What to do with cash on hand?

Submitted by DayShiftDave t3_11dtl6m in personalfinance

I (34m) have about $230k cash in my day to day savings/checking accounts. I max out my 401k, maxed out my IRA until I didn't qualify anymore, and have a low 6-figure stock portfolio about 90% invested in my employers stock. My total recurring monthly costs (e.g., incl. rent, gym, but not food) are around 30-32% of my take-home pay.

A relevant point: I currently rent a house and would eventually like to use a lot of that cash to put down on a home, but I'm not inclined to buy anything at this very moment given interest rates and home prices still very choose to peak pandemic prices in my VHCOL area (would like to buy in the same small town), but would for the right place/deal.

What am I supposed to do with the cash? I don't want to mega backdoor it into an IRA and not have it available for a house purchase, but I've also been looking at houses for two years and haven't pulled the trigger.

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MyCatsNameIsMilton t1_jaarfiw wrote

Throw it in a HYSA (paying >4.25% right now) or into the market in a sp500 or whole market fund. Instant diversification. It's stupid to hold it all in a checking account when just an HYSA would be paying >$8k/yr on it.

Side note, diversify your stock portfolio unless you really believe in your company. I worked for an incredible rocketship company and one day it dropped 40%. Sucked. Took three years to make it back to even and then I dropped it in a whole market fund.

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DayShiftDave OP t1_jaas1e0 wrote

Oh, it's already dropped 40%, and it all very conveniently happened during a trading blackout window :)

What HYSAs are paying that much? I only see mid 3's

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MyCatsNameIsMilton t1_jaasfby wrote

I'm with CitiBank - I just checked and it's at 4.00%. I may have exaggerated slightly since I hadn't checked it in a while and just assumed it went up more with the last interest rate hike.

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Maece t1_jaaq12v wrote

All depends on your time horizon for using the money and your risk tolerance. If you are going to buy a place in 6 months and use the 230k for a down payment, put it in a HYSA and call it done. If you aren't going to buy for a while go ahead and either get a CD going (very low risk) or invest the money in some broad market low cost ETFs (higher risk), or what the heck, yeet it into some crypto currency and find out (insane risk).

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Key-Ad-8944 t1_jaau3fw wrote

If you have maxed out your accounts with tax benefits such as 401k/IRA, then you could invest on your own. Examples include low fee index fund, iBonds (max of $10k per year), T-Bills (~5% for 3 months + no state tax), or a money market account ( well above 4% after fees).

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Stock-Freedom t1_jaazgqw wrote

Follow the flowchart.

My generic advice:

https://i.imgur.com/lSoUQr2.png

Here is the flowchart from the r/personalfinance subreddit’s Prime Directive. If you follow that, you will be ahead of almost all of your peers.

Stop by the sidebar to see the Common Topics, which include basic money handling and investing.

You don’t need to talk to anyone or buy some random book to do this. You have all the tools right here.

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TwstdSista t1_jabr5rb wrote

A HYSA is a great idea. But avoid Citibank - they have a tendency to freeze your account and withhold your money for many, many months.

A Money Market Fund and/or T Bills at a brokerage are also great options.

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DayShiftDave OP t1_jac8cyf wrote

What am I missing on t bills? Am I reading it correctly I can earn more on a three month t bill than I would for a year on a HYSA?

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TwstdSista t1_jac8xf4 wrote

Technically, no. A T bill yield is annualized, so you'll earn the yield divided by 12 (months) times 3 (months). And the yield might be higher today than it is in three more moths when you buy another, or vice versa.

I keep it simple with a HYSA and MMF. Although I do have some T bills within my HSA.

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dad_husband_selfi t1_jaasd5t wrote

Well, you can take advice from Warren Buffett the greatest investor of all time and invest in a low cost S&P 500 fund (which you should have been doing as you were accumulating) or you can take advice from randoms on the internet. Tough call.

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DayShiftDave OP t1_jaaz3l9 wrote

No reason for the snark, it's why this sub exists. Anyway, a few years ago I had about $30k cash and was actively saving for a down payment. My income went up a good bit and I didn't change my plan. Couple years later and the balance has gone up while I never found a place.

I also didn't grow up with much, so I am risk adverse and subconsciously inclined to find comfort in having more cash on hand than I need.

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dad_husband_selfi t1_jaazolg wrote

sorry, i was meant with humor. Good for you saving up that amount of cash. Good problem to have! lol. There's a lot of savings accounts that now offer decent yield. I saw Marcus by GS is up to 3.750%. If unsure to buy a home or invest in the market, that may be a good holding spot.

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