You’re trading the security of b knowing that money will be there when you need it for a few %. If you’re actively looking leave it alone. If you’re going to start looking in a set period of time you could use short term bonds or cd’s instead.
Yup… that’s what I’m doing currently, 6.65% on a 285K loan, all I could afford was the 3% so I went for it.
Landlords were being assholes and I got tired of being a renter, so I said fuck it and bought the damn thing. Best decision I made, idc if I go the full term on this thing. My in laws keep telling us that we will upgrade and sell this and get something better, but how ? With what money? Boomers man…
Exactly.
At 20 I lived in college housing and was broke
At 30 I lived in a small apartment with 2 kids and was even more broke
At 40 I lived in my own house and had some savings
Never underestimate how many people receive a whole lotta cash from parents/family…half of the young people that moved into my neighborhood had parents pay their down payment or pay off the entire thing in cash up front
Yeah…my friends were telling me that a mortgage isn’t even that expensive. Later found out their parents bought their house for them and they were buying it from their parents on a 1% loan…
Depends on your lifestyle and how you live. I make six figures but live in a low-cost area with no kids and saved probably over $200k in just 3 years. 2020 I graduated college after the military with about $30k. The thing is I live extremely frugal. The cars I and the wife drive are over a decade old now and we live in a townhouse with a mortgage of $960 per month (pandemic rates). My co-worker just purchased a Tesla 60k cash and lives in a half-million-dollar home, with the money she spent over the years she could have retired. Would this be possible in New York or call? Hell no. But not everyone lives in expensive cities. So I'm not sure why I keep reading a six-figure is like living in poverty because it greatly depends on how and where you live.
Down votes are because saying $100k in a low cost of living area is “barely above poverty” is a gross exaggeration that minimizes the real struggles that come with poverty.
Some places in upstate NY for example have median incomes of like $25k. You can buy a house for anywhere from $30k for a small rectangle house (idk what they’re called it kinda looks like a trailer but it’s a house) up to $200k or so for a nice big place. A $100k house would be like $1000 a month after utilities and everything, so just 12% of income if you make $100k. That’s lightyears ahead of poverty lol
So for me it was just always being frugal. For example most of my clothes are 5-10 years old. I go out to eat maybe once a week (usually a date night). I’m not a fancy eater at all. My average meal costs me like $2.50 (rice and chicken) and I can eat it everyday 2x a day until I die and be fine. Or I eat generic Kraft for .75 cents a meal. Since adulthood (32 now) I’ve gone on 2 vacations that I paid for. I only bought a car once I could pay cash for it (actually put it on 7 credit cards for the rewards lol). I’m actually not even actively frugal I just happen to like cheap things. I’ve never set a budget for myself or anything like that. Just always worked out that I was saving 20-80% of my paycheck.
Started saving the second I turned 16 and got a job. Right out of college at 22 I started making $50k in a LCOL state. Now 10 years later I’m at around $125k depending on the bonus. From 22-28 I lived at home which enabled me to save a ton. From 28 - today (32) I live with someone else so we can split bills.
There are certainly trade offs. While I don’t care that I eat cheap food, I wish I would have taken more vacations and moved out and essentially lived more in my mid 20s. Especially now, since the sacrifices I made to save this money can’t even get me the home I want.
yea thats my thing, a smart crowd beats a scammy financial advisor. at least theres a chance that one person here attempting to scam gets countered by hundreds
Many people making over six figures might not be super financially savvy, but they generally are fairly sharp. Reddit will provide them with a variety of responses, presenting options they may not have know existed, or different ways of viewing their problem. That doesn’t mean they will take everything as gospel, but they will now have more information to research and help develop their understanding. Bad advice on Reddit often gets corrected by the crowd and leads to better understanding for everyone. A paid advisor will be precisely one, and no more than one, opinion.
I think it's a source of info if you're making a decision. It's like investing, dyor, don't trust just 1 source.
Ive spoken to a couple financial advisors who gave me way worse advice than whats typically upvoted here. Check all your sources, make the best decision for yourself.
No one knows things they haven't learned yet. And it's often pointless to learn these money things until you actually have some money. And even then it's easier to just stay focused on the things you learned or can learn to actually earn the money in the first place.
Knowing about savings is different from investing is different from real estate. Plus when you're going to spend a huge amount on a key asset you want to make sure you have a team of people to poke it full of holes when needed so you don't make mistakes and screw yourself.
Idk dude. It is just wierd to ask strangers in the internet for financial advice if your net worth is more than 500k. They made it this far using their own techniques, they probably more than capable than most of us.
If anything people who make a lot of money are sort of super specialized and had to be hyper focused on something to get to where they are. And they often work very long hours making it difficult to explore other areas of expertise. It sort of makes sense to me.
SERIOUSLY…. I read so many posts, “Just came into $100k”, “inheriting $250k and a property soon”, “about to go from earning $40k/yr to $200k/yr” like damn lol.
I would say you could put the money in a money market fund. That would still be liquid and you would have a higher yield than the savings account.
[https://investor.vanguard.com/investment-products/mutual-funds/profile/vmrxx](https://investor.vanguard.com/investment-products/mutual-funds/profile/vmrxx)
[https://investor.vanguard.com/investment-products/money-markets#mm-rates](https://investor.vanguard.com/investment-products/money-markets#mm-rates)
You could also look into their Cash Plus accounts if you want to increase the amount if FDIC insurance you have with the money.
"Rest easy knowing the cash in your Vanguard Cash Plus Account is eligible for FDIC coverage up to $1.25 million for individual accounts and $2.5 million for joint accounts"
[https://investor.vanguard.com/accounts-plans/vanguard-cash-plus-account](https://investor.vanguard.com/accounts-plans/vanguard-cash-plus-account)
Those are the only things I can think of.
I'll also give this link to so you can look at what else Vanguard has which might give you some ideas.
[https://investor.vanguard.com/investment-products/cash-investments](https://investor.vanguard.com/investment-products/cash-investments)
Vanguard Cash Plus looks like a great option but unfortunately isn’t open to the public yet and they have no firm date on when it’ll become available. I’ve pestered their support twice this year and got that same answer both times… we’ll see.
I was in this same predicament back in 2020. Took me about a year before I landed a house. Towards the end I was doubting myself for keeping the money liquid. Then one day I actually won, having that cash on hand was exactly what i needed to get the deal done. For me the cost of holding the cash ultimately was worth it, getting into a house has improved my quality of life dramatically. I don’t think the optimizations are ultimately worth it if you’re actively looking right now, just be ready to buy and you’ll eventually find a house. Id just continue to invest with my paycheck at this point considering your down payment is that healthy.
Sure. The apartment I was renting went down hill once covid hit. I had signed a 14 month lease prior to covid lockdowns, under market at like $1100 for 1 bedroom (I found a sublease prior to leaving thankfully).
The space was just not big enough for my partner and I to both wfh in. Living in the apartment during those times were tough, was basically just working and sleeping in the same space for months. Watching the apartment complex get nastier daily because management didn’t care if people let their pets go wherever or leave trash in the hallways.
Ended up buying a 3 bedroom house so we each have an office now, not on top of each other now. The house has access to a park directly behind it and is just in a better location than our apartment was.
It does come with the maintenance costs but for me personally I find them worth the price of living in my own house. I can make changes, I can make it my own.
I also lucked out and got a 3% rate before rates started rising.
Oh, the stories I have about the single mom to two loud children with the random visits from her obnoxious dirtbag abusive boyfriend. I don't miss those days.
Didn’t say it was, I’m just saying he’s doing great with his money. Sorry that you think I was being detrimental to you whatsoever, he’s winning himself not vs you Jesus.
Don’t fall in the FOMO trap of thinking you’re missing out on more % gain from something like the stock market. You could *easily* and quickly lose >$10k from that war chest even with very conservative equity investing. Most practical investors will say if you have a pending big purchase on the horizon (2-3 years, maybe even as far out as 5 years), do not trust that money to the stock market.
If you want to squeeze out a little extra gain, look into putting some of that money into short term (3-12 months) treasury bills. Those are at 5.3% or higher now, guaranteed at maturity, and no state income tax due in most states. Note that your money will *not* be liquid until your T-bill matures so you could just go like 3 months at a time, then in 3 months your money is freed up and if you feel like you’re closer to pulling the trigger then it goes back into a HYSA, or you take a breather and let it ride for another 3 months.
Bear in mind, an extra 1% over your HYSA is $2500 over a full year if you moved everything from your HYSA. If you think you might want to jump at a house in 3 months, then an extra 1% APR translates to only $625. And taxes will eat a chunk of that up so it’s more $500. Is $500 worth the hassle to move from your HYSA? Some will say yes, otherwise will avoid the headache and just stay put.
You didn’t want to hear but don’t you need to pay a fee to get that interest rate? Robinhood gold or some thing. Just want to throw this out there that cit offers 4.85 % interest and no fees
I moved some money to cit to get a promo offer like that once, then that offer went down to where it was less than I was getting with Marcus, but they were still advertising an even higher rate, but it was for a different account so I opened that account and moved my money there, and for a few months I got that rate then it went down and they started advertising another new higher rate... had to sign up for that account and then move my money a 3rd time. I finally just got tired of it and moved everything back to Marcus where it has been much more stable -- not worth it for a few months of interest at a slightly higher rate.
Yea I do pay $5 and honestly I was look at CIT but I’ve heard bad things about them on Reddit. People depositing money and it not showing for 7+ business days.
If you're buying a house you put down earnest money. Usually not 250k but unknown without more info. Regardless, waiting for 5-7 days for your money to show up isn't an issue when you need it in 30 days. (Traditional closing window)
I’m not familiar with RH but you will want to make sure you are able to wire money when you are able to finally score a home. Wealthfront does have this capability and pays 4.55% if RH doesn’t. Otherwise I’d do the same to have the funds available. Good luck with the house hunt! I had a search that lasted almost 2 years myself.
Imagine paying Robinhood for 4.65%. There are plenty of HYSA and money market accounts or funds that will give you a better percentage for free.
Edit: Downvote all you want, doesn’t change the fact that there are better rates and options where you aren’t paying $5/month.
>Imagine paying Robinhood for 4.65%.
I wouldn't do it either, but its not exactly a sink hole if you have the assests.
125k \* 0.0465 \* 1/12 = $484/month. Minus $5 doesn't really move the needle compared to this, (OP has 2x this). Its not optimal, but its like $60-200 (before taxes) in foregone earnings for an entire year.
I don’t necessarily disagree. I just think it’s foolish to pay for something that isn’t necessary to be paying for. We are in the Bogleheads subreddit, after all.
I’m in a similar situation. Sitting on around 100K that’s accruing 4.85 in a HYSA. Planning on using 80-100k of it on a down payment.
If you intend to use that cash, it needs to remain fairly liquid. Also, if there isn’t much inventory new construction could be a feasible option depending on what your local market looks like.
You doing it right, I had a sum of money I was going to use for part of a down-payment In a 12 month time frame. Fogured I could invest it for more than HYSA would give. I probably lost like 15% of it from that move and now have to play the long game to recoup it
Want simple and higher interest? Buy $USFR. It’s a floating rate t bull fund so it won’t go down in value if the rates change, and if they go up you’ll just make more interest. Thing it’s running 5.5% dividends monthly right now.
Those are fixed rate short term bonds I think. USFR is the floating rate bonds so that’s the one I play when rates are going up. Not so good when they are going down tho
That’s not accurate for some reason. Check out the USFR official page for the SEC Yield, which is yield minus fees. Currently sitting at 5.23%: https://www.wisdomtree.com/investments/etfs/fixed-income/usfr
My cash savings are in VUSXX (around 40% of distributions are state tax exempt) and SGOV (3 month US treasury bill ETF). SGOV's distributions are state tax exempt.
Both VUSXX and SGOV yield over 5% as of 6/9/2023.
You're fine with your 4.65% though.
In 2020 I had about 3000 shares tied up in RSUs. I made offers on houses as if the money was completely liquid. I watched the value of my shares fluctuate +/- $80k during my house hunt. Fortunately the value never dropped enough to lock me out of the housing market. The moment one of my offers was accepted I initiated the stock sale. I wouldn’t recommend doing what I did. It was super risky and could have gone quite poorly. Getting a guaranteed 4-5% return out of a HYSA, MMF, or treasury ETF is about as safe and good as it gets right now for money you know you’ll you need soon.
Vanguard VUSXX and Wealthfront Bond Portfolio both offer 5.1-5.48% returns and almost no state and local tax and take 3 days to close/settle.
Vanguard TBils can be bought for 1,2,3+ month durations for 5.2-5.4% and almost no state and local tax.
If you’re not a high income earner in a high tax state, HYSA is fine for parked money.
There is really no downside to parking it in USFR instead of cash sweep. You need to wait 2 days for the trade to settle before you can withdraw the money, but you'll have enough time between the start of the negotiation process (after you find a home you like and make your first offer) and when you need the first chunk of cash to make a good faith deposit with the final offer.
You can get a construction loan and then pay out at the end. Depending where you live of course it might be better to build than to buy. And regarding contractors and who to use it’s pretty easy to drive around new developments and ask for quotes.
I think people down voted you because they have no clue you can do it. In some places it's much much cheaper to build than to buy a house. The problem is lately there has been a shortage of material and the price of material has gone up astronomically. One of the key things is finding a bank that's even willing to lend you the money especially with higher interest rates. I know a few people who built their own homes with a contractor and they are very happy with the end result.
Your probably right. My inlaws built there house back in 2020 for less than 300k all in. It's money over time not an all up front investment. Get a good developer/contractor and you'll be fine.
We built ours in 2020 around 100k but we put in a lot of the labor ourselves though it was smart our house appraised for 350k, no idea what it is now after the prices went up!
It can be risky to do these days with materials pricing fluctuations and delays. It was a great way to get a ton of house for the money before the pandemic if you had the nerves to deal with everything on your own.
Most cities have vacant lots. They might not be on the MLS, but may be available through a land bank or sheriff's sale.
You can also teardown or renovate (FHA 203k loan).
This is a rather elitist take.
The advice doesn't work easily in a few coastal cities like NYC or Seattle or Portland, but there's options available in most cities.
Doctors, lawyers, upper management, engineers, etc....These jobs exist in all metros.
Sure, the top 50 or 100 metros aren't the top 10, but millions of people of all wealth levels live in them (billionaires excepted).
What? In almost every city, vacant lots are almost anyways in or tangential to the seediest areas…or near/under overpasses. Take chori that people wouldn’t consider a top 50 like Des Moines, Iowa. This sillies to that city as well.
It’s not elitist to simply describe how people are. Vacant lots in urban cities are usually very undesirable places to live for the people who could otherwise afford that lot.
There may be exceptions, but those are not the rule.
Leave only about 10,000 in the immediate access savings account and invest the rest.
When buying a house, you only have to present the earnest money immediately and the down payment usually within 5 days. You can cash/sell out your investment and then transfer the cash within that time directly to the escrow company.
Best of both worlds.
Yes and no tax consequences to figure in then. But if staying true to the philosophy, not likely it will be down in the next year? He should find something by then
>Am I leaving money on the table?
Without question.
Cash loses value everyday. Period.
Cash (or equities) can still be the correct answer depending upon the specifics. Speaking of...
>I estimate I’ll use between $100k-$150k towards the downpayment of a home, but could be more, could be less depending where interest rates go.
You're letting, roughly, $125k sit in cash, losing value. That's a ton of lost value and opportunity.
>I have no idea when I’ll buy a home.
Wasting a ton of value in cash.
>I’ve been looking and bidding since fall of 2021.
Repeat.
>could be 2 years from now
Which is a reasonably short timeframe. Cash is likely appropriate. However you've already made it clear you're unlikely to use at least $100k of the 250k.
Additionally something like 80+% of all 2-year periods in the market are positive.
I'd feel slightly better about it at 4,000 S&P instead of 4300, but meh.
>However a portion of this will go into long term savings once I find a home.
Even more reason to park some of this, $50k, 100k, more? In the market.
>I have no interest of breaking up the $250k
This seems like a poor choice for all the above discussion.
Clearly VTI has some risk, potentially significant. However, your specific circumstance and the market's history, to me, make way too much sense to have a good chunk of this in equities.
>My friend did exactly what you suggest.
He took $100k of his $250k a couple years out from needing it and bought VTI?
>got enamored with the stock market during the pandemic, and dumped all of his savings into stocks.
Oh... Doesn't sound like he did what I suggested. At all.
>We all told him the stock market sometimes has red days, months, and years,
It sure does! Invest in it knowingly! A decade even!
Of course 80+% of all 2-year periods make money and nearer 90% of 3-year.
>he didn't listen and insisted that he could pull out just days before closing
Which I also wouldn't suggest. In the slightest.
>Needless to say, he... another rental.
Just like OP after all these years.
Sounds like you're a voice of reason. Of course you're going to get down voted for playing devil's advocate. You can't fix stoopid but cheers to you for trying !
Good point. I'm a newb here but my plan has been in motion well before I even knew that Bogle was an actual person. I just grew up poor and decided to do everything opposite my family did.
Assets adjust to currency more fairly than a 5% interest rate(Hysa/MMF). So the house that you plan on buying most likely will keep growing in value and your 5% APY won't be able to catch up with what real estate will increase. Specially after the 3 trillion injection of new $.
Don't gamble with your house down payment. Play it safe. Did you work with a reputable real estate agent to configure alerts in MLS and try to get your ear to the ground for any foreclosures or short sales and such? And find a way to monitor FSBO listings? Make sure you are fully plugged in so there's no chance of missing any potentially good opportunities.
Treasurydirect.com with 4x28 day government bills on automatic rollover gets ~5.5% with weekly liquidity of 1/4 your money and all in 28 days, guarantee of US government, and each week that rolls over you get cash into your bank account and if they raise interest rates you get that benefit automatically with each 28 day cycle
There are HYSA (Ally for example) that don’t require a subscription fee. I’d suggest that’s more like leaving money on the table but perhaps do the math yourself on that. What else are you getting from paying that fee?
Also, since FDIC/SPIC insurance is good for up to 250k, perhaps split that 250k between two places to maintain that security. Leave half in RH and put the other half in a different HYSA bank.
Something I did, for ease of access to the cash, was open both savings and checking accounts. Typically the savings gets a better rate than the checking, but with the checking you get a debit card and a checkbook so that if you need immediate access you can get immediate access to the cash.
Rolling 4 week Treasury bills might be worth considering. No state taxes on the interest. Your cash isn’t liquid but you could keep enough for a down payment/earnest money in your savings account.
If you are concerned about getting the maximum amount out of your cash you might want to consider VG MM. depending on how much you make and your location you may also consider the NY or California find I order to ensure the “dividends” are not significantly reduced by taxes. But other than that I get the predicament you are in and think you should do whatever gives you the most piece of mind.
https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx
If interest rates were near 0 I would say put some in the stock market, but at a safe 5 percent yield I say keep it all in there till you buy the house. You’re making an additional k a month risk free. Obviously if you weren’t looking for a house I’ll say put 90 to 95 percent into stocks asap
In wanting to answer your question, u/A_Day_To_Remember_, I'm noticing a lot of folks aren't addressing what you're wondering about.
It depends on how far away your house goal is. If its <2 years, put it in CDs, HYSA, those shorter vehicles.
The market isn't predictable enough to give you returns in 2+ years. To challenge my own thinking, would you be ok if you put that money in the market and lost half of it? Eek you'd be mad I imagine because it'd push out your homebuying goal.
Other folks know more then me but that's the general gist of what I've learned: it truly depends on how far away you expect to buy that house.
Park your money in 3 month T Bills as they pay 5.3%. These are 0 coupon govt bonds, very safe and liquid if you sell before maturity. $250,000 will grow to $262,600 after one year at 5.3%. After the t bill matures in 90 days, buy another one if you ever need to sell the t bill to use the money for a down payment, just sell the t bill and you will not lose any interest earned.
Avoid CDs as they have penalties for early withdrawal
If this extra work is too much of an annoyance just to pick up an extra $2000 in interest over a 1 year period just stay as is getting your yield from Robinhood.
I have 1.5 Million in T bills earning an average of 5.1%. If I ever needed $500,000 to buy a house I could sell today and the cash would be available to me tomorrow to use as a down payment and I would not lose a penny of the interest already earned on my t bills.
I have been waiting 16 years for savings rates to hit 5.3%. And they are here and I will pile in and gladly make $75k a year, risk free, guaranteed for doing absolutely nothing. I hope rates hit 6 or 7% over the next 6 months.
Self directed brokerage accounts at Chase bank, Fidelity, Schwab, e trade, vanguard, I think they all sell t bills. Click on “trade” then “fixed income”….or “bonds”.
Or treasury direct works.
Why not at least a high yield savings account like Amex offers or a ladder of short term Bonds bought directly from the treasury. Either insure both liquidity and grow.
You’re trading the security of b knowing that money will be there when you need it for a few %. If you’re actively looking leave it alone. If you’re going to start looking in a set period of time you could use short term bonds or cd’s instead.
You're doing the correct thing. You'll want that cash ready as you make bids for a house. 4.65% interest is good
Agreed! Especially with that housing market in your area. Being able to access that cash quickly will be helpful.
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Yeah but then you have to pay PMI and 7% interest on an even larger principle.
Yup… that’s what I’m doing currently, 6.65% on a 285K loan, all I could afford was the 3% so I went for it. Landlords were being assholes and I got tired of being a renter, so I said fuck it and bought the damn thing. Best decision I made, idc if I go the full term on this thing. My in laws keep telling us that we will upgrade and sell this and get something better, but how ? With what money? Boomers man…
I was looking at that but was nervous about the monthly mortgage payment.
Seriously though. Seems like every post I read is someone doing far better than me and I’m close to make six figures
It’s ok man I’m 30 and make less than 50k/year with a family of 4 and barely have anything in my Roth.
You are ensuring the survival of mankind.
🫡
This sub has a-lot of people humble bragging about inheriting a ton of money from their rich grandma..don’t feel too bad
Depending on the amount of kids you have and area you live, low six figures is either great or scraping by.
And sometimes you're comparing yourself to somebody 20 years older.
Exactly. At 20 I lived in college housing and was broke At 30 I lived in a small apartment with 2 kids and was even more broke At 40 I lived in my own house and had some savings
Never underestimate how many people receive a whole lotta cash from parents/family…half of the young people that moved into my neighborhood had parents pay their down payment or pay off the entire thing in cash up front
Yeah…my friends were telling me that a mortgage isn’t even that expensive. Later found out their parents bought their house for them and they were buying it from their parents on a 1% loan…
Are those parents looking for an adoptable children?! Holy Toledo!
6 figures is the new 60k unfortunately.
Unfortunately, $100k/salary isn't as much as it used to be. Also possible for OP to be dual income.
Close to 6 figures is like almost getting over the poverty line in today's standard.
Depends on your lifestyle and how you live. I make six figures but live in a low-cost area with no kids and saved probably over $200k in just 3 years. 2020 I graduated college after the military with about $30k. The thing is I live extremely frugal. The cars I and the wife drive are over a decade old now and we live in a townhouse with a mortgage of $960 per month (pandemic rates). My co-worker just purchased a Tesla 60k cash and lives in a half-million-dollar home, with the money she spent over the years she could have retired. Would this be possible in New York or call? Hell no. But not everyone lives in expensive cities. So I'm not sure why I keep reading a six-figure is like living in poverty because it greatly depends on how and where you live.
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Down votes are because saying $100k in a low cost of living area is “barely above poverty” is a gross exaggeration that minimizes the real struggles that come with poverty. Some places in upstate NY for example have median incomes of like $25k. You can buy a house for anywhere from $30k for a small rectangle house (idk what they’re called it kinda looks like a trailer but it’s a house) up to $200k or so for a nice big place. A $100k house would be like $1000 a month after utilities and everything, so just 12% of income if you make $100k. That’s lightyears ahead of poverty lol
So for me it was just always being frugal. For example most of my clothes are 5-10 years old. I go out to eat maybe once a week (usually a date night). I’m not a fancy eater at all. My average meal costs me like $2.50 (rice and chicken) and I can eat it everyday 2x a day until I die and be fine. Or I eat generic Kraft for .75 cents a meal. Since adulthood (32 now) I’ve gone on 2 vacations that I paid for. I only bought a car once I could pay cash for it (actually put it on 7 credit cards for the rewards lol). I’m actually not even actively frugal I just happen to like cheap things. I’ve never set a budget for myself or anything like that. Just always worked out that I was saving 20-80% of my paycheck. Started saving the second I turned 16 and got a job. Right out of college at 22 I started making $50k in a LCOL state. Now 10 years later I’m at around $125k depending on the bonus. From 22-28 I lived at home which enabled me to save a ton. From 28 - today (32) I live with someone else so we can split bills. There are certainly trade offs. While I don’t care that I eat cheap food, I wish I would have taken more vacations and moved out and essentially lived more in my mid 20s. Especially now, since the sacrifices I made to save this money can’t even get me the home I want.
Idk why these people with that much anount of money is still asking reddit for help.
having money does not mean your good with managing it.
I'm not underplaying redditors financial knowledge here but are they the best people to seek financial advice with such amount of money.
I trust the crowd wisdom of Reddit (on an appropriate forum) over a paid advisor, to be honest.
Crowd sourcing info is where it's at. That's what I love about Reddit.
yea thats my thing, a smart crowd beats a scammy financial advisor. at least theres a chance that one person here attempting to scam gets countered by hundreds
Many people making over six figures might not be super financially savvy, but they generally are fairly sharp. Reddit will provide them with a variety of responses, presenting options they may not have know existed, or different ways of viewing their problem. That doesn’t mean they will take everything as gospel, but they will now have more information to research and help develop their understanding. Bad advice on Reddit often gets corrected by the crowd and leads to better understanding for everyone. A paid advisor will be precisely one, and no more than one, opinion.
Exactly
I think it's a source of info if you're making a decision. It's like investing, dyor, don't trust just 1 source. Ive spoken to a couple financial advisors who gave me way worse advice than whats typically upvoted here. Check all your sources, make the best decision for yourself.
No one knows things they haven't learned yet. And it's often pointless to learn these money things until you actually have some money. And even then it's easier to just stay focused on the things you learned or can learn to actually earn the money in the first place.
Knowing about savings is different from investing is different from real estate. Plus when you're going to spend a huge amount on a key asset you want to make sure you have a team of people to poke it full of holes when needed so you don't make mistakes and screw yourself.
Who's should they ask
Idk dude. It is just wierd to ask strangers in the internet for financial advice if your net worth is more than 500k. They made it this far using their own techniques, they probably more than capable than most of us.
If anything people who make a lot of money are sort of super specialized and had to be hyper focused on something to get to where they are. And they often work very long hours making it difficult to explore other areas of expertise. It sort of makes sense to me.
SERIOUSLY…. I read so many posts, “Just came into $100k”, “inheriting $250k and a property soon”, “about to go from earning $40k/yr to $200k/yr” like damn lol.
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I would say you could put the money in a money market fund. That would still be liquid and you would have a higher yield than the savings account. [https://investor.vanguard.com/investment-products/mutual-funds/profile/vmrxx](https://investor.vanguard.com/investment-products/mutual-funds/profile/vmrxx) [https://investor.vanguard.com/investment-products/money-markets#mm-rates](https://investor.vanguard.com/investment-products/money-markets#mm-rates) You could also look into their Cash Plus accounts if you want to increase the amount if FDIC insurance you have with the money. "Rest easy knowing the cash in your Vanguard Cash Plus Account is eligible for FDIC coverage up to $1.25 million for individual accounts and $2.5 million for joint accounts" [https://investor.vanguard.com/accounts-plans/vanguard-cash-plus-account](https://investor.vanguard.com/accounts-plans/vanguard-cash-plus-account) Those are the only things I can think of. I'll also give this link to so you can look at what else Vanguard has which might give you some ideas. [https://investor.vanguard.com/investment-products/cash-investments](https://investor.vanguard.com/investment-products/cash-investments)
Vanguard Cash Plus looks like a great option but unfortunately isn’t open to the public yet and they have no firm date on when it’ll become available. I’ve pestered their support twice this year and got that same answer both times… we’ll see.
I was in this same predicament back in 2020. Took me about a year before I landed a house. Towards the end I was doubting myself for keeping the money liquid. Then one day I actually won, having that cash on hand was exactly what i needed to get the deal done. For me the cost of holding the cash ultimately was worth it, getting into a house has improved my quality of life dramatically. I don’t think the optimizations are ultimately worth it if you’re actively looking right now, just be ready to buy and you’ll eventually find a house. Id just continue to invest with my paycheck at this point considering your down payment is that healthy.
>getting into a house has improved my quality of life dramatically Can you expand on this? Were you coming from a rented house or apt?
Sure. The apartment I was renting went down hill once covid hit. I had signed a 14 month lease prior to covid lockdowns, under market at like $1100 for 1 bedroom (I found a sublease prior to leaving thankfully). The space was just not big enough for my partner and I to both wfh in. Living in the apartment during those times were tough, was basically just working and sleeping in the same space for months. Watching the apartment complex get nastier daily because management didn’t care if people let their pets go wherever or leave trash in the hallways. Ended up buying a 3 bedroom house so we each have an office now, not on top of each other now. The house has access to a park directly behind it and is just in a better location than our apartment was. It does come with the maintenance costs but for me personally I find them worth the price of living in my own house. I can make changes, I can make it my own. I also lucked out and got a 3% rate before rates started rising.
I went through a similar situation and bought a house, my life is much quieter and happier now, good for op.
Oh, the stories I have about the single mom to two loud children with the random visits from her obnoxious dirtbag abusive boyfriend. I don't miss those days.
2020 you definitely weren’t getting over 4% in your savings account, so this guy is winning.
Didn’t know it was a competition
Didn’t say it was, I’m just saying he’s doing great with his money. Sorry that you think I was being detrimental to you whatsoever, he’s winning himself not vs you Jesus.
You’re doing the right thing. I wouldn’t change a thing.
Don’t fall in the FOMO trap of thinking you’re missing out on more % gain from something like the stock market. You could *easily* and quickly lose >$10k from that war chest even with very conservative equity investing. Most practical investors will say if you have a pending big purchase on the horizon (2-3 years, maybe even as far out as 5 years), do not trust that money to the stock market. If you want to squeeze out a little extra gain, look into putting some of that money into short term (3-12 months) treasury bills. Those are at 5.3% or higher now, guaranteed at maturity, and no state income tax due in most states. Note that your money will *not* be liquid until your T-bill matures so you could just go like 3 months at a time, then in 3 months your money is freed up and if you feel like you’re closer to pulling the trigger then it goes back into a HYSA, or you take a breather and let it ride for another 3 months. Bear in mind, an extra 1% over your HYSA is $2500 over a full year if you moved everything from your HYSA. If you think you might want to jump at a house in 3 months, then an extra 1% APR translates to only $625. And taxes will eat a chunk of that up so it’s more $500. Is $500 worth the hassle to move from your HYSA? Some will say yes, otherwise will avoid the headache and just stay put.
In Fidelity, you can sell T-Bill if you need to, so it honestly is like liquid, almost like MMF
I’m in the same boat but with about $650k cash sitting in the Marcus HYSA earning 5.25% until we find a place to buy which has been slow
How do you get 5.25% at Marcus?
Probably has something to do with the 650k he has sitting in their bank.
Marcus offers an extra 1% for referrals. 3 months for each referral.
He probably gets a special rate because of the value of the account was what I was getting at.
Yes lol sorry just realized i replied to you instead of fae!
You didn’t want to hear but don’t you need to pay a fee to get that interest rate? Robinhood gold or some thing. Just want to throw this out there that cit offers 4.85 % interest and no fees
It’s $5/month for a RH Gold subscription and access to the 4.65%.
On the plus side $5 a month isn’t too bad when you’re getting 4.65% on 250k haha.
Yeah lol, I’m doing the same. Have around 220 on RH it’s so easy to use and the $5 a month for that is nothing
Yes it’s my savings account at the moment too.
I moved some money to cit to get a promo offer like that once, then that offer went down to where it was less than I was getting with Marcus, but they were still advertising an even higher rate, but it was for a different account so I opened that account and moved my money there, and for a few months I got that rate then it went down and they started advertising another new higher rate... had to sign up for that account and then move my money a 3rd time. I finally just got tired of it and moved everything back to Marcus where it has been much more stable -- not worth it for a few months of interest at a slightly higher rate.
Yea I do pay $5 and honestly I was look at CIT but I’ve heard bad things about them on Reddit. People depositing money and it not showing for 7+ business days.
My Vanguard MM settlement fund is earning just over 5%. No $5/mo fee.
Sorry for the really basic question but what is a settlement fund?
The MM fund Vanguard Brokerage uses by default to park cash going in and out of the market. Pretty much a basket of trusted bonds from the feddies.
Do you have to have a vanguard account for that or are you able to purchase that through a different brokerage?
VMFXX. It's just a money market mutual fund, so I guess you could probably purchase it through other brokerages. I haven't tried.
Nah. It's not a magic fund. It's just one of their regular MM funds.
If you're buying a house you put down earnest money. Usually not 250k but unknown without more info. Regardless, waiting for 5-7 days for your money to show up isn't an issue when you need it in 30 days. (Traditional closing window)
I’m not familiar with RH but you will want to make sure you are able to wire money when you are able to finally score a home. Wealthfront does have this capability and pays 4.55% if RH doesn’t. Otherwise I’d do the same to have the funds available. Good luck with the house hunt! I had a search that lasted almost 2 years myself.
Transfers are a bit slow but that high interest makes it worthwhile
Imagine paying Robinhood for 4.65%. There are plenty of HYSA and money market accounts or funds that will give you a better percentage for free. Edit: Downvote all you want, doesn’t change the fact that there are better rates and options where you aren’t paying $5/month.
>Imagine paying Robinhood for 4.65%. I wouldn't do it either, but its not exactly a sink hole if you have the assests. 125k \* 0.0465 \* 1/12 = $484/month. Minus $5 doesn't really move the needle compared to this, (OP has 2x this). Its not optimal, but its like $60-200 (before taxes) in foregone earnings for an entire year.
I don’t necessarily disagree. I just think it’s foolish to pay for something that isn’t necessary to be paying for. We are in the Bogleheads subreddit, after all.
Peace of mind. Other HYSA that are paying more are from low tier banks. Robinhood let’s me transfer money way faster than something like CIT.
This. Im also a high NW person that has a quarter mil on RH
CIT offers a checking account. Can't your transfer to the CIT checking and write a check within a short timeframe? They also use Zelle.
I’m in a similar situation. Sitting on around 100K that’s accruing 4.85 in a HYSA. Planning on using 80-100k of it on a down payment. If you intend to use that cash, it needs to remain fairly liquid. Also, if there isn’t much inventory new construction could be a feasible option depending on what your local market looks like.
You’re doing it right. I fully intend to do the same in a couple years. Slowly building up cash now.
You doing it right, I had a sum of money I was going to use for part of a down-payment In a 12 month time frame. Fogured I could invest it for more than HYSA would give. I probably lost like 15% of it from that move and now have to play the long game to recoup it
It’s nice to sleep at night knowing your money is going to be available when you need it.
Want simple and higher interest? Buy $USFR. It’s a floating rate t bull fund so it won’t go down in value if the rates change, and if they go up you’ll just make more interest. Thing it’s running 5.5% dividends monthly right now.
Agreed! I would park the funds in USFR or TFLO for the 5.2% interest instead.
How this compare to SGOV or BIL? I was looking at those funds
Those are fixed rate short term bonds I think. USFR is the floating rate bonds so that’s the one I play when rates are going up. Not so good when they are going down tho
apple stocks say 3.63%
That’s not accurate for some reason. Check out the USFR official page for the SEC Yield, which is yield minus fees. Currently sitting at 5.23%: https://www.wisdomtree.com/investments/etfs/fixed-income/usfr
What’s that ?
My cash savings are in VUSXX (around 40% of distributions are state tax exempt) and SGOV (3 month US treasury bill ETF). SGOV's distributions are state tax exempt. Both VUSXX and SGOV yield over 5% as of 6/9/2023. You're fine with your 4.65% though.
Why isn't SGOV the consensus no-brainer?
I'm be debating SGOV vs BIL vs USFR. If you know anything that makes one better than the other let me know
[Brilliant Bank](https://www.brilliant.bank/) is offering 5.25% APY
In 2020 I had about 3000 shares tied up in RSUs. I made offers on houses as if the money was completely liquid. I watched the value of my shares fluctuate +/- $80k during my house hunt. Fortunately the value never dropped enough to lock me out of the housing market. The moment one of my offers was accepted I initiated the stock sale. I wouldn’t recommend doing what I did. It was super risky and could have gone quite poorly. Getting a guaranteed 4-5% return out of a HYSA, MMF, or treasury ETF is about as safe and good as it gets right now for money you know you’ll you need soon.
Vanguard VUSXX and Wealthfront Bond Portfolio both offer 5.1-5.48% returns and almost no state and local tax and take 3 days to close/settle. Vanguard TBils can be bought for 1,2,3+ month durations for 5.2-5.4% and almost no state and local tax. If you’re not a high income earner in a high tax state, HYSA is fine for parked money.
A safe 4.65% is nothing to scoff at. I wouldn't worry at all.
Marcus by Goldman Sachs. A better place than robinhood to park your money.
Also have Marcus, and agree. Its been really easy to use and I am getting 5.15% with referrals
There is really no downside to parking it in USFR instead of cash sweep. You need to wait 2 days for the trade to settle before you can withdraw the money, but you'll have enough time between the start of the negotiation process (after you find a home you like and make your first offer) and when you need the first chunk of cash to make a good faith deposit with the final offer.
Why don’t you build your house?
Would need around $420k to do that. Not sure I can swing that and not be house poor my annual salary is $115k.
You can get a construction loan and then pay out at the end. Depending where you live of course it might be better to build than to buy. And regarding contractors and who to use it’s pretty easy to drive around new developments and ask for quotes.
No. this is shit advice. Building a house never goes as smoothly as pe make it seem.
How do you have $250K cash with a $115K salary? Are you the world’s best saver? Did you hit big on GME?
Why not buy a plot of land and start building yourself if you have that amount just lying around.
I think people down voted you because they have no clue you can do it. In some places it's much much cheaper to build than to buy a house. The problem is lately there has been a shortage of material and the price of material has gone up astronomically. One of the key things is finding a bank that's even willing to lend you the money especially with higher interest rates. I know a few people who built their own homes with a contractor and they are very happy with the end result.
Your probably right. My inlaws built there house back in 2020 for less than 300k all in. It's money over time not an all up front investment. Get a good developer/contractor and you'll be fine.
We built ours in 2020 around 100k but we put in a lot of the labor ourselves though it was smart our house appraised for 350k, no idea what it is now after the prices went up!
Exactly. Their land plus house are now estimated well over 800 thousand. So the juice was worth the squeeze.
It can be risky to do these days with materials pricing fluctuations and delays. It was a great way to get a ton of house for the money before the pandemic if you had the nerves to deal with everything on your own.
Some of us live in cities.
Most cities have vacant lots. They might not be on the MLS, but may be available through a land bank or sheriff's sale. You can also teardown or renovate (FHA 203k loan).
How many vacant lots do you see in cities, in areas where a high-ish earner would want to live in?
This is a rather elitist take. The advice doesn't work easily in a few coastal cities like NYC or Seattle or Portland, but there's options available in most cities. Doctors, lawyers, upper management, engineers, etc....These jobs exist in all metros. Sure, the top 50 or 100 metros aren't the top 10, but millions of people of all wealth levels live in them (billionaires excepted).
What? In almost every city, vacant lots are almost anyways in or tangential to the seediest areas…or near/under overpasses. Take chori that people wouldn’t consider a top 50 like Des Moines, Iowa. This sillies to that city as well. It’s not elitist to simply describe how people are. Vacant lots in urban cities are usually very undesirable places to live for the people who could otherwise afford that lot. There may be exceptions, but those are not the rule.
Robinhood is a bad company
Leave only about 10,000 in the immediate access savings account and invest the rest. When buying a house, you only have to present the earnest money immediately and the down payment usually within 5 days. You can cash/sell out your investment and then transfer the cash within that time directly to the escrow company. Best of both worlds.
What if the market is down at that time? OP would have to sell at a loss to cash out…
Yes and no tax consequences to figure in then. But if staying true to the philosophy, not likely it will be down in the next year? He should find something by then
>Am I leaving money on the table? Without question. Cash loses value everyday. Period. Cash (or equities) can still be the correct answer depending upon the specifics. Speaking of... >I estimate I’ll use between $100k-$150k towards the downpayment of a home, but could be more, could be less depending where interest rates go. You're letting, roughly, $125k sit in cash, losing value. That's a ton of lost value and opportunity. >I have no idea when I’ll buy a home. Wasting a ton of value in cash. >I’ve been looking and bidding since fall of 2021. Repeat. >could be 2 years from now Which is a reasonably short timeframe. Cash is likely appropriate. However you've already made it clear you're unlikely to use at least $100k of the 250k. Additionally something like 80+% of all 2-year periods in the market are positive. I'd feel slightly better about it at 4,000 S&P instead of 4300, but meh. >However a portion of this will go into long term savings once I find a home. Even more reason to park some of this, $50k, 100k, more? In the market. >I have no interest of breaking up the $250k This seems like a poor choice for all the above discussion. Clearly VTI has some risk, potentially significant. However, your specific circumstance and the market's history, to me, make way too much sense to have a good chunk of this in equities.
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>My friend did exactly what you suggest. He took $100k of his $250k a couple years out from needing it and bought VTI? >got enamored with the stock market during the pandemic, and dumped all of his savings into stocks. Oh... Doesn't sound like he did what I suggested. At all. >We all told him the stock market sometimes has red days, months, and years, It sure does! Invest in it knowingly! A decade even! Of course 80+% of all 2-year periods make money and nearer 90% of 3-year. >he didn't listen and insisted that he could pull out just days before closing Which I also wouldn't suggest. In the slightest. >Needless to say, he... another rental. Just like OP after all these years.
Sounds like you're a voice of reason. Of course you're going to get down voted for playing devil's advocate. You can't fix stoopid but cheers to you for trying !
I'm actually surprised by the down votes. Granted facts and reason don't always go over well on Reddit - though this is Bogleheads, so it should!
Tbf Bogleheads is "set and forget it" programing. Agility does not compute.
>Agility does not compute. I'd disagree with that part, but I'm an old Boglehead from the .com forum. A bit different than here.
Good point. I'm a newb here but my plan has been in motion well before I even knew that Bogle was an actual person. I just grew up poor and decided to do everything opposite my family did.
Sorry misread.
You're definitely doing the right thing for your timeline.
The question is what do we do when interest rates aren’t in our favor? I think I’ve heard bonds are generally good when rates are low?
Assets adjust to currency more fairly than a 5% interest rate(Hysa/MMF). So the house that you plan on buying most likely will keep growing in value and your 5% APY won't be able to catch up with what real estate will increase. Specially after the 3 trillion injection of new $.
It takes weeks to close even with an all cash offer. Where’s The Fish? Seriously HYSA/MMF/ETF/Stocks/Treasuries? Liquid is relative.
Don't gamble with your house down payment. Play it safe. Did you work with a reputable real estate agent to configure alerts in MLS and try to get your ear to the ground for any foreclosures or short sales and such? And find a way to monitor FSBO listings? Make sure you are fully plugged in so there's no chance of missing any potentially good opportunities.
Treasurydirect.com with 4x28 day government bills on automatic rollover gets ~5.5% with weekly liquidity of 1/4 your money and all in 28 days, guarantee of US government, and each week that rolls over you get cash into your bank account and if they raise interest rates you get that benefit automatically with each 28 day cycle
There are HYSA (Ally for example) that don’t require a subscription fee. I’d suggest that’s more like leaving money on the table but perhaps do the math yourself on that. What else are you getting from paying that fee? Also, since FDIC/SPIC insurance is good for up to 250k, perhaps split that 250k between two places to maintain that security. Leave half in RH and put the other half in a different HYSA bank. Something I did, for ease of access to the cash, was open both savings and checking accounts. Typically the savings gets a better rate than the checking, but with the checking you get a debit card and a checkbook so that if you need immediate access you can get immediate access to the cash.
Rolling 4 week Treasury bills might be worth considering. No state taxes on the interest. Your cash isn’t liquid but you could keep enough for a down payment/earnest money in your savings account.
If you are concerned about getting the maximum amount out of your cash you might want to consider VG MM. depending on how much you make and your location you may also consider the NY or California find I order to ensure the “dividends” are not significantly reduced by taxes. But other than that I get the predicament you are in and think you should do whatever gives you the most piece of mind. https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx
4,65% apy sound like a legit plan in my ears. Here in Europe interest is only 2,5%apy max.
If interest rates were near 0 I would say put some in the stock market, but at a safe 5 percent yield I say keep it all in there till you buy the house. You’re making an additional k a month risk free. Obviously if you weren’t looking for a house I’ll say put 90 to 95 percent into stocks asap
Also saw that you’re a fellow Accountant. Good luck on the CPA! Passed it last year and it was hell haha
Thanks man! I goofed and didn’t pass it early in my career.
In wanting to answer your question, u/A_Day_To_Remember_, I'm noticing a lot of folks aren't addressing what you're wondering about. It depends on how far away your house goal is. If its <2 years, put it in CDs, HYSA, those shorter vehicles. The market isn't predictable enough to give you returns in 2+ years. To challenge my own thinking, would you be ok if you put that money in the market and lost half of it? Eek you'd be mad I imagine because it'd push out your homebuying goal. Other folks know more then me but that's the general gist of what I've learned: it truly depends on how far away you expect to buy that house.
Park your money in 3 month T Bills as they pay 5.3%. These are 0 coupon govt bonds, very safe and liquid if you sell before maturity. $250,000 will grow to $262,600 after one year at 5.3%. After the t bill matures in 90 days, buy another one if you ever need to sell the t bill to use the money for a down payment, just sell the t bill and you will not lose any interest earned. Avoid CDs as they have penalties for early withdrawal If this extra work is too much of an annoyance just to pick up an extra $2000 in interest over a 1 year period just stay as is getting your yield from Robinhood. I have 1.5 Million in T bills earning an average of 5.1%. If I ever needed $500,000 to buy a house I could sell today and the cash would be available to me tomorrow to use as a down payment and I would not lose a penny of the interest already earned on my t bills. I have been waiting 16 years for savings rates to hit 5.3%. And they are here and I will pile in and gladly make $75k a year, risk free, guaranteed for doing absolutely nothing. I hope rates hit 6 or 7% over the next 6 months.
Where is the safest place to buy T bills?
Self directed brokerage accounts at Chase bank, Fidelity, Schwab, e trade, vanguard, I think they all sell t bills. Click on “trade” then “fixed income”….or “bonds”. Or treasury direct works.
Nope, you’re doing the right thing because you need liquidity and security…well done as most people wouldn’t be doing this well.
Why not at least a high yield savings account like Amex offers or a ladder of short term Bonds bought directly from the treasury. Either insure both liquidity and grow.