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Old 09-24-2015, 11:30 AM   #21
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I typically keep an extra months worth of living expenses in my checking account.

I used to keep a years worth of living expenses in cash back when my investment income was less. If I ESR I'll set aside 2-3 years in cash first.

I no longer keep that much money in cash as my brokerage account investment income (dividends) is equal to around 73% of my living expenses and div growth rate is currently around 6% per year.

I'm 39 and working full time. Maybe I will ESR when I'm 45ish.

I'll also add that if/when I need more money than usual I would just use a credit card and pay it off the next month. I only have two credit cards but each one would let me borrow about three months living expenses in cash.

I make about twice what I spend each month and that extra money is typically invested in my brokerage account. So there is always extra cash coming in each month if I need it. Worse case scenario I sell some investments to raise cash.
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Old 09-24-2015, 11:30 AM   #22
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$10 in a checking account is admittedly too low, but I try to keep my balance at no more than $1000 or so. It only takes a few buttons to push to transfer money into checking for a big ticket item.
But as others have pointed out, OP's relative has more serious money management issues than a low checking account balance.
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Old 09-24-2015, 11:35 AM   #23
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Forget about how much money he has in the bank. I wouldn't even be going on a fishing trip if I was laid off. Unless the "fishing trip" meant a couple hours going to a local lake and everything was free.
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Old 09-24-2015, 11:59 AM   #24
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There was a time when I would routinely get my checking account down to $10-20 between paychecks. This was in the mid nineties and I was an active duty lieutenant living overseas and had purchased a house stateside (the one I live in now) and I took out a 15 year mortgage at 7.75%. I would throw everything I could scrounge up on the house and then figure out how to scrape by on the rest. Some two week stretches were easier than others. I ate a lot of cheerios. Actually I still do eat a lot of cheerios. I did pay off the mortgage in 2 years. I definitely wasn't going to the officer's club for drinks. Of course many military members lived paycheck to paycheck, the Commissary would be almost empty the day before payday because people knew that their checks wouldn't be cashed until the next day. I was doing something similar, but at least I got a house in the end. We are now FIRE'd, but I have suggested using this strategy to my DH just for fun and he is surprisingly not interested.

I suspect the OP's family member is not trying to pay off a mortgage, but is just massively disorganized. I do wonder how some people are able to function at their jobs when their financial lives are in chaos.
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Old 09-24-2015, 12:23 PM   #25
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I keep what many here would probably consider too much in my checking account but some of my hobbies (e.g. cars) can require a lot of immediate cash. There was a time, some years ago, before the Fed forced rates down so low, that I played the game of transferring money around between accounts to get the better interest rates. But at today's low interest rates it doesn't matter too much.
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Old 09-24-2015, 12:38 PM   #26
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I let my checking account go down to about $500-700 then I transfer $1000 from my MM then repeat. I virtually never have a transaction over $300 and most months have $500 or less coming out of my checking account for the whole month. Obviously i'm a very low spender and this won't work for most people but it works for me. I've never had an overdraft. Can't think of a reason to let it go all the way down to $10.
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Old 09-24-2015, 12:49 PM   #27
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OP's story reminded me of my 54-year-old friend who hasn't had a steady job since he was laid off at 41. He currently lives with his girlfriend and, in lieu of rent and utilities, has been making improvements on her house. He proudly showed me photos of his latest project on his brand-new giant smartphone.

He got a modest inheritance when his mother passed. He used most of it to buy a new boat and fix his Harley. He has lots of "toys," most of which don't run. Prior to the inheritance, he had consumed all his savings and was living on proceeds from the sale of his house.

Since getting laid off 13 years ago, he has worked occasionally as a contractor in his field, which pays quite well. But this has been phasing down to almost nothing. He told me he turned down a 3-month gig recently because he had the inheritance money now. I asked him how long that would last and he said, "well, maybe 6 months, unless I decide to fix the transmission in the truck, so I can haul the new boat to the lake."

He was here for a Labor Day gathering and BBQ at our house. I overheard him telling people he was "retired." He was getting the usual "you're so young" reactions. I just rolled my eyes and flipped the chicken thighs.
One thing I've learned from this forum over the years is that there are several versions of (and several avenues to) ER.

One could say that this guy retired 13 years ago and does odd jobs as needed to supplement. Doesn't sound like he's in any serious debt.

There's tons of people out there who more or less stumble their way through retirement and 'find a way'. Not my cup of tea but it seems to be working for him.

Not to be provocative, but....He should join us here!!
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Old 09-24-2015, 12:56 PM   #28
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OP's friend should be using a credit card, not debit card. That alone would avoid the problem he had, assuming the credit card is paid off or at least has balance available. Of course I am not advocating carrying credit card balance, and should be paid off each month. Plus get the cash back or other airmiles or whatever benefits.


My checking account varies from $5-6K to $200 depending on outstanding bills payments or timing of money coming in. Nothing that being responsible can't handle. I can transfer money from savings if required to cover any short-term need. I do not ever keep a high avg balance, I would guess it is around $1000 avg. Sounds like OP's friend does not keep up on balances, or really understand his finances very well. Maybe he should try to learn some financial education while he is out of work (hopefully short-term for his sake of spending so much!!)
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Old 09-24-2015, 01:01 PM   #29
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But as others have pointed out, OP's relative has more serious money management issues than a low checking account balance.
Absolutely. The issue here is not the guy's $10 balance in his checking account, it's his inability to manage any of his finances. I know more than one person that pretty much fits the description of this guy, and I would guess that most others do also. I hope they enjoy all their toys, big fancy houses, etc., because they will be working until they drop dead (or close to it) to pay for them all....
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Old 09-24-2015, 01:18 PM   #30
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Did you get the truck running?
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Old 09-24-2015, 01:30 PM   #31
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When working, it makes a lot of sense to me to make a HUGE effort to LBYM and save until one is FI, and to do it ASAP. Becoming FI is not an easy task, but it takes away a lot of the fear of being laid off at a relatively older age.
It's my exact motivation as well. Makes us a big exception and weird folk, but just how i'm wired.
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Old 09-24-2015, 01:52 PM   #32
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One thing I've learned from this forum over the years is that there are several versions of (and several avenues to) ER.

One could say that this guy retired 13 years ago and does odd jobs as needed to supplement. Doesn't sound like he's in any serious debt.

There's tons of people out there who more or less stumble their way through retirement and 'find a way'. Not my cup of tea but it seems to be working for him.

Not to be provocative, but....He should join us here!!
Not my cup of tea either. But you are right... he has no debt, he's happy, he's resourceful, he's employable (if need be), and he has plenty of family and friends in case the girlfriend kicks him out. He's been a great friend for over 30 years. I'm just amazed at the different paths we took and where we ended up. I can assure you he would have zero interest in the topics discussed on this forum.
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Old 09-24-2015, 01:57 PM   #33
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We keep $0 in the checking accounts. When a check appears, the credit union automatically transfers from the savings account to the checking account.


We don't use debit cards. We have several cash back credit cards that we use in rotation. Almost everything goes across the cards.


We have two checking accounts, although now we could perhaps combine them into one. My account handles a few big expenses (farm expenses), and I am the only one that writes a check against it, unless I tell my wife to pay a bill. We probably only write 10 checks a year on that account. I do pay a few bills electronically from it.


The other account is my wife's domain. She maintains it, she knows what the savings balance is associated with it. She writes all the checks. We electronically transfer money as needed between the two accounts when needed.


When I need cash, I stop by the branch and pull cash. Or I ask my wife to pull cash.


It works for us.
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Old 09-24-2015, 02:10 PM   #34
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The people living paycheck-to-paycheck always amaze me, especially when they have the ability to do better. My older sister knew a lot of people where she worked with six figure incomes but if their paychecks didn't come out before lunch they couldn't eat.

That said, there was a time in my life when my checking account balance was two cents. Really! But that was a long time ago and now it rarely goes below a few hundred, and if more is needed there's plenty in the savings account to pay for life's "stuff happens" events.
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Old 09-24-2015, 02:43 PM   #35
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Did you get the truck running?
We did get the truck running. I replaced the belt, but one of the pulleys had a bad bearing. It worked, but he was worried about pulling a boat 300 miles, so he dropped it off at the dealership to get it fixed.
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Old 09-24-2015, 03:01 PM   #36
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I am suprised at the low number posted here. I have more than 100K cash in my checking/saving accounts.
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Old 09-24-2015, 03:07 PM   #37
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Back in the mid-1980s, when I was in college and first opened my checking account, I already had a linked savings account. I wrote very few checks so I would routinely leave next to nothing in the account and use an ATM to transfer money from the savings account as soon as I wrote any checks. The savings account paid some real interest so I wanted as much of my limited money earning it. I withdrew cash from the savings account.


When I started working FT in 1985, I continued this system but one time I forgot to move money into the checking account for a day and I wrote a check which bounced (the recipient used the same bank as I did so it cleared very quickly) but the bank covered it and hit me with a NSF charge.


This led me to add a bounce-free feature to my checking account, a $2,000 credit line. So, whenever I overdrew from my checking account, the difference would go into the credit line for a few days until I would cover its small but temporary balance and pay a tiny amount in interest, maybe a dollar (which beat a $25 NSF charge).


A few years later, I changed banks and kept this linked feature but the savings account had its own checkwriting feature (which I rarely used because I was limited to 3 checks per month). I had not begun investing my surplus money in other investments but that soon changed.


Several years later, in the mid-1990s, my bank boosted its minimum balance to keep a separate, linked savings account. I didn't want to tie up the extra cash in there at the expense of my outside investments which were preforming much better. So, I consolidated the two accounts into a single checking account, basically eliminating the need for the bounce-free protection because the savings account cushion was now blended with the checking account. Since that time, I simply make sure to keep about $750 over the minimum daily balance amount to avoid monthly fees. The checking account pays little or no interest (the bank changed its terms over the years), no big deal.
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Old 09-24-2015, 03:35 PM   #38
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Not my cup of tea either. But you are right... he has no debt, he's happy, he's resourceful, he's employable (if need be), and he has plenty of family and friends in case the girlfriend kicks him out. He's been a great friend for over 30 years. I'm just amazed at the different paths we took and where we ended up. I can assure you he would have zero interest in the topics discussed on this forum.
I cannot tell you how many really good friends I have who fit this description, lol. Good people, getting by, and living in the moment. Lots of fun to hang out with, certainly, but not discuss SWR and such. Variety is indeed the spice of life.
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Old 09-24-2015, 05:32 PM   #39
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One thing I've learned from this forum over the years is that there are several versions of (and several avenues to) ER.

One could say that this guy retired 13 years ago and does odd jobs as needed to supplement. Doesn't sound like he's in any serious debt.

There's tons of people out there who more or less stumble their way through retirement and 'find a way'. Not my cup of tea but it seems to be working for him.

Yeah, I know some folks who fit this description also. It may work for a while, especially while you are still in your 50s/early 60s, but what happens when you get older and can't do those odd jobs anymore? And you've pretty much exhausted your savings? Or even more serious, what happens when you get older and get really sick, with no health insurance?

It would be interesting to check back with folks like the guy described above in 15-20 years, and see how he is faring then. My guess is not so good.
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Old 09-24-2015, 05:45 PM   #40
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Yeah, I know some folks who fit this description also. It may work for a while, especially while you are still in your 50s/early 60s, but what happens when you get older and can't do those odd jobs anymore? And you've pretty much exhausted your savings? Or even more serious, what happens when you get older and get really sick, with no health insurance?

It would be interesting to check back with folks like the guy described above in 15-20 years, and see how he is faring then. My guess is not so good.
I agree. But people like that always seem to land on their feet, albeit not in as good a shape as you or I might find acceptable. There always seems to be some GF that comes out of the woodwork or some odd life-saving windfall. Then end up knowing someone who knows someone and they get public housing and meals at the church across the street.

Again, not what how I'd want to live but.....it's RE without the FI
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