Why are people still holding cash?

[nuisance]

I've never put much stock in the 6-month rule. It strikes me as a very personal decision, that is hugely affected by your situation and risk tolerance. I've got almost no cash reserves, instead putting almost everything into my 401k. If I really need cash for a while, I can always borrow against that. I know that's a big no-no, but I don't expect ever to suddenly need an emergency fund either. I don't have any dependents. Just a fairly cheap college loan that needs to be paid every month, with basic living expenses, and a fiancee who would help me out financially if really needed. If I was the head of a single-income household with kids, I might plan more carefully.

Tim

[Nords]

Quote:

Originally Posted by grumpy The only cash I hold is what would be needed to make the payments on the HELOC draw necessary to cover 6 months of living expenses.* This lets me invest a larger amount for growth. Opinions?* * * Grumpy

HELOCs are great for this.

Most people stash six months' expenses without considering that they'd be doing considerable belt-tightening as the first month dragged into two, then three... so six months' cash may actually last quite a bit longer.

[BUM]

Besides all the excellent reasons for holding cash:
Warren Buffett thinking, ScareBears, bond worries, realestate (REIT) bubbles, 2 faced Saudi cartels, Euro/Yen shell games, etc. :P

Cash is king (for awhile). I move in a bit at a time when it makes sense (to me) to do so. The transition from accumulation phase to distribution phase is a slow one. These things must be done dellllllllicately. A screw up could mean back to work

In the meantime (since ER in Jan.) I've invested about 25% in equities and 25% in bonds. The cash is doing well thank you, in Vanguard both taxable and t/free money market accounts... and I feel so fresh THAT might answer to why people hold cash. You can feel it. Loan it. Collateralize it. Invest it. Hoard it. Spend it. Its about as nutty a feeling as gold bugs have about gold.

[Spanky]

Quote:

Originally Posted by BUM Besides all the excellent reasons for holding cash: Warren Buffett thinking, ScareBears, bond worries, realestate (REIT) bubbles, 2 faced Saudi cartels, Euro/Yen shell games, etc. :P

Does that mean that it is time to get rid of REIT fund holding?

Spanky

[uncledrz]

Read the HELOC documents and in many (I haven't seen all) there is an out for the bank. So in a dire emergency (yours or theirs) the funds might not be available, or at least might not be readily available. So some cash directly under your control is, IMHO, beneficial.

[MRGALT2U]

Quote:

Originally Posted by uncledrz Read the HELOC documents and in many (I haven't seen all) there is an out for the bank.* So in a dire emergency (yours or theirs) the funds might not be available, or at least might not be readily available.* So some cash directly under your control is, IMHO, beneficial.

I carry no particular "reserve" or emergency fund. I agree HELOCs are
an excellent choice. I would have one now except for two (2) things.
Our primary residence is in a flood plain and I would be required to carry flood insurance, which I never have had, and both residences are
titled in corporate name which normally does not allow me to qualify for a HELOC. For most folks who want an easy way to tap that equity, it's a no-brainer.

JG

[BUM]

Quote:

Originally Posted by Spanky Does that mean that it is time to get rid of REIT fund holding? Spanky

Depends on the holdings. See if they are doing well individually, e.g. a REIT fund thats heavy with office space might be worse off than one with single family homes and retail space. If the top 10% are declining it might be time to sell.

[cute fuzzy bunny]

I may pare off some of my reit holdings, although they're in my IRA and I wont be after that money for 20+ years yet, so maybe I'll let 'em ride.

What I've been doing though is having the dividends and gains sent off to buy small cap value index rather than reinvested though, so i'm sort of 'soft reducing' the holding.

[Zipper]

As an old Geography major from 40 years ago, I learned nobody should build on a flood plain.

[unclemick]

Duh

Most of Louisiana is a flood plain - and then, and then hurricanes push water the other way.

Atop 12' plings is a modest concession - viewing Ivan from Dallas last year was just ducky.

A fish camp is a throw away item - like a coffee cup - you can keep reusing it for a while - until you can't.

[MRGALT2U]

Quote:

Originally Posted by Zipper As an old Geography major from 40 years ago, I learned nobody should build on a flood plain.

I have owned property in this particular flood plain continuously since 1974.
The biggest problems I ever had were the mud which is left behind when
the water recedes, and where to put the dogs when they are swimming in their runs Otherwise, some simple precautions are all you need.
New construction has to be built up on pilings.

JG

[BUM]

Quote:

Originally Posted by Zipper As an old Geography major from 40 years ago, I learned nobody should build on a flood plain.

I too own coastal property. We that do spell relief F E M A
Great (cheap) insurance.

BUM

[dm]

Quote:

Originally Posted by BUM I too own coastal property. We that do spell relief F E M A Great (cheap) insurance. BUM

I'm also in the flood plain. There was about a foot of water on the property during the 93 flood. I built 7' above that so I should be OK. St. Louis would be under water before me. I pay less than $300 per year for flood insurance to cover $250K.

[Helen]

Quote:

Originally Posted by dm I'm also in the flood plain.* There was about a foot of water on the property during the 93 flood.* I built 7' above that so I should be OK.* St. Louis would be under water before me.* I pay less than $300 per year for flood insurance to cover $250K.* *

Wow, you have a deal. I bought a $100k 1200sq ranch on three acres in 1993. There is a trout stream in the backyard. In 1996 or so, we had a 100 year flood, but my house didn't get flooded. It's a daylight ranch so even if it did flood it would only flood the cement unfinished basement. It costs me $600 a year for the flood insurance and that doesn't cover any contents.

I've been thinking I'd drop the flood insurance once I pay the mortgage off next year.

I'm a big fan of insurance but in this case it doesn't seem reasonable.

-helen

[cute fuzzy bunny]

I used to get a kick out of looking at property in certain areas of the CA central valley, much of which is a flood plain. Some realtors were pretty creative: "Seasonal Stream" or "Seasonal pond" on the properties were highly touted. I translated that to "barely controlled flooding".

Wifes old house was in a special flood hazard zone. We had three big floods in the time she lived there. Water came nowhere near the place. Glad we sold it as the army corps of engineers did a few million dollars worth of work to the levies nearby last year and then after finishing discovered that the levy foundations were shot and were offering nearly no flood protection at all.

New house is 35' above the 500 year flood line. You dont have to drive far to find homes with 3' deep ditches all around them. Lots and lots of rivers around here fed by Sierra snows. Lots of snow this year. Might be posting to you from an island sometime in the near future

[MJ]

Quote:

Originally Posted by th Might be posting to you from an island sometime in the near future

Waterfront property. $$$$$

[cute fuzzy bunny]

Hey and the fishing around here is good too.