How much in the bank?

[Animeniax]

So I found out today the average American (US) has $10k in debt, and $0 savings in the bank, a fact that boggled my mind. Since I started working after college, I always made sure I had at least $3k in the bank, in case I lost my job or another emergency occurred. Now I have considerably more than that in the bank, but I'm wondering what most people think is an appropriate amount of savings for the rainy day.

[Assertn]

Liquid assets in a savings account should be enough to cover 3-6 months of expenses. Deviation is attributed to your level of risk-tolerance.

In other words, if you typically budget $1000/mo for bills, food, utilities, etc, then you should have $3000-6000 in your savings account.

This is what a financial adviser would tell you.

[Animeniax]

Originally this was going to be a bragging contest about how much money each of us actually has in the bank, but then I remembered a lot of people here are still in high school or college and are broke. Of course they can always ask their parents for money, but as for the rest of us working types, I was wondering how much people keep in their bank accounts to feel secure and prepared for unemployment or a disaster.

[Death BOO Z]

i've got around 10k of NIS (about 3.2k$), mostly from my job before the army, and the salary from it.
however, I'm still living in my paraents house, and don't have living expences. so i don't count.

[Assertn]

I prefer to freeze up most of the money that I don't need anytime soon into stocks and such to get better returns.

I do, however, have about $20k in savings so far for a potential down-payment on some property.

[itadakimasu]

The idea of saving enough for 3 months of living expenses is a good idea.

I generally keep around $2000 in savings but right now the banks looking a little bare because i've been spending alot and I have alot of stuff I haven't put on ebay yet. I bought my dad a tv for fathers day and meant to put it on my credit card that has no interest until next year but I accidentally paypal'd it out of my checking and whiped out half my account.

Since october i've been investing alot of money in Dell desktops and servers and have been reselling them for extra money ($12,000 total in the past year, 25-40% profit margin)

[Ryllharu]

I keep around the 3 months of expenses in the bank. Good thing too, because when I needed to quickly buy a new car, it made for one hell of a down payment. And since I was currently living at home, just fresh out of college, I was able to fill it back up within two and a half months of pay.

Now I just keep loading that savings account with whatever overflow I have from my living expenses and various purchases.

I don't invest a whole lot, but when I get a raise, I intend to take exactly the amount I gain directly into my retirement plan. Never saw it? You will never miss it.

[Munsu]

$100 billion

http://img401.imageshack.us/img401/4604/austinpowersmikemyersasqp9.jpg

[David75]

Around kUS$ 12 aprox 6 to 8 months expenses.
Plus some other values I would need to convert.

Wife has a lot more, but she's even more the saver type than I am...

[Assertn]

Honestly though, there are many different ways to allocate your money...it all comes down to three different factors:

1) accessibility
2) risk tolerance
3) allocation size

Obviously, the less accessible, higher risk, and higher allocation you're willing to go, the better your returns can be. The highest in this regard are typically company shareholding.

Conversely, the most accessible, lowest risk, and lowest allocation requirement would clearly be cash in your hand, which of course results in 0 returns.

Actually, I lied. When viewed from an economic-level perspective, the latter results in negative returns. If you assume an average inflation rate of 4% per year, then your money needs to earn 4% interest per year just to preserve its buying power.

This also means that a savings account that earns 0.1% interest per year results in your assets depreciating by 3.9% per year.

Money Market is the bare minimum to break even, but money that you plan to keep for retirement should definitely be frozen in equities with larger ROIs. Even more conservative stock investments will allow you to reap much greater gains. After all, the average returns from the market over a 10 year timespan is typically 11%.


Long story short.....
If you have more than a year's worth of expenses sitting in a savings account without any short term plans of spending it, you need to fix that.

[Board of Command]

Nearly $14000 in my savings account.

I plan on moving some of that into retirement savings in the near future.

[Assassin]

do you guys have seperate accounts for daily stuff and savings? Cuz i just have a savings account, and anything i makes goes into that....and i just take out whatever i need, as either cash or debit.

I only have about $600 in there rite now, which technically isn't even my money (yay for osap). Now that im working though, hopefully that will change...but honestly, till im done school and officially enter the working world, i dont see the point in saving up. I barely make enough to cover my costs anyway. Last summer i made like $1500 ish, which over the span of 4 months amounts to jack shit. Not enough to earn any reasonable interest, not enough to invest. I'd much rather use that to increase my quality of life (read: chilling).

[Board of Command]

do you guys have seperate accounts for daily stuff and savings?
Yes. I put all my earnings in the savings and only keep enough in my chequings for stuff like rent and regular expenses.

$13700 in savings
$1300 in chequing

[Animeniax]

Typically savings accounts allow limited transactions per month, so its better to have a checking account for liquid funds. Most of my money is tied up in CDs, stocks, and a savings account, with a money market account for monthly use.

@Munsu: I forgot how much #2 said the legitimate evil empire was worth, but no government ever paid up the $100 billion so he doesn't have that in the bank.

[Board of Command]

Aside from cash, I really don't have any assets aside from my computer parts. It's not a very good investment but it keeps me happy...

[Animeniax]

Yeah but you're young and on a great career track, so there's no need to save much. Plus you have your parents to help out if the need arises.

I think I have more in my 401(k) than most people here have in their total savings. And no, I'm not 42.

[The Heretic Azazel]

I have about 800 dollars saved up, but since I'm about to quit my job that shit will go fast.

[David75]

Yeah but you're young and on a great career track, so there's no need to save much. Plus you have your parents to help out if the need arises.

I think I have more in my 401(k) than most people here have in their total savings. And no, I'm not 42.

We're only talking about bank accounts right?
Because Real estate for example isn't the reliable asset you'd think it is, with massive downfall in the US and crisis starting about almost everywhere on the planet...

[Animeniax]

Right, only liquid assets, unless you don't count CDs as liquid assets, though they are easily converted to liquid minus a penalty. And being an American thinking about buying a house myself, I know real estate is an uncertain market these days, but it's a cycle so it will come around in a few years. Might be good to buy some property now so when the sector recovers, you're in the green.

[Assertn]

Yeah but you're young and on a great career track, so there's no need to save much. Plus you have your parents to help out if the need arises.
http://www.fool.com/personal-finance/retirement/2008/01/17/the-one-year-1-million-challenge.aspx

The sooner you start, the more exponential the realized gains will be.
Don't use youth as an excuse to slack off!

[Animeniax]

True, but at 19, that's beyond youth in terms of future financial considerations. I think it's more of an issue when your average 24-25 year old feels he doesn't need to save for his future or retirement.

I'll admit I've always been leery of contributing too much to a 401(k) or IRA since I like to have disposable income readily available. I worked for a company with a stock purchase program that basically guaranteed 15% return on your initial investment after 1 year, with a good chance of making even more than that. I opted out of the program because I didn't have enough liquid assets in the bank. I've beat my head against the wall ever since for this poor decision. People were making so much off this program that they reduced it to a 7.5% discount on the stock.

[David75]

Right, only liquid assets, unless you don't count CDs as liquid assets, though they are easily converted to liquid minus a penalty. And being an American thinking about buying a house myself, I know real estate is an uncertain market these days, but it's a cycle so it will come around in a few years. Might be good to buy some property now so when the sector recovers, you're in the green.

Real Estate in the USA is a bit risky nowadays.
I know that riskfull markets are a good way of gaining a lot, but it's also a way of loosing a lot.

If you're to buy a home, try to find the long term value of the homes in the are you target.
Then when the prices are within a -10%/+10% range from the long term prices, you can start searching for a home again with fair security. The risk is still there, but to a much lesser extent, and is mainly time related: you could need more time to sell than expected... which is sometimes a problem.
As of yet, prices are really too high and time to sell a house is too high too almost everywhere in the USA. So it's safe to say it's time for waiting.

The other option is the auction market, if the targeted area is well know. It's possible to have low prices now instead of waiting. It's just a bit more risky if you can't keep your head cool and due to the fact that everything goes fast and may have you overlook potential problems.

For other types of investments, I have no clue. I'm only interrested in the housing market ;)

[Raven]

I could talk about what I do with some figures and such thrown in, but being in a different country with different dollar values and different methods of investing etc to most of you, not a lot of it would make sense compared to the rest of the thread.:p

Basically, I try to keep myself debt free as much as possible. If I put something on my credit card I try to pay it off instantly and treat it more like a convenience thing rather than 'free money' like some idiots tend to.

I'm still living at home for the moment and saving 40-50% of my income each fortnight, which is quite substantial as I'm doing fairly well career wise, and hopefully I'll be getting a company car soonish so that will cut out another expense. I'd like to build a house and I'm hoping to never have to rent and just move into my own place straight away. I don't have a problem with living at home for the moment - the parents keep to themselves and I'll quite often be out of the house socializing or exercising so it's quite an independent lifestyle.

I'll give it a few more years of heavy saving and see how things turn out.

[David75]

I could talk about what I do with some figures and such thrown in, but being in a different country with different dollar values and different methods of investing etc to most of you, not a lot of it would make sense compared to the rest of the thread.:p

Basically, I try to keep myself debt free as much as possible. If I put something on my credit card I try to pay it off instantly and treat it more like a convenience thing rather than 'free money' like some idiots tend to.

I'm still living at home for the moment and saving 40-50% of my income each fortnight, which is quite substantial as I'm doing fairly well career wise, and hopefully I'll be getting a company car soonish so that will cut out another expense. I'd like to build a house and I'm hoping to never have to rent and just move into my own place straight away. I don't have a problem with living at home for the moment - the parents keep to themselves and I'll quite often be out of the house socializing or exercising so it's quite an independent lifestyle.

I'll give it a few more years of heavy saving and see how things turn out.

Using a Debit Card instead of a Credit one is what I do too. I prefer limiting my expenses and/or increase my income, rather than paying interest rates.

For the company car, it depends on the contry where you live and if puclic transportation is of good quality or not. I tend to think that the company car is more an annoyance than it is a good thing. In France for example, you pay more taxes if you have one and it's not always worth it. Plus you tend to loose great amount of time for parking, risk fines and so on. Unless a car is absolutely needed for work, I would not have it. But then I remarked that in France jobs that absolutely need a car are not interresting and/or do not pay enough...
I utterly prefer to take taxis, sometimes it's more than enough, falls in good positions for accounting for the society, isn't a burden tax wise for the employee and in most cases the total amount each month is well below the one of a company car total costs...
So i'd rather have a better salary and taxis freedom... and personal car to commute if it's really more convenient than public transportation.


Regarding the house and renting... Well I wouldn't be so sharp as you are.
There are times when buying your house is obviously the wrong choice...
It's when prices are too high.
When you're still quite young and may need to move across the country.

Houses aren't that easy to sell, you need time, and when you move you may not
have time.
If prices are too high, probability is that you can't afford one or you're stuck there because of the mortgage. Remember that the bank owns the house until it's paid fully.

I made simulations and unless I stay more than 7 years in a house, if the prices are stable, renting for the same surface is always a win as opposed to buying (because there are a lot of hidden expenses in buying/owning a home in France...)
If the market slides down even by a little amount, renting is always a win, and big $$$ at that.
In my situation, waiting 5 years and buying would be a good solution since the market is going down.

General rules for buying a home:
Be sure you'll live there long enough
Know the price trend of the area and be sure you're in a +/- 10 % trend for long term prices
If you need a mortgage buy with fix rates
Buy when rates are high if you can... correlates with 2nd point.

I know last point is hard to believe but think about it when rates are high:
Money has more value, meaning each penny you saved is more powerful to buy your home. It's also a fact that if rates are very high, lots of people will have trouble buying a home... meaning the prices probably are lower. But there will still be less competition.
If prices are lower, that means that hard earned pennies will even be stronger as to the project, reducing the amount mortgaged...

So now you have a home, a mortgage with high rate... the rate is high, so the probability rates will decrease in time is high... meaning you'll probably be able to renogociate the mortgage...

So if I summ up:
Stronger savings, Price paid lower, Small mortgage that will probably be renegociable.

[Buffalobiian]

For the company car, it depends on the contry where you live and if puclic transportation is of good quality or not. I tend to think that the company car is more an annoyance than it is a good thing. In France for example, you pay more taxes if you have one and it's not always worth it. Plus you tend to loose great amount of time for parking, risk fines and so on. Unless a car is absolutely needed for work, I would not have it. But then I remarked that in France jobs that absolutely need a car are not interresting and/or do not pay enough...
I utterly prefer to take taxis, sometimes it's more than enough, falls in good positions for accounting for the society, isn't a burden tax wise for the employee and in most cases the total amount each month is well below the one of a company car total costs...
So i'd rather have a better salary and taxis freedom... and personal car to commute if it's really more convenient than public transportation.

It indeed does depend on the country you live in. In Australia, the only people who can get around comfortably in public transport are the elderly and students. That is, people who have time to spend waiting for public transport. It's not as convenient as we'd like it to be (public transport), but that's to be expected given our sparsely populated country. Actually though, we're all concentrated in coastline cities, so it's quite crowded in places like Sydney. In general though, when you move out into the suburbs, a car is almost a necessity. We have the same problem with internet. Low profitability due to sparse population and lack of competition due to Government Owned Enterprise late last century has really taken it's toll in the form of backward infrastructure.

[Animeniax]

I prefer to use a credit card instead of a debit card since I don't want to provide a direct link to my bank account funds to any merchant where I use the card. I pay off the credit card every month, so I do get the grace period in case something happens, which is like a free one month loan.

I don't know much about housing but I do know that I made around and over $500 a month in bank interest on my accounts for the past year and a half. It's less now that the Fed cut interest rates, but supposedly they're going to raise them again to fight inflation, so bank savings interest rates should go back up. One of my accounts has a 5.65% APR with no silly requirements, but sadly that ends in 2 months, at which point it will probably go down to 3.75%. Ahh the good old days of high interest yield bank accounts, how I miss them already.

[Board of Command]

$500 a month in bank interest? Wow you're loaded...

[Animeniax]

I do ok. It's not sustainable though, since it's sort of a temporary situation. Once Fall 09 arrives, I'll spend the following three years not making any money beyond bank interest and stock gains while I go back to school, so my accounts will dwindle.

And with that, the thread goes full circle to its original intended purpose. Thanks BoC!

[David75]

$500 a month in bank interest? Wow you're loaded...

kUS$ 120 is needed with 5% interrest per year to obtain US$ 500/month if I'm correct.

120k is possible through hard work and limited expenses... like working abroad when everything is paid there, or working and living with parents that ask nothing in return. Or having a very well paid job.
Next solution is also making very nice investments. I was once pretty lucky with real estate. Waiting for next cycle ;)

[Animeniax]

Some stock tips:

SLB - Schlumberger Oilfield Services: they help the big oil companies find and extract oil and gas. When oil supply is down, their stock rises as big oil utilizes their services to find more oil. Currently trading ~$104/share.
DCP - Dyncorp International: contractor company that provides logistics and security support to the US government and private businesses. They just won 1/3 of the new LOGCAP Army support contract that is worth $15B a year for the next 10 years. That's $5B a year in revenue for the next 10 years, on top of other business they earn. Currently trading ~$16.50/share. The LOGCAP contract negotiations finalize in August.
V - Visa: credit card services. IPO'd 3 months ago at ~$55, currently trading at ~$84. Look at Mastercard, currently worth ~$290 a share. Visa is bigger than Mastercard, so you can imagine where their stock value could be in another year.

[Assertn]

I've had my reservations about Visa.
Their IPO was supposed to be a way to help the current credit crisis, and that its market capitalization relative to its growth potential is nothing to compare to Mastercard's when they went IPO. Personally, I think its overvalued, especially with a PEG of 1.82.

Also a Fool article about it:
http://www.fool.com/investing/dividends-income/2008/03/27/is-visa-worth-the-price.aspx?terms=visa&vstest=search_042607_linkdefault

My recommendations:

INFN (Infinera)
Infinera is a company that focuses on efficiency for setting up fiber optic networks. Yesterday the stock dropped 25% in light of lowered quarterly projections. Personally, I think it oversold.

NFLX (Netflix)
Netflix has been one of my more profitable investments, and with good reason. They are the big dogs for video rentals, and are single-handedly responsible for Blockbuster's downfall. They have recently released the Roku Box, which I understand has been selling out of stock as of late.

CSE (CapitalSource)
Money lender to businesses, they've obviously been hit by the credit crisis. Not only is it still undervalued, but it also has a 16% dividend yield (which is....pretty insane).

[Animeniax]

Beyond the numbers, I'm looking at real life circumstances. With the economy the way it is at present, everyone is using credit cards to give themselves some breathing room, and Visa is the largest credit card company with more acceptance and name recognition than any other card out there. They will have an advertising blitz when the Olympics arrive, where once again they are the only card accepted.

Regardless of the outcome of litigation and possibly restructuring merchant fees, Visa will continue to make money. They have little to no debt, limited expenses, and basically it's a pure revenue maker, if not at the rate that Wall Street predicts.

The Fool article is a good read, but it asks more questions than it helps to answer.

[Assertn]

Great companies are definitely important, but they are only one variable in the overall equation.

Microsoft is another great company, however its stock price hasn't grown in the past 8 years. All they've got going for them is a 1.5% dividend yield...you can do better than that in a money market account.

Edit: Woot....just increased my position in CSE. I couldn't resist.