How Much Ready Cash Should One Keep Available?

[ERN]

I just wanted to throw this out there not in a tinfoil apocalyptic way at all.

We all know it is important to diversify investments. In addition we all know cash is king.

How much "ready cash" is reasonable to keep around say in stacks of $100s?

Cash laying around is unavailable for typical investments, but definitely available for less typical deals that fall outside the eyes of Mordor. Emergency cash can also be nice for when the banks are not available or accounts are frozen. Come to think of it I can think of quite a few uses for cash.

For myself, I typically just live with a single credit card for most things and carry very little cash

Follow up question: Would you keep cash around in any other particular fiat currency? I personally think that dollars still rule. Dollars were bribing refugees out of Syria and I assume they still talk everywhere else around the world.

[TACC]

The question may have some qualifiers; are you looking to have enough to get out of the country and live for a while? Are just wanting to get out of dodge but stay in CONUS? I do not have the answer to your question but would think those two numbers may be very different for my questions?

[Chris Upchurch]

How much "ready cash" is reasonable to keep around say in stacks of $100s?

Well, to start with, I would keep a some or all of it in $20 bills rather than $100s. $20s will add to the bulk, but they are much easier to use than $100s. Lots of places won't take $100s, and at lots more where they will attract a lot of attention (potentially undesirable, depending on your reason for using your cash hoard).

Here in the U.S. dollars rule. I think you'd have trouble even getting anyone other than a bank or currency exchange to take foreign currency. Overseas, a case can be made for euros as an alternative. US dollars are still probably more widely accepted, but the euro is well known. One undisputable advantage if you have to move a lot of currency is the fact that euros are available in a 500 euro note, while the US dollar tops out at the $100 note (a deliberate choice to make moving lots of cash harder).

[Dave Sauer]

You will probably find the wise folks who have a cash stash declining to tell you how much they have. Everyone's circumstances and anticipated needs may vary. Define your needs and stash accordingly.

[strengverboten]

Big C has a point about the confidence thing.....


I'm about to buy a brand new family vehicle for myself, with cash. It isn't an expensive car (Subaru) and I could finance it - but it makes me feel more confident to own it outright.


To me, having "stuff" people can't take away is as important as having cash on hand. As far as that goes, I can do alot with the amount I keep spread around - which is probably alot less than some WT brothers have.

I started with just one month of my paycheck...then added a month of my wife's..so on.

[Mickey Rourke]

During the April 2011 tornado outbreak in my area, cash-on-hand was a life saver.

Many places couldn't/wouldn't take checks. Power outages over several counties made debit/credit cards pretty much useless, and a trip to a bank with power was an hour or so away instead of down the block.

Cash speaks a universal language.

[Bob50j]

An interesting topic that probably won't give you or anyone else here a definitive answer to the question. As stated, there are just too many variables, from what the cash is for(taking advantage of unexpected gun deals, confidence, living expenses during the rainy day, getting out of dodge, etc...) to your current lifestyle, to what an acceptable lifestyle would be after the cash is needed, to your location(the answer would be very different for someone in NYC as opposed to Miles City, MT).

I'll just say that I usually keep a few thousand on hand for incidentals and surprise opportunities. The rest is kept in a safety deposit box with it's main purpose being my confidence factor. Thankfully, I seldom if ever need to touch it except to build the stack.

[strengverboten]

Pearls of Wisdom, C as always......


100k in savings is nice....but stupid if one isn't using it to make more.


I've been guilty in the past of just "having"....man how stupid I was to not invest it

[CaptBeach]

My TIB bag serves as a get home bag when I travel...it used to have $500 in $20's, recently I upped it to $1K, it never gets touched...I also added a throwaway cell phone recently...

[ERN]

Cash in hand is not the first or only asset one necessarily needs to have. It is for circumstances just like Dr. Meade describes. Everything goes to pot and you need something to bridge until things are working again. I really appreciate the perspective of those Gulf coast folks.

As big C points out, cash on hand contributes to confidence. My list of monetary "security" priorities go:

1. Make more than you spend.
2. Save three months income in very liquid and readily available investments. Money market in my case.
3. Pay off and don't go into any stupid consumer debt.
4. Have a long term saving/investment plan.

Cash in hand supplements or is a portion of #2. It is the most liquid, versatile asset out there, and available right now. It seems a reasonable amount for straightforward emergencies would be a couple weeks expenses or the equivalent of one two week paycheck. If you want to be able to skip town and retire out of country without going to the bank again, it will obviously have to be a lot more.

I would consider gold or other precious metals more a diversification of #4 in a long term plan.

I also appreciate the recommendation of $20s instead of $100s. Good idea.

[BeardedPelican]

When I grew up overseas, we never had 100s, always 20s, 10s, and smaller bills. Some places in San Juan would get you shot if you even showed a single Benjamin.

I always prefer at least a minimum of 500$, depends on your locale and what your needs are individually.

[TFA303]

Good thoughts here - and important to distinguish between "cash" as tangible greenbacks and "cash" as liquid funds in the bank.

Given that everyone's circumstances vary, a time-based figure might make more sense. One month's living expenses in actual currency seems like a good benchmark.

A related question - how much cash do you / should you carry around on a daily basis? I don't carry much these days. Interestingly, when I lived in southern Italy, where tax evasion is more popular than soccer, everything was in cash, and it was not uncommon for me to have several hundred Euros in my pocket just when going out to dinner. Paying the rent meant handing over a wad of a couple thousand on the front porch every month. Felt very pimp.

[AlwaysVigilant]

My goal is to get to the old stand by of save 10%, invest 10%, give 10%, live off 70%. I have no idea if this is still a good way to live, but it seems ok. To the extent of the save 10%, C is right on with the law of diminishing returns. At some point it will be large enough that some of it needs to be working for you. The cash on hand is a comfort thing for sure, but even in some methods of investing quick liquidity is prudent in spite of the week rate of interest...just to have options for cash when you need it. My cash on hand is pretty small...as is my income in relation to some of you guys...but it works for me. I have enough to get out of any realistic emergency without needing to rely on credit...that is my comfort zone.

[JustMe]

my rule of thumb:

what is your total cost of living for two months?

minimum, have that in $20 bills. everywhere i go it seems few use cash anymore. anything over $20 bills "freeks out" some cashiers. the $20 get you out without any drama ...

[TrojanSkyCop1]

Great perspectives on this thread all around gents, especially from Colombianito, thanks!

[Web Services]

Cash is king and cash makes people drool. All depends on whether it's for emergency or for using. We all know the biblical story of the dude who was chastised for burying the money under ground instead of investing it and growing it. Cash on hand should obviously not be considered an investment. So that leaves two scenarios for its use.

1) Complete emergency, which realistically boils down to lack of access to your bank for withdrawal or electronic card use. There are lots of different types of emergencies, but the only one that matters in this situation is if you can't withdrawal or use your cards. The amount you need depends on how long access to the bank might realistically be blocked. Anywhere from a few days to a few weeks? (a historical study would be good here). I don't see how a bank could stay down for months on end. If you want to plan for that, you may as well keep ALL your money out of banks except for what you want to spend electronically on Amazon or whatever.

2) Spending. Cash is useful for garage sales, getting discounts with service people, hiring local kids to mow the lawn, using the car wash, random acts of giving, buying the spouse a gift with no electronic record to spoil it etc etc. And cash has a lot of power if you want to buy a vehicle, can easily save hundreds or thousands in most cases. But here is the problem, if the bank isn't down, you can always just go withdraw what you need for the big purchase anyway. So considering garage sales and service people, some smaller amount like hundreds, perhaps up to a thousand, seems rational for those random needs. Planning a car purchase or getting massive discounts to construction people for a remodel, you can just take it out of the bank as needed.


One last thought, banks aren't investments. Unless you have a zillion dollars in a savings account, the .002% interest you get isn't much better that stuffing it under your pillow. So keeping the money in a savings account has little benefit except it may be safer than under your bed, and you're less likely to spend it at random. It is liquid funds either way. Any real investment is not going to be liquid, your 401k, or Money Markets, or bonds, or whatever. You have to separate liquid funds from investment funds. Investment funds have tax issues attached to them, less so on liquid.
That means the real question is whether to keep your liquid funds in a savings account, or in cash on hand. If you have little savings, perhaps cash. If you have tons and tons of savings, you should start splitting between cash on hand, bank savings, and investments.

[JustMe]

i just had a tree cut down. the offered cash price for the job was much less than other payment methods. cash seemed like a good "investment" to me.

[SheepDog68]

i just had a tree cut down. the offered cash price for the job was much less than other payment methods. cash seemed like a good "investment" to me.


I will many times ask for a cash price once I have been quoted a "regular" price! Works more times than not.

SD

[Goodspeed(TPF)]

Yup, as has been said, CA$H is King. How much should you have on hand? = How much can you afford to have on hand? Exactly that much.

[Mickey Rourke]

anything over $20 bills "freeks out" some cashiers. the $20 get you out without any drama ...Like C says, it depends.

I remember when most convenience stores and gas stations wouldn't take anything larger than a $20, but mine don't seem to have a problem with any denomination of bills now-a-days. And my area isn't nearly as affluent as the one C described in his post.


i notice clerks eyeballing $20's more then the $100's for counterfeit bills. IIRC, $20's are then most cost effective to be counterfeit.

[Bob50j]

Yup, as has been said, CA$H is King. How much should you have on hand? = How much can you afford to have on hand? Exactly that much.


When everything is considered, this is your answer...

[Doug Little]

During the April 2011 tornado outbreak in my area, cash-on-hand was a life saver.

Many places couldn't/wouldn't take checks. Power outages over several counties made debit/credit cards pretty much useless, and a trip to a bank with power was an hour or so away instead of down the block.

Cash speaks a universal language.

This is exactly what happened during the 1989 San Francisco earthquake, properly referred to as the Loma Prieta quake. ATMs and credit cards machines didn't work...no one was taking checks. If you had cash, you were good, if not you weren't buying anything. The power started returning on day 2...long time to wait when there is no running water, no lights, etc. We always have a chunk of $$$ in the safe now for just such an event. Small denominations.

[SheepDog68]

Also after being around a buddy that always carried cash I have started to carry a titanium money clip or even folded bills with a rubber band around them if I will be going through metal detectors.

The rubber band also grabs your pocket so is less likely to fall out of your pocket. It also holds more bills than a money clip which is nice if you are carrying $5,10 & 20's instead if just a few $100s.

[Jons999]

I keep at least 2K in the safe, all $20's. I also like to have at least $300 on me at all times. There's been times that i've made several random purchases in different locations in one day and my debit card got turned off because the card company thought it was suspicious activity. Always have enough cash to get you home from where ever you are. Another good reason for cash close at hand. When you run across people that are down on there luck and need cash fast you can buy cars, tools, electronics, etc for much less than it is actually worth. When you have cash money in your hand in front of someone you can negotiate a great price. This is how pawn shops make their money, you can do the same by buying and reselling or getting great deals for things you need. I recently picked up a one month old chainsaw from an out of work tree cutter. It was an $800 saw, i gave him $350 and sold it the next day for $500.

[azDevilsFan]

For those with a mortgage I'm curios whether this makes sense?

My mortgage holder sends me a payment slip as soon as they receive the previous payment. This results in me having them well before the 1st of the month.
I've taken to paying another payment (and additional principal) as soon as I can afford it.

At this point I don't strictly have to make a payment until January 2014 per the payment slip. I sort of figured that this would be nice if something happened and I then didn't have to make a payment for 6 months or so?

It's not cash on hand (I have some of that as well) but it is a debt that I can ignore for a period of time.

[AZBanks]

I find gas stations are more willing to take a $100 bill if you say "fill it up". They assume you are not going to be getting much change back these days(sadly, they are right).

[SheepDog68]

For those with a mortgage I'm curios whether this makes sense?

My mortgage holder sends me a payment slip as soon as they receive the previous payment. This results in me having them well before the 1st of the month.
I've taken to paying another payment (and additional principal) as soon as I can afford it.

At this point I don't strictly have to make a payment until January 2014 per the payment slip. I sort of figured that this would be nice if something happened and I then didn't have to make a payment for 6 months or so?

It's not cash on hand (I have some of that as well) but it is a debt that I can ignore for a period of time.

You are locked in to only one thing with this approach. Many problems can be sidetracked with a few hundred bucks applied correctly and timely. Dave Ramsey calls it an emergency fund and I guess that is as good a name as any.

SD

[CB3]

While $20'S "rule", that is when goods and services are selling for their current value. When times are really hard, it might take quite a stack of 20's to get what you need.

During such times, a $50 can be 2 1/2 times better than a $20. When you need larger denominations, people will not only take them, they may prefer them. Having only $20's is a pain, especially if you are going to be carrying a substantial amount of cash.

Do not keep it or carry it all in one place.

Your pocket is not necessarily the safest place.

Extra stored in the house should be in a grab & go form, such as in a 32 oz insulated mug with hot chocolate spilled on the top & outside and numerous scratches, dents and black marks. Thrown on the floor of your vehicle it could be almost invisible--hidden in plain sight.

While cash is king, it may not always be. Some diversification, such as with some gold or silver coins, or other highly barterable items, adds to that feeling of being self-insured.

[azDevilsFan]

You are locked in to only one thing with this approach. Many problems can be sidetracked with a few hundred bucks applied correctly and timely. Dave Ramsey calls it an emergency fund and I guess that is as good a name as any.

SD


It's not cash on hand (I have some of that as well) but it is a debt that I can ignore for a period of time.

How so? I have OP topic "cash on hand" as well.

[Jons999]

Also i might add, hold on to your cash as long as possible. I pay for everything with my credit card, then pay it off completely before the end of the billing cycle. I use the credit card companies money for a few weeks and pay it off without paying a penny in interest or fees. Which means i have a decent amount of cash available most of the month in case of emergency.

[SheepDog68]

How so? I have OP topic "cash on hand" as well.

Sorry I must of missed the line where you stated you have cash as well.

I have paid ahead on principle before, but not usually ahead on interest if that is what you are talking about.

I prefer a larger cash fund than months ahead on the payment for most things I can think of.

SD

[bae]

I do a large portion of my daily business in cash. People working in my local economy seem to prefer cash, for some odd reason.

I usually keep a month or so's expenses in cash, because I hate bothering to go to the bank, and during the summer months tourists sometimes vacuum dry the one useful ATM machine here.

I find I can almost always negotiate decent discount deals by paying cash, for everything from gravel to medical care.

I also find having "extra" cash around to take advantage of garage/estate sales, guys selling off guns at the club, and similar opportunities-of-the-moment is a win. Cash can get you a big score, in a situation where the deal might not even exist if you have to use a check, or go to the bank.

The "correct" amount depends entirely on your circumstances.

[bdcbbq]

My personal preference is to have between $500-$1000 in cash for walking around money and replenish weekly. Lately, that hasn't been possible but I hope pay off some extra and unexpected bills soon to be back in that position. I did raise my ATM limit to allow for larger cash withdrawals than my bank normally allows.

[azDevilsFan]

Sorry I must of missed the line where you stated you have cash as well.

I have paid ahead on principle before, but not usually ahead on interest if that is what you are talking about.

I prefer a larger cash fund than months ahead on the payment for most things I can think of.

SD

Some portion of each payment goes to interest based on the remaining unpaid loan balance.
Paying in advance reduces the principal as does the additional principal, so while some interest is being paid in advance it will eventually be paid anyway, and the overall interest paid on the loan is reduced.

This is the basis of accelerated payoff based on making one additional payment per year.
This along with having several months of fixed expenses covered in cash is where I try to keep things.