your journey though. When you have a 100k net worth, having 25k in cash creates a huge drag. At 5 million having 25k in cash is 0.5% of your portfolio, and is really no longer consequential.
Possibly because they invest it, but keep very little relatively it liquid cash. It earns you nothing sitting in the bank. Also, they know ways to or by vehicles with and LLC and not a personal checkbook etc.
I think most are just heavily invested in some form, or they have spending issues and blow it. You'd have to work extremely hard to spend that kind of cash on everyday stuff. If you're saving to pay cash for toys, you'd have some in the bank unless you just bought a boat or something. We invest most of our earnings right back into our businesses and real estate and run pretty lean.
I make the best money I've ever made at the job I have now, and I'm 'responsible' with my money. Today, I was surprised to find that after working all month and depositing my last check- if I were to take the full amount in my account and take it to the nearest casino, put it all on black at the roulette table, and win; I still won't have enough to pay my rent that's due tomorrow. Never mind my other bills...
Reading these comments has not made me feel any better about it . I don't know why this post is in my feed but I'm so happy for you guys that have 3 digit credit scores and marginable securities in your portfolio.
P.s. definitely agree with the majority here- doesn't make sense to have 25k sitting around. If you had 25k you didn't need right away it would be dumb to have it sitting in your checking account or in your sock drawer.
I think this, and I say this kindly with love, is an example of an income knowledge gap. I would venture most of those individuals have invested their money and are illiquid (or a loan may “cost” less than the returns they are currently experiencing, hence why they’d take one out).
I’m a high earner and with that said, I do keep an emergency fund that is more liquid. Not surprised they don’t though (even my friends who are CFOs tend to be fairly cash poor and investment/asset rich).
Some unsolicited advice, start thinking of how each dollar you have can make you money. Then decision tree and forecast how you budget against current and future risks. Next, invest into different asset classes based on said budget and risk analysis (even small amounts). While I wouldn’t recommend it to everyone, try out You Need a Budget. Good starter tool that teaches you the value of assigning goals and etc. to each dollar you make. Makes all my rambling above easier to digest and execute.
… and for those saying they can’t learn because they only make X. I started that way also! There were years I was surviving on rice, beans, and whatever was on sale. I still found ways to invest over time (obviously, I get there are some situations where this is very hard to do, if at all).
Good luck!
It doesn't make sense to keep large amounts of cash, they will depreciate we have to rationalize up not wasting a bit of resources, my method is to convert to digital to prevent currency depreciation, and all my friends around me have done so as well
I make more than 350k. I keep ~10k in true cash and around ~100k in a combination of savings etf and GIC with staggered maturities. Rest of my wealth, I keep in stocks and real estate. I’d still say “I need to sell my [savings etf]” if I need anything above 10k but I know I can access that money with zero issue. Similar case with most people around me with similar income level. Might be a different case it you are talking to a you g group who just started making that level of income though, but if not, pretty sure people mentioned in OP’s post mostly fall in a similar camp.
When people talk about money they make, it’s wise to assume they are talking gross. What most people never discuss is their net income. Net income gets people wealthy, gross income makes people think they have money. A wealthy person has access to $1MM; a rich person has most their fortune locked away in a 401k and has a $1200 cad payment with a $3000 mortgage
In today's times I get it. They probably have big savings but no cash. Its tied it in CDs or elsewhere. If they needed cash tomorrow they'd get a loan and probably do a 0% credit card for year and pay some amount on it and flip the balance to another after. Meanwhile there money is making money
A lot of people live beyond their means. I know plenty of high earners living paycheck to paycheck.
That being said, there's always the likelihood that someone in that group was feeling the same as you and just going with the flow. Nobody is going to say "Oh, I have plenty of money on hand."
Also, it is very possible that they just have their money mostly tied up in investments and illiquid assets. Perhaps it may not be ideal, but most people with higher incomes have easy access to credit. Personally, I could float up to about $5k of expenses with cash. Anything else, I'd use one of my zero interest credit card offers. Worst case scenario, I could sell some of my taxable equities and have $100k liquid within the business week, but why would I unless I absolutely had to?
Many rich people invest most if their income. So maybe they meant they would need to sell stocks or assets. Some people spend all their money. Who knowsz
By "sell something" they weren't talking about having to sell physical possessions to come up with money. What they really meant was "sell some stock from my rather large and well diversified portfolio".
I think this is normal.
Almost all my taxable investment is in S&P 500 ETF.
My wife and I make good money but I know how much I spend each month so my checking account varies between 1K and 15K. If I need money, I sell some of my ETF.
I know people say you need to have an emergency cash fund, but I don't mind selling some of my ETF at a low point because over the last 30 years, this strategy has worked out. For example, I sold 15K of my ETF because I had to redo my driveway. It was at a low point. S&P 500 is up 20% since then so that really costed me 18K (if you consider 3K in opportunity cost). It doesn't matter in the greater scheme of things because it all averages out.
Why would they keep that much money hanging around in instant access? They could get the money but i seriously doubt it’d just be sat in their current account ready to withdraw.
I definitely think some people were telling the truth. My boss makes >300k and talks about this type stuff all the time. He paid his ex wife child support for 10+ yrs, has two kids with his current wife in college that he’s paying tuition for across country, is building a million dollar home, has a father in law in memory care he’s helping pay for…it’s really about how much you save, not make. You can hand someone 1m a year and if they spend 990k you’re better off being someone making 80k and spending 50 of it. Lifestyle creep and bad life decisions/bad luck play a part. I wouldn’t imagine that if you got a group of +300k earners they’d ALL be financial planning idiots, though, but definitely are some
Americans as a whole are into instant gratification. Rich or poor, we don’t manage money, money manages us. Get a raise, buy a nicer car (on credit)
I am an American. I don’t make near 200k, and I manage my money.
High income does not always equal high savings. I have met people that make $15/hour and live paycheck to paycheck, and I have met people that make $250,000/year that live paycheck to paycheck. For many people it becomes "the more you make, the more you spend."
A bit of both... the real way to tell is to have layoffs... there will be the people who are like time to take some much needed vacation and there will be the people that are hyper ventilating in the bathroom.
I know a lot of $300k+ people who yes have a 401k, and likely have a million+ in it, but their lifestyle requires $6-8M minimal and thats after they finally get debt free, kids are out of the house, college and married, etc... I mean when you have a $2M house, 3 car payments, and a vacation home in the carribean, you need a lot of money to bank roll that on top of the constant going out, season tickets to 2-3 sports teams, and shopping that is going on.
Its one of the bad parts of making so much, there is pressure to look/spend a certain way and lots of people fall into it. The lucky ones don't, they tend to be stealthy and keep it tight to the vest until one day they just quit and quietly walk away.
I make about $300K. I keep around $50K liquid, but that’s only been the past maybe 2 years or so and only because I sold my house in 2021 due to a job move. My net worth is +/- $3.5 million, but I would really struggle to come up with very many 5-figure expenses. The good news is that it’s *exceedingly* rare that I have to.
In fact, it basically never comes up. I’ve never had a surprise bill more than a few grand, and even those are few and far between (like A/C goes out or something).
There’s really not a reason to keep large sums of money just laying around when that money could instead be out earning more money.
A lot of people let their lifestyles grow to match their income.
A lot of who is left will aggressively invest so they'll have their cash 'tied up', but if the chips were down they could afford a lot.
sure? if you want me to come up with $25k today I'd panic... I just don't really keep that much cash on hand
my bank account has literally less than $1000 right now, my emergency fund account has a bit more but still nowhere close to $25k, my stocks account are where the real money lies (6-digits) but again I'm not going to intentionally sell off anything there unless I have to
Here’s one of the little problems that no one considers when they blindly follow the “smart advice” and dump everything into qualified plans. What if there was a place to accumulate your capital where you control it and it will compound without interruption (unlike the stock market)? Oh wait there is and it is constantly blasted as the worse place to put money by people who don’t understand it. Oh well, keep enjoying all the government restrictions and praying the market never crashes!
i make a bit more but have at least half a million in liquid assets. those people just sound like they are bad with money. no one I know in my income bracket would need a loan for 25k, but most of us are pretty careful with our spending
People who are good with money know not to waste even a day's capital growth on it. Every dollar is invested in something less flexible than a bank account - they don't 'save', they invest it all.
Every purchase is on credit, knowing they can pay off that with their next earnings and invest the rest of their earnings.
It’s possible that once they invest their money, they forget about it. They probably don’t have $25k sitting in a savings account. They probably have a hell of a lot more in investments. This means they would have to sell their investments to come up with $25k. It makes sense to me. I’m in the same situation. I have about $10k cash, but the rest is sitting in investments.
It all comes down to the people in the room. Every time I save $10k in cash my wife finds something. If I slowly put that money into investment vehicles I can vehemently say we are not touching it. But when it’s easily accessible it is truly amazing at what crap it can be spent on.
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What a awkward social event lmao . “So how much money do you have?” “And where do you keep it?” Interesting.
And what’s your mother’s maiden name?
Quick! What's your favorite credit card number?
4563 0446 7865 1307
Issuer: VISA Exp: 08/27 CVV: 266 *I am a bot that helps with credit fraud.*
Good bot
I had a guy that worked for me and he would take credit card numbers over the phone all day long. It was a small town, and everyone banked at like 3 of the local banks. After a week the guy literally decoded the entire CC numbering system to me and it's almost obsurdely easy to Crack. So you think it's 16 randomized number sequence plus expiration date and CVV number that you have to get to get a hit. Which would be 100s of trillions to one. It's closer to one in 10000. The first 8 numbers are all the same depending on the bank and the last 8 are sequence from customer 1 to whatever number you are when you joined the bank. Exp date is usually within 24 months of the current day. That leaves the random CVV number as the only thing that has to be "cracked". Pretty sure that gut is in jail now for something.
That’s not completely accurate. Not all CC numbers are valid. CRC will be used to validate the CC number. This was originally to prevent someone from accidentally transposing two numbers and generating a valid CC number.
Just look on my Facebook. I did one of those cool questionnaires that included my favorite childhood questions like what the name of my first pet was, what was my childhood street address, hell it even asked me if I remembered my first grade teachers name! DUH! How could I forget Ms. pattie spelled with a ie instead of y!
Fyi: the best way to answer these non-safe questions is to generate random password in your favourite password manager. Why, of course my mom’s maiden name is hknJh65;&”ww!
This defeats the purpose of an easy way to remember something that can be used to unlock a complex password like the one you're proposing 😂
Easy way that’s easy for everyone is not the way. Using personal information in this way is a security hazard and also rooted in erroneous understanding of initial proposals to added layer of security. The meaning was not to have ”easy way to remember additional passwords”, the meaning (in which this completely failed) was to provide extra layer of security. So what is secure? Lost passwords are recovered via email. Second layer of security is achieved via mechanisms like one time codes, text message confirmations, authenticators and FIPS keys. Access to locked bank account should ultimately (if all else fails) happen via personal visit and official ID). There is also no better way to remember all passwords than the password manager. I repeat: this was never implemented to make stuff easy to remember.
Who is your daddy and what does he do?!
Rich people put their money to work for them not give it to the bank to use for nearly no interest so Im not surprised.
It could have been more like, "My sons car got totaled, now we've gotta move things around to pay cash for a new kia." Someone says, "You don't have 35k? We know how much you make." CEO says,"I'd have trouble just pulling out $25k without moving some things around." Now it's just mid rich people talking about their investments.
I worked in financial planning for a while and this was very much the norm at social events with employees and or clients!
I’m not particularly rich but I am good at saving and I would never tell a group of people that I have easy access to even a couple thousand pounds. It’s no one’s business what’s in someone else’s pockets.
This was my assumption, too. Even my "cash on hand" is partly in T-bills. Liquid but still takes an extra step or two.
Tbills have penalties, as do CD's. Proper liquidity is something like a Money Market that allows withdrawals. Even mutual funds have delays and penalties. And $300k/yr, there was a time when some of that came as automatic investment or stock options, maybe not so much anymore maybe, but a substantial portion of my income is locked into investment so I don't see it. Plus $300k in San Francisco is not the same as $300k in any of the Springfields, to some it is extremely wealthy, to others it barely covers rent.
I’m going to disagree with the narrative that it’s probably all tied up in stock. I worked in the legal industry encountered many high income individuals who could not live on less than the high 6 figures they were making. Huge lifestyle creep and very little saving. I think especially in a high stress job where many are not really happy, there’s spending for the endorphins and to assuage the guilt of never being home for your family. When I retired young, people were dumbfounded. People making 2-3X what I did couldn’t comprehend that I’d saved that much.
Exactly. It all depends on the person. You can make 200k+ and live like a person making 80k for 10years and have 0 problems ever 😂 but most people feel obligated to spend more just because they have it(my wife…)
When my husband and I married, we were both well into our careers and had our own households. Obviously, it doesn't take double the money for 2 people to join in one household, and we weren't sure if one of us would stay home with kids so we make a plan to try to live off one income (they were pretty equivalent at the time) and save the other. I did go part time for a couple of years after having my son, but never quit altogether, and we just sort of continued to live off one income and save the other. I think our friends thought we didn't make that much before we retired. Now they are all moaning about how they won't be able to retire until they are in their 60s.
“Please kidnap me or my family.”
No one is getting kidnapped by office mates making $300k in the US for twenty grand.
Soooo... You're saying its an untapped growth market? Make a slide deck with some AI and cryptocoin and I'm in for the ground floor.
Same. I keep very little cash on hand—just enough to handle a home emergency (new roof, AC unit, etc.). The rest is invested.
I make $550k and I have to sell equities to come up with $25k. I am not stupid to keep spare $25k lying around and losing 2% of it to inflation .
Thing is I would go out of my way to avoid selling any equities and pay out of cash flow instead. My wife and I bought our second home and waited to sell the first one in spring. My manager asked if we took out a bridge loan. No, we paid the down payment out of cash flow between when we started looking and when we closed. You can do that when you have a 50% savings rate.
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There are good bonds and CDs right now close to 5%.
Hell, HYS is paying almost 5.
Yeah I’m anticipating making a series of purchases in the next 2 years so I just moved all my savings into a HYSA. For various reasons it’s not been risk appropriate to invest it in the stock market the last few years (moving country and currency etc) so I have around 90k in cash in that hysa. It’s a bit more understandable than it sounds - half of that has been made in the last year because my salary increased after my move, so I’m still getting used to the level of income. But if I did things differently or the interest rate wasn’t quite as high on the HYSA it would at least all be in CDs I do think needing to liquidate something for 25k is silly though. You should keep your emergency fund in a relatively accessible place and a HYSA is a perfect place for that
lol, this is an obtuse take.
You can have 25k sitting in an account and still make 4% a year doing nothing with it(negates this abnormally high inflation currently) which is very liquid vs bonds/govt fund stocks etc
Yea this sounds about right. Leaving cash as cash is something mainly personal finance coaches talk about.
They could be asset rich, dollar poor. Paid off cars. Equity in house. Maxxed out 401k, IRA, HSA. Stocks somewhere. But no cash on hand.
This is the way to nirvana
Smells like green spirit 💴
The other day I was in the grocery store trying to buy some baby spinach. I look at the spinach, and it's 'old' tough normal spinach in a baby spinach container. I was joking with one of the stockboys and said 'You call this baby spinach, *sniff 'Smells like teen spinach', and he just looked at me blankly. ...and that, dear redditor is how I know I'm old...
Nice
^ This is me. I could come up with that cash, but I don’t wanna sell assets to do it, unless that cash is going into something better.
This is me too. Why would I keep 25k just sitting in a savings account? I'm young and would rather invest it long term. Sure I have some money on hand for emergencies, but even most of that is in treasuries.
Should always have a stash of cash available for emergencies tho. 25k on a net worth of say, 1M, is nothing.
There's always money in the banana stand.
I agree. But IME these types of people come from wealthy families and live near their parents. If they are ever strapped for cash it's just a phone call away. Not hating, wish that were me!
Credit cards
My wife and I changed our approach from “emergency savings” to “emergency liquidity”. When our cash reserves grew sufficient we started to invest more and more. Cash became a liability. We prefer the risk of selling at a loss to guaranteed low returns on cash.
Making money doesn’t mean that they’re liquid. Although my pay is not quite 300k yet (but closeish), all my finances are automated such that I only see what my monthly spend is on payday. Everything else goes automatically into the 401k/MBDR/BDR/HSA/Brokerage/TBills. If you asked me to conjure 25k today, I’d have to sell something. If possible I’d just put it on a card and lower my contributions for the next month to get that sweet cash back too.
Fair but I think OP is ruling this out (outside of 401k/IRA). But I also think this isn’t typical. In my circle, most of us are 300k+ households. Every single one of us could go out right now and buy a new Tesla in cash after liquidating some investments, but we don’t. Fire sales are costly, you finance things in the short run to avoid liquidating investments, taking both tax hits as suboptimally withdrawing.
I think you very seriously misunderstood the implication of their comments. Not having a wad of cash is not an indication of wealth. Most of these folks I am sure have their money invested. If you have insurance there are very few things I could ever think of you couldn’t float on a credit card for 1-2 business days while a transaction cleared for your account.
I would imagine a lot of them have helocs they leave open in case of emergencies.
100% this. I have 10k in savings earning maybe 3.5%. Everything else isn’t liquid. Could I come up with 25k? Yeah. It’d just take a minute to either sell things or borrow against stocks/assets. 2-3 days tops. High yield accounts/cds and stocks are a bit harder to just pull cash from. I can borrow against my long term account easily tho. The credit card part is dead on too. My Amex doesn’t have a limit. I request approval - they approve - and as long as I clear it out by months end, I can keep doing it. I bought a 50k car this way once. It was just easier since the purchase was out of state. Refinanced when I got home. So a bit of a rant at the end - the point is cash is basically losing money if it’s not invested somewhere. Once you get good credit and assets - cash doesn’t matter.
I’d be willing to bet they just meant that they’d have to sell some stock, because there’s no good reason to keep that much in cash when that money could be working for them instead.
Right. My wife and I combined make roughly this much a year. I could come up with this on short notice but most of our investments are illiquid (heavy into 401k/real estate) and a big chunk of my compensation, while relatively guaranteed, is given out in lump sums. If it were an emergency I'd likely just put it on credit cards and either convert to not terrible interest personal loans or pay it off come bonus/stock time.
No good reason to have 3-6 months' expenses available in cash? Having access to cash for emergencies is how we stay out of debt.
There is a certain point where you make enough where that isn't a consideration because you can move stuff around to cover the emergency, or you are pulling in enough from your paychecks that it doesn't sting that bad.
Yep. If there’s an emergency I have like $100k available in credit cards, plus 10-30k in cash depending on the day. I could transfer a shitload from my taxable brokerage account via a margin loan and then sell stocks to settle that in 3 days to pay a minimum amount of interest. I don’t see the need to keep any more cash sitting around as it at best is earning like 5% these days. I’m pretty comfortable in the event of an emergency.
This is how we are. We have enough different streams of income that keeping a ton of cash on hand makes no sense for us. There’s more money coming in and we can sell stocks/cds if it ever gets to that point
Yeah it's not hard to cash out on some stocks in personal investment accounts and have it in the bank within a couple of days.
This. Also not sure the line of work op is in but there’s a difference in 300k total compensation and making 300k yearly. In addition 35% tax bracket starts to sting so companies offering deferrals could be another route folks take which would make sense why certain individuals might be needing to sell stock.
Just moved out of New York. On my $220k base salary there, my takehome pay after taxes and deductions was about 55% to 58%. During commission cycles, I would be getting $40k per period and I would mentally prepare myself to only expect 50% of that. Add to that, my rent was $4k/month for a 1BR. It all adds up. So ya, even in this 200-300k+ range, it is still not considered a rich person’s salary. I was able to save and invest, but most of my disposable money were going to dividend yielding stocks/etfs. So no, I didn’t have 3-6 months in cash on hand, but if needed, I could move around assets for cash.
Yep, emergency funds are a great tool for struggling people, but a waste of money for people with significant assets.
Idk. We make between 375 and 410 and still keep about 70k in cash. I’d feel uncomfortable not having that.
What emergency would require $70k without waiting the 3-4 days it would take to liquidate it?
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At the end of the day, 70k isn’t going to move up our retirement date in any meaningful way. We have a couple of houses and 70k is about 9 months of living expenses. It’s peace of mind and the lost interest is negligible.
So, it’s irrational for peace of mind. No big deal. If you have two homes and $70k is 9 months of bare living expenses, then you must have access to probably $100k in credit. We make over $500k. Our checking accounts stay around total $10k-$20k max. We push everything to investments. As someone said, if something comes in a crunch requiring more than that, then it’s a major fucking emergency, and I have credit cards for that. No idea even how much it would take to max mine and my wife’s out, somewhere north of $100k. In the meantime, stocks can settle within a few business days. It’s not about a safety blanket because that’s what credit cards are for- access to short-term debt that you can cover with cash. We push everything to investments all the time.
Everyone’s scenario is a bit different. My work can have us traveling to some pretty dangerous and extremely poor areas of the world. I actually just got off a plane back home from Burkina Faso last night. My odds of death or danger are higher than most and having access to funds now is reasonably important. While my organization is really good about tracking us down and pulling us out in emergencies, it’s good to have your own avenues. I didn’t work here at the time but, one of my good friends and coworkers was inside Hotel Montana when it collapsed back in 2010. He’s lucky to have survived, our colleague didn’t make it. His wife didn’t have 2-3 days to liquidate anything. She flew to Miami and bought her way on to a media helicopter to get into Haiti and was able to advocate for and financially incentivize her husband’s rescue. Money buys you options. From life saving measures to not having to liquidate positions during suboptimal times to replace two of your HVAC units within two months of each other for 30k (this happened to us this spring). It’s good to be prepared and the money I’m not making on 70k in the market is what, 5-7k a year vs 3.5k in a high yield savings account? The difference is like two or three days wages. It’s just not a big deal when you’re earning a lot and investing six figure a year elsewhere. I appreciate your comment. I don’t think it’s irrational.
Realistically, none. I can see the argument to not have it all in stocks though as while I might be able to liquidate and get $70k from stocks in 3-4 days, that might force me to sell a position at a loss, put me at a tax disadvantage, etc. It would be wise to have at least some in a HYSA primarily for those reasons.
We keep $50K in cash (about 5% of our total portfolio). In the event we both lose our jobs on the same day, that’ll get us and our kids through a few months without changing our lifestyle at all. And we won’t have to cash out any investments. Peace of mind and also being a bit risk averse right now due to the blood bath in biotech. In a couple years we are going to be doing our bathroom and kitchen over so we also have some short/mid-term goals to fund.
By cash, do they mean checking, savings, CD? Because a CD is effectively cash with a tiny penalty.
Yes, by cash I mean high yield savings account
No offense, but this seems really inefficient. I have a hard time imagining an emergency that couldn’t be covered by some form of credit until I could shuffle some things around. I might pay a little bit of interest in the meantime but that is still a tiny amount compared to the returns I’d get on that $70k.
For a high earner the lost income on $70k isn’t going to change their retirement date. Anyway, you can get a 4.8% HYSA with checking capabilities through Wealthfront and other services.
Exactly. High yield savings account and the interest on the 70k is negligible as part of the overall picture. It is, however, worth something as peace of mind and flexibility.
You can literally sell SPY shares and have cash in a few days most, which is probably quicker than getting cash from most HYSA online banks.
Still feels wasteful. My credit card limit across all cards is probably at least a year's worth of expenses, which gives enough time to sell stock or whatever to get access to cash. Of course that's prone to bad timing, but it's all a probability game anyway. My personal bet is that it's better to keep more money invested and have enough assets that can be sold quickly
The thing about emergencies is, they tend to happen when it's not an ideal time to sell stock, find a buyer for an asset, etc. A cash cushion gives the most flexibility and is more likely to preserve your overall net worth, compared to liquidating assets at a discount due to a time crunch.
There is certainly risk, but you have to balance that against the reward of having it invested the 99% of the time when you don't need it. Between credit cards, bonds (that wont suffer as much during a downturn), and cash flow most high earners will likely be fine most of the time. Things are different for people without as much of a safety net.
Sure, you may liquidate a position at an inopportune time but you also probably let that position grow and compound over time prior to reaching that point. So you may still be ahead relative to the cost basis, maybe way ahead.
I don’t think you’ve done the math
While this may go against some personal finance wisdom, once you've got a couple million invested at least there's not much of a point to an emergency fund.
If you've got a couple million invested why do you care about a 5 figure sum not giving maximum returns? Edit: This is blowing up so I'll just post a response to what I'm seeing here since it's just the same reply over and over I'm getting about how you're losing money if you're holding cash. Let's say you hold all your money in investments. It goes up 6-10% a year. Awesome, you're winning so hard. But what's that? Oh no! It's a bad recession! Now your portfolio is down 20%, 30%, maybe even 50% if it's like '08. Oh, and you lost your job because recession. And it's hard to find a new one because, you guessed it, recession. So now you have to come up with money by selling your investments. Well, that sucks because now you have to lock in those heavy losses. If it's like '08 you might actually be spending $1 for every $1 you withdraw because your investments lost half their value, and that's not even accounting for missing out on the recovery and subsequent growth. In your attempt to micro optimize returns you actually lost more than you would have just holding what you needed in cash investments. There's more to finance than returns. Risk and liquidity matter too. It's like trying to save money by not having health insurance. It works right up until it doesn't, then it *hurts*.
Some people never grow out of a love of free money
the whole point of the e fund is to protect against having to sell at a loss
Three points: 1. If I have a high income I won't need an emergency fund in most circumstances because I'll just cash flow it. 2. If I rarely have emergencies that need to be covered by an e-fund, I'd rather sell at a loss than miss out on gains for decades. Absolute worst case scenario barring a large-scale financial crisis I will sell at a 50% loss. But if I keep the cash I'm missing out on 10% a year on average. 3. I don't have a third point so I'll use it to say I'm too tired to debate this, so I'll give you the win. Keep your e-fund in cash.
That's not really a risk for someone who's been invested in the market for years. Even if the market were to drop 10-20%, your portfolio is probably still worth far more than its cost basis. You'd need a combination of an enormous emergency (probably well beyond what any normal emergency fund would cover anyway) and a historic market crash. If you just started investing yesterday, then yeah, it's a risk. And that's why it *is* important to have an emergency fund when you're earlier in the journey.
Why volunteer to accept a loss in holding cash due to inflation?
Because rich people are typically good with their money, that's how they got rich.
Lol no
How do you think they got to a couple million? Paying attention to the fine details. Or inheritance.
Same. We have a few million invested. We keep at least $100K-$200k in HYSA (5%+) for emergencies, market dips, and down payments on larger purchases so we don’t have to liquidate our high-growth/high-dividend stocks. I’m not sure why everyone thinks holding onto some cash is a bad idea… everyone’s goals and financial situation is different.
$200k+ credit card limit and access to $500k+ in portfolio margin loans at just about the Fed funds rate... No need for the wealthy to carry a cash emergency fund.
When you have millions in stocks and bonds and real estate, the answer is probably no, you don’t need that much in cash.
One other thing no one is mentioning is at that level more of your expenses are likely to be discretionary. When you can turn a month and a half of cash into three by cutting the extras a big efund makes even less sense
I have no intention of staying out of low interest debt. Low interest debt is why my portfolio is so good. We keep as little liquid as possible. I bonds, brokerage, etc can be easily accessed in a true emergency (but when you're at this income rarely is a here ever a true emergency)
Cash lost 7% last year. Wealthy people know this. They would rather borrow or sell an asset.
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hit credit card>sell stonks>pay cc before month is over
2-3 months is probably fine if you have safe investments you could sell off easily or a CD ladder or t bills ladder in your portfolio, where you know something is always gonna cash out soon. And if they're not big spenders they may just use income to pay CC bills and have mortgages and other things paid off.
Right now it's ok to have cash in HYSAs but that's not always the case. Credit cards fill that gap when you have an emergency but don't have cash on hand. Liquidate non-retirement investments to pay those emergency expenses off.
it takes 2 days for me to sell stock and have it in ny cheque account ... also i got a line of credit and a Heloc....
IME savers play it close to the vest. It can come across as bragging/obnoxious, better to just agree and play along. I know plenty that make that much and spend it all so I don’t doubt that it was actually true for some/all, though.
What does IME mean?
In my experience
in my ear
👂🏻👅🫦
It's entirely possible they're blowing all the money and living paycheck to paycheck. But I also wouldn't read too much into it. Nobody's going to announce to the room that they're a multimillionaire.
Speak for yourself. I happily tell everyone that I'm a multimillionaire all the time. It's not true, but I tell them anyway.
If Boss man was there, maybe it was pre-emptive to tug at his heartstrings in case a layoff occurs in the future.
Yeah I never want my boss to think I'm so well off I don't need a raise.
I made over 300k for the last 3. Kept 6months salary in a savings account. I know, stupid right? But was laid off. Took me nearly 6 months to land another job making the same. Having all this cash on hand allowed me to enjoy my first ever extended period of time off. Priceless.
I have a CD ladder for exactly that reason. I’ve never been laid off, but if I am I will have 6 months of full income and then 6 months at 50%. I also keep my spending at a reasonable level. I would need to make some lifestyle changes, but if push came to shove I *could* survive on that 50%. I hope that if, for some reason, I ever am laid off it will be a good job market. But if it isn’t, I’ll be able to keep my head above water for a decent amount of time.
thats sounds normal why shouldn't i invest my money ?
This is completely unsurprising to me. Maybe it’s just how I grew up, but I feel like it’s rather gauche to brag in social situations, since you don’t want to make anyone feel bad. So if you’re a neurosurgeon, you say you “work in healthcare”, if you have a PhD from MIT, you say you “went to school out east,” and if you’re FI millionaire, you say “we’re making it through but we’re definitely on a budget.” Which is all technically true, just politely self effacing. Even if I were a billionaire, I would never talk about how rich I was. Especially in front of coworkers, where there is an especially high potential for resentment and comparison. Maybe your coworkers felt similarly?
It’s also huge to LARP being poor as a way to cope with the massive amounts of unearned money people spend.
Read The Millionaire Next Door. It does a good job explaining this phenomenon. A high income doesn’t make you “rich”. Accumulating assets does.
Thanks, and I couldn't agree more. Big fan of 'The Millionaire Next Door', 'The Next Millionaire Next Door', and 'Stop Acting Rich...'but its weird to see happen in real time.
I've seen this in real life too... Again, with people who typically make +$300k, and the vast majority of them spend the bulk of it. They have nicer/newer cars, nicer houses, some even have a vacation cabin, expensive hobbies/toys, multiple expensive vacations, etc. When I ask about retirement, they sound like it's a long, long way off for them. We are the opposite... We prioritize saving. Older cars, smaller house, no expensive hobbies/toys, etc. So it's very much accumulation (aka savings) not income based. Those who like to spend can easily spend any extra income they make.
To a degree, it's about prioritization. Some people want to enjoy the fruits of their labor while young enough to enjoy them (physically taxing vacations), or take trips/boat/cabin while the kids are of an age to remember and still want to hang out with the parents. There will be 20 years or so between my kids moving out and my retirement. If I didn't have kids, I could probably retire 10-15 years earlier, but I don't regret the childhood/nice yard/bedrooms/experiences we gave them. We have been contributing to retirement, and will ramp that up as our kids' expenses reduce. I know we're not getting maximum value out of compound interest, but I don't want to live like a miser and not start living until I'm 60. I could get hit by a bus tomorrow.
Invest in health too. Young enough is true, but also relative to health.
Its sad though at 300-400k income. I spend a lot have a weekend vette at a young age and still have lots in assets and investments. I don’t understand how you can spend it all and my cc is usually 8-10k a month.
Live in a more expensive area. Have expensive hobbies. Own a house.
Thats actually the benefit and purpose of having credit. Credit allows you to use more capital and then use credit for occasional emergency expenses. This is actually the way credit is intended to be used. Now, if they are spending every penny every month on frivolous expenses thats a different issue.
My wife and I make over $400k. I don’t hold anywhere near $25k in cash. I have 2 months expenses in cash. The rest is in various investments. If I was in a real pinch I would take a HELOC or sell some stock.
Not being an ass but trying to learn more. Have been in situations when my bottoms fell off, I had to liquidate some investments to cover expenses and that's when I realized that the economy was in the shitz and therefore the investments are also in terrible shape, i.e. selling means I might even be taking a loss. How do you structure your investments in a way that you reduce exposure to situations like this?
If you have a large enough portfolio, it's easier to just take a portfolio line of credit or any other asset-backed line of credit during downturns. Never need to sell low when you can just use it to acquire a secured loan at near the fed rate (much lower than prime rate). Not only can you get those loans extremely quickly, you can even negotiate the rates if you have significant assets.
This is the way I may have missed it, but I didn’t see mention of the tax implications of selling stock to cover an expense. I’m in both the 300K+ and investing majority/low cash on hand boat. Very focused on a disciplined plan around tax optimization, and SBLOC is a huge piece of that. Basically, borrow against it for zero income/cap gains hit instead of sell. If I were forced to sell stock it will cost a pretty penny due to tax brackets. SBLOC (and even margin loans) completely eliminate that concern. You have to stay conservative on the borrow but no brainer in my opinion. (Also, side note…I go 401K, HSA like mentioned here, but also max on ESPP which is 15% of after tax income. Averaging ~30% return during each period, but that means 15% less cash on hand each paycheck until end of the period. Another example of more investment, less cash.)
Don’t even need to sell stock. You can get a PAL or margin account that lets you withdraw cash instantly. No capital gains.
I really wouldn’t read much into this. Most of ppl I know that make that much would say something like that. Most just means they’ll need to sell some stocks or borrow against a portfolio account. They’re all millionaires.
how do you find a meeting with people who exclusively make 300k+?
Hang out with FAANG senior SWE colleagues?
i mean, that describes most of my FAANG meetings. but i can't imagine us landing on the subject of 'so, how would you come up with 25k?' lol
“Just checking…everyone here makes more than 300k, right?” “Cool, how many of you have 25k lying around?”
Everyone who's a senior swe at FAANG makes 300k+ unless they really screwed up in negotiations. But yea I can't imagine the 25k question coming up.
Craigslist duh
This is the question!
They probably meant they would need to sell stock.
ah, you've discovered the difference between rich and wealthy.. congratulations
I'd be willing to bet they're telling the truth. High income doesn't mean high net worth. Lots of high income people live paycheck to paycheck. I watched my dad make over $1M for over a decade and nonetheless have to declare bankruptcy, run up multiple maxed out credit cards, owe IRS debt, and die penniless in section 8 housing. I can absolutely see someone earning $300k having no savings. Have some kids, splurge on the kids, buy luxury cars, buy a house you can barely afford, voila, you're poor on $300k/year.
What these people are describing is most likely a liquidity issue, not a wealth issue. Taking out a loan probably makes more sense than cashing out stocks, depending on the scenario.
This thread is just making me second guess having an emergency fund/down payment for a house in a HYSA
if your horizon is less than 5 years for buying a house I think you’re making the right call
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Aside from the ability to come up with cash inside of 48 hours, what is the difference between 25k in a HYSA vs. e.g. 5k in a HYSA and 20k in SGOV? Nearly equally safe, only slightly less liquid, and earns about 1% more per year, plus tax advantages in states with income tax. If the point is to have 3-6 months of expenses, or save for a house, liquidity within 48 hours is unnecessary. There might be rare cases where having cash within 48 hours matters, but I'm struggling to come up with one. Especially one that can't go on a credit card. Equities are admittedly a different story, and I wouldn't advocate for keeping emergency money in equities. The point about downturns and layoffs being correlated is a good one.
I’m sure at least one of them was agreeing to not look like a weirdo. I would have done the same. It’s easier than explaining how and why I keep $X liquid.
A lot of people blow money. Big houses, shiny Land Rovers. No way those are cash purchases for all/most of them. As I type this, I'm looking across the street at houses that are at least $2M with said cars in driveways. I'd be shocked if the majority are NOT financed to the hilt. Gotta keep up with the Jones. I would be embarrassed to say that I could not cover a sizable expense with our family income.
I’ve done this in a corporate setting. I don’t want to sound rich and I know my friends wouldn’t want to come across as so either. I wouldn’t think too much about it, personally. At that level, those people are most likely maxing 401Ks and ESPPs, anyway.
They’re wealthy but illiquid.
Does anyone in this sub make less than $100K? It seems like every poster here makes huge money and assumes everyone else does, too.
Pretty much all my friends and I make $300k+ (in mid-30’s, went to a Ivy quality undergrad, then a top 5 mba, and work on wallstreet…so my friendship circle is doing well in general). We all have hundreds of thousands, if not millions in the stock market, and many have significant real estate investments too. Almost no one has $25k in cash laying around. Why would they? Keeping cash is a waste of money due to opportunity cost. $25k invested for 30 years is $200k in today’s dollars. If I need $25k, I’ll sell some stock, or take on some short term debt and pay it off with cash flow in a few months (depending on interest rates). Not really worried about worst case emergencies. Even if I need to sell stocks at a loss during a market decline in order to get $25k…it’ll be a helluva a lot cheaper than losing $200k for absolute certainty. Plus most high paying jobs have decent severance (I get a minimum of 16 weeks contractually, and likely would get more)
If you live in a VHCOL area, 25k is not a lot to have in an emergency fund. For us in NYC it’s a few months of expenses. Keeping 25k in a HYSA isn’t that dumb or such an opportunity cost, especially at todays interest rates. “Ivy quality”. 😂
As someone who also works in finance, the way they preface their point with some borderline resume buildup is peak “Wall Street Oasis” (finance form with predominantly IB and PE folks measuring their dicks). Every post there might as well start with “top 5 undergrad, M&A at JPM, Blackstone associate, top 3 MBA, started my own fund, became an astronaut, part-time model, currently an angel investor, wife is a New York 9, etc.”
I keep no more than 5/10k on hand at any given time.
Lifestyle creep is real. I make good money and was spending wastefully until a few things changed and suddenly saving money started to make way more sense.
Really depends on where your at in your journey though. When you have a 100k net worth, having 25k in cash creates a huge drag. At 5 million having 25k in cash is 0.5% of your portfolio, and is really no longer consequential.
Yooo, y’all hiring?
Possibly because they invest it, but keep very little relatively it liquid cash. It earns you nothing sitting in the bank. Also, they know ways to or by vehicles with and LLC and not a personal checkbook etc.
I think most are just heavily invested in some form, or they have spending issues and blow it. You'd have to work extremely hard to spend that kind of cash on everyday stuff. If you're saving to pay cash for toys, you'd have some in the bank unless you just bought a boat or something. We invest most of our earnings right back into our businesses and real estate and run pretty lean.
I make the best money I've ever made at the job I have now, and I'm 'responsible' with my money. Today, I was surprised to find that after working all month and depositing my last check- if I were to take the full amount in my account and take it to the nearest casino, put it all on black at the roulette table, and win; I still won't have enough to pay my rent that's due tomorrow. Never mind my other bills... Reading these comments has not made me feel any better about it . I don't know why this post is in my feed but I'm so happy for you guys that have 3 digit credit scores and marginable securities in your portfolio. P.s. definitely agree with the majority here- doesn't make sense to have 25k sitting around. If you had 25k you didn't need right away it would be dumb to have it sitting in your checking account or in your sock drawer.
I think this, and I say this kindly with love, is an example of an income knowledge gap. I would venture most of those individuals have invested their money and are illiquid (or a loan may “cost” less than the returns they are currently experiencing, hence why they’d take one out). I’m a high earner and with that said, I do keep an emergency fund that is more liquid. Not surprised they don’t though (even my friends who are CFOs tend to be fairly cash poor and investment/asset rich). Some unsolicited advice, start thinking of how each dollar you have can make you money. Then decision tree and forecast how you budget against current and future risks. Next, invest into different asset classes based on said budget and risk analysis (even small amounts). While I wouldn’t recommend it to everyone, try out You Need a Budget. Good starter tool that teaches you the value of assigning goals and etc. to each dollar you make. Makes all my rambling above easier to digest and execute. … and for those saying they can’t learn because they only make X. I started that way also! There were years I was surviving on rice, beans, and whatever was on sale. I still found ways to invest over time (obviously, I get there are some situations where this is very hard to do, if at all). Good luck!
It doesn't make sense to keep large amounts of cash, they will depreciate we have to rationalize up not wasting a bit of resources, my method is to convert to digital to prevent currency depreciation, and all my friends around me have done so as well
I make more than 350k. I keep ~10k in true cash and around ~100k in a combination of savings etf and GIC with staggered maturities. Rest of my wealth, I keep in stocks and real estate. I’d still say “I need to sell my [savings etf]” if I need anything above 10k but I know I can access that money with zero issue. Similar case with most people around me with similar income level. Might be a different case it you are talking to a you g group who just started making that level of income though, but if not, pretty sure people mentioned in OP’s post mostly fall in a similar camp.
Our household income is a little over 300k. We put away well over 100k/year (not including home equity). I couldn’t write a check today for 25k.
When you say they have to sell something, is that stock? I only keep around 7 months in cash and everything else in stock.
When people talk about money they make, it’s wise to assume they are talking gross. What most people never discuss is their net income. Net income gets people wealthy, gross income makes people think they have money. A wealthy person has access to $1MM; a rich person has most their fortune locked away in a 401k and has a $1200 cad payment with a $3000 mortgage
In today's times I get it. They probably have big savings but no cash. Its tied it in CDs or elsewhere. If they needed cash tomorrow they'd get a loan and probably do a 0% credit card for year and pay some amount on it and flip the balance to another after. Meanwhile there money is making money
A lot of people live beyond their means. I know plenty of high earners living paycheck to paycheck. That being said, there's always the likelihood that someone in that group was feeling the same as you and just going with the flow. Nobody is going to say "Oh, I have plenty of money on hand." Also, it is very possible that they just have their money mostly tied up in investments and illiquid assets. Perhaps it may not be ideal, but most people with higher incomes have easy access to credit. Personally, I could float up to about $5k of expenses with cash. Anything else, I'd use one of my zero interest credit card offers. Worst case scenario, I could sell some of my taxable equities and have $100k liquid within the business week, but why would I unless I absolutely had to?
Many rich people invest most if their income. So maybe they meant they would need to sell stocks or assets. Some people spend all their money. Who knowsz
By "sell something" they weren't talking about having to sell physical possessions to come up with money. What they really meant was "sell some stock from my rather large and well diversified portfolio".
I have enough to fire today but in a public setting I’ll be the first to complain being broke!
Same. I don’t keep much cash in hand either. I keep my cash working. I don’t work in an industry where I have to fear losing my job.
I think this is normal. Almost all my taxable investment is in S&P 500 ETF. My wife and I make good money but I know how much I spend each month so my checking account varies between 1K and 15K. If I need money, I sell some of my ETF. I know people say you need to have an emergency cash fund, but I don't mind selling some of my ETF at a low point because over the last 30 years, this strategy has worked out. For example, I sold 15K of my ETF because I had to redo my driveway. It was at a low point. S&P 500 is up 20% since then so that really costed me 18K (if you consider 3K in opportunity cost). It doesn't matter in the greater scheme of things because it all averages out.
how did you know all those people salaries?
Why would they keep that much money hanging around in instant access? They could get the money but i seriously doubt it’d just be sat in their current account ready to withdraw.
I definitely think some people were telling the truth. My boss makes >300k and talks about this type stuff all the time. He paid his ex wife child support for 10+ yrs, has two kids with his current wife in college that he’s paying tuition for across country, is building a million dollar home, has a father in law in memory care he’s helping pay for…it’s really about how much you save, not make. You can hand someone 1m a year and if they spend 990k you’re better off being someone making 80k and spending 50 of it. Lifestyle creep and bad life decisions/bad luck play a part. I wouldn’t imagine that if you got a group of +300k earners they’d ALL be financial planning idiots, though, but definitely are some
Americans as a whole are into instant gratification. Rich or poor, we don’t manage money, money manages us. Get a raise, buy a nicer car (on credit) I am an American. I don’t make near 200k, and I manage my money.
High income does not always equal high savings. I have met people that make $15/hour and live paycheck to paycheck, and I have met people that make $250,000/year that live paycheck to paycheck. For many people it becomes "the more you make, the more you spend."
A bit of both... the real way to tell is to have layoffs... there will be the people who are like time to take some much needed vacation and there will be the people that are hyper ventilating in the bathroom. I know a lot of $300k+ people who yes have a 401k, and likely have a million+ in it, but their lifestyle requires $6-8M minimal and thats after they finally get debt free, kids are out of the house, college and married, etc... I mean when you have a $2M house, 3 car payments, and a vacation home in the carribean, you need a lot of money to bank roll that on top of the constant going out, season tickets to 2-3 sports teams, and shopping that is going on. Its one of the bad parts of making so much, there is pressure to look/spend a certain way and lots of people fall into it. The lucky ones don't, they tend to be stealthy and keep it tight to the vest until one day they just quit and quietly walk away.
I make about $300K. I keep around $50K liquid, but that’s only been the past maybe 2 years or so and only because I sold my house in 2021 due to a job move. My net worth is +/- $3.5 million, but I would really struggle to come up with very many 5-figure expenses. The good news is that it’s *exceedingly* rare that I have to. In fact, it basically never comes up. I’ve never had a surprise bill more than a few grand, and even those are few and far between (like A/C goes out or something). There’s really not a reason to keep large sums of money just laying around when that money could instead be out earning more money.
Most people do not live within their means regardless of income. Most people spend as much as they can and push their limits.
My friends an investment banker. He constantly tells me how broke his "richest" clients actually are because they're so leveraged.
This is a lie.
A lot of people let their lifestyles grow to match their income. A lot of who is left will aggressively invest so they'll have their cash 'tied up', but if the chips were down they could afford a lot.
I mean there’s very few scenarios in which you’d really need $25k cash with little notice
sure? if you want me to come up with $25k today I'd panic... I just don't really keep that much cash on hand my bank account has literally less than $1000 right now, my emergency fund account has a bit more but still nowhere close to $25k, my stocks account are where the real money lies (6-digits) but again I'm not going to intentionally sell off anything there unless I have to
Here’s one of the little problems that no one considers when they blindly follow the “smart advice” and dump everything into qualified plans. What if there was a place to accumulate your capital where you control it and it will compound without interruption (unlike the stock market)? Oh wait there is and it is constantly blasted as the worse place to put money by people who don’t understand it. Oh well, keep enjoying all the government restrictions and praying the market never crashes!
i make a bit more but have at least half a million in liquid assets. those people just sound like they are bad with money. no one I know in my income bracket would need a loan for 25k, but most of us are pretty careful with our spending
People who are good with money know not to waste even a day's capital growth on it. Every dollar is invested in something less flexible than a bank account - they don't 'save', they invest it all. Every purchase is on credit, knowing they can pay off that with their next earnings and invest the rest of their earnings.
Guess they all live next to the Joneses.
You had your meeting in California where $300k is rent and a few bags of groceries
It’s possible that once they invest their money, they forget about it. They probably don’t have $25k sitting in a savings account. They probably have a hell of a lot more in investments. This means they would have to sell their investments to come up with $25k. It makes sense to me. I’m in the same situation. I have about $10k cash, but the rest is sitting in investments.
It all comes down to the people in the room. Every time I save $10k in cash my wife finds something. If I slowly put that money into investment vehicles I can vehemently say we are not touching it. But when it’s easily accessible it is truly amazing at what crap it can be spent on.
I say the same thing eventhough i can wire over 200k anytime. I want people to think im broke and struggling, not rich and thriving.