PowerBag21 wrote:Is there a general consensus on how much money to keep in your checking account? I've always heard that you should have 3-6 months of living expenses in cash, but it feels kind of silly to have $20k+ sitting in my checking account rather than putting a good chunk of this into my taxable brokerage account. Would it be foolhardy to put $10k-$15k of this into my brokerage account and just keep $5k-$10k in checking?
In the "I don't practice what I preach department", I highly recommend keeping your 6 months liquid (savings account--not checking) when you're first starting out. You have to realize that you're most likely to need your emergency fund when you're unemployed, and you're most likely to be unemployed during a market downturn. So a pure-brokerage e-fund adds to your risk profile.
Now, to be honest, my wife and I, we only keep $5K in checking and everything else in brokerage. But here's why I think we can get away with it while most TLSers can't:
1. My wife and I both work, which lessens the likelihood of typical "job churn" leaving us both without any income in a given month.
2. We don't have kids or pets so we expose ourselves to less risk associated with those unexpected expenses popping up (especially when compared to a typical 4-person family with a dog/cat and associated hospital/vet bills).
3. We have two paid off cars (so no car note to wrangle). The cars are also only a couple years old and so we don't expect major repair expenses in the foreseeable.
4. We have no mortgage or student loans left.
5. Our taxable brokerage account exceeds six figures. Meaning even if the market declines by 50+% like in 1929, there should still be enough in there to cover six months of expenses.
6. Our IRAs/401Ks are roughly equivalent in value to our taxable brokerage account and could be raided in a "no shitter" emergency to keep food on the table for several years.
All this to say, I sincerely doubt many (any?) TLSers fit this profile, and I only very recently felt comfortable taking that additional 15-20K in the emergency fund out of savings and putting it back to work in the brokerage account. If you have non-mortgage debt (car/student/etc), if you are single (or have a significant other that doesn't work and doesn't offset the volatility in your income), if you're married with tons of childcare/petcare costs that are "spikey" or unpredictable, if you don't have enough in savings that you could weather a 50% "haircut" in a market downturn and still cover your emergency fund requirements, then don't do it.