• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Wealth Pilgrim

No Money Worries. No Matter What.

Neal Frankle featured in
  • Home
  • Life Insurance
  • Investing
    • Build Strong Investment Building Blocks To Avoid Going Broke In Retirement
    • Systematic Mutual Fund and ETF Investing
    • Stock Market Investing Guide
    • Choosing the Right Investment Brokerage Guide
    • How Bonds Work Guide
    • How Banks Really Work Guide
    • Annuities – What You Need To Know Before You Invest
    • A Beginners Guide To Buying Individual Stocks
    • Create A Pool Of Great Mutual Funds and ETFs To Pick From To Secure Your Retirement
    • ETF and Index Fund Investment Guide
  • Earn More
  • Banking
  • Retirement Planning
    • Retirement Guide
  • Ask Neal a Question
  • Reviews
    • Upgrade Personal Loans Review
    • Lending Club Review
    • Prosper Review
    • Ally Invest TradeKing Review
    • CIT Bank Review
    • LegalZoom Review
    • Lexington Law Review
    • Airbnb Host Review
    • Should You Drive For Uber?
  • Tax
  • Courses
    • Raise Your Credit Score So You Can Buy a House – Free Video Course

What To Do With Money You Might Not Need Immediately

by Neal Frankle, CFP ®, The article represents the author's opinion. This post may contain affiliate links. Please read our disclosure for more info.

You already know how to invest your very short-term money. Stick in the bank and don’t worry about the low return – the liquidity and safety are what you need.

And you know what to do with long-term money too. Use a long-term growth strategy that matches your goals and comfort level.
But what do you do with cash when aren’t quite sure when you’ll need it?

I received a call from an impressive young man yesterday that had this dilemma. He’s 27 and single. He has no debt and he’s saved $150,000 over the years. (Now you know why I say that he is impressive!) We spent for about 30 minutes on the phone and here’s what he told me:

a. He wants to invest the money for growth.
b. He might need a portion of this $150,000 to buy a house sometime in the future.
c. His job is stable but he’d like to have some liquidity.

What would you suggest our friend do? My idea was as follows:

1. Split the money up into 2 buckets. Put $50,000 in his emergency liquidity fund and earmark the remaining $100,000 for investment.
2. Manage the investment account for balanced growth (a portfolio of funds that included bonds and stocks) with a 50-50 split.

Why Keep So Much Liquid?

It’s true that the $50,000 in the bank will provide close to no return. But it provides liquidity and opportunity. Since Jim has never tapped into an emergency fund, it’s very possible that he won’t have to touch that account. That means he’ll probably have that $50,000 available in case a great real estate deal comes his way.

Why Have Bonds in the Portfolio

With interest rates this low, this is a good question. The reason it’s smart for Jim to have bonds in his portfolio is because we don’t know when he’ll need the money and we can’t take the risk of putting all the money in the stock market. The bonds provide diversification and liquidity. They are not there to provide high return either.

I feel that some bonds are risky. But Jim can purchase bonds that have less risk quite easily.

Why Have Money In Equity?

Remember, Jim might need some of this money but probably not all of it. If he does need cash the money in the bank and bonds might be enough. Nobody knows if, when or how much money Jim is going to need down the line. Because of all this uncertainty, this approach is reasonable – and probably the best one out there. He has growth, safety and liquidity.

Do you think this is a good way for Jim to go? If you have money you aren’t sure you’ll need, would this be an attractive alternative for you? What might work better?

Tweet
Pin
Share2

Reader Interactions

User Generated Content (UGC) Disclosure: Please note that the opinions of the commenters are not necessarily the opinions of this site.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Are You Human? * Time limit is exhausted. Please reload CAPTCHA.

Primary Sidebar

Who is Neal Frankle

Neal Frankle

I'm a Certified Financial Planner™ with more than 25 years of experience. I feel very blessed and hope to share my personal financial experience and professional wisdom with readers of WealthPilgrim.
Read More »

Stay Connected

Facebook Twitter YouTube RSS

More Categories

Career Development
College Funding
Credit Cards
Credit Score Fixes
Money and Marriage
Debt Relief
Estate Protection
Property Investment Loans
Small Business Strategies
Spend Less Money

Disclaimer

Wealth Pilgrim is not responsible for and does not endorse any advertising, products or resource available from advertisements on this website. Wealth Pilgrim receives compensation from Google for advertising space on this website, but does not control the advertising selection or content. Please do the appropriate research before participating in any third party offers. The information contained in WealthPilgrim.com is for general information or entertainment purposes only and does not constitute professional financial advice. Please contact an independent financial professional for advice regarding your specific situation. Wealth Pilgrim does not provide investment advisory services and is not a registered investment adviser. Neal may provide advisory services through Wealth Resources Group, a registered investment adviser. Wealth Pilgrim and Wealth Resources Group are affiliated companies. In accordance with FTC guidelines, we state that we have a financial relationship with some of the companies mentioned in this website. This may include receiving payments,access to free products and services for product and service reviews and giveaways. Any references to third party products, rates, or websites are subject to change without notice. We do our best to maintain current information, but due to the rapidly changing environment, some information may have changed since it was published. Please do the appropriate research before participating in any third party offers.


About · Contact · Disclaimer & Privacy policy

Copyright © Wealth Pilgrim 2021 All Rights Reserved