Running on thin ice – you know exactly what this post is about everyone? I know, very ambiguous and disguise-like, but it’s how I’ve been running over the last 5-6 months. This year has had many events, opportunities and actions that has had me running on thin ice, but for some reason – it’s becoming less and less “scary”. What do I even mean about running on thin ice, one may be asking? One slight cue – it deals with cash. And not simply just cash but…I mean running low on cash during each and everything month in my savings investment account. This is the account I use to make extra payments towards my mortgage and investment purchases. For the record, I do have another savings account, where I have approximately $1,500 in, and a credit credit, but I make sure I pay off the balance in full each month. During 2014, it felt like I always had ample cash, say $5,000 to $10,000 sitting in my savings for investment purposes, at all times. It felt like I could pounce on any opportunity that came by. Well, 2015 is definitely a different story, but why? How does it feel? Am I concerned? Is this dangerous? I mean, wow, currently I am sitting at $161.92 in my savings account for investment purposes, given that I just made a $1,500 investment back into JNJ last week. Here is a snap shot:
Only $161.92. That’s it. Thin ice? I’d say for sure. I think most of us would be shaking with their legs a bit here. I was initially worried and concerned, as my balance has hit these lows before this year. Today, I’m going to discuss (1) why it is at this level (2) how it feels at this level (3) Concerns at this level and (4) what I have learned with running on thin ice. It’s amazing, to say the least and more frustrating actually, than anything.
Why Am I Running on Thin Ice?
It’s actually quite interesting. Few reasons, easy reasons, come to mind. Through the date of this writing – I have made a capital contribution to investments in the amount of $12,077 – and I’m not even through 6 months fully yet! That is over an average of $2K per month – not even including dividend reinvestment nor 401k contributions. It all began in January when I purchased Rockwell Automation, Tupperware and DOW Chemical early on. Then other opportunities came to my door, such as additional Caterpillar investments (purchased those bad boys twice!), Johnson & Johnson (Twice!) and even a decent chunk back into DOW Chemical and HCP, the REIT. As soon as cash was deposited into this account from my salary, it was almost being transferred into my brokerage account just as quick to be used on purchasing a dividend paying, cash flowing asset. However, that does not stop there, at all.
I created an article asking the community if one should invest or pay down the mortgage some time ago. And wow… that has been a fun debate, not just with this wonderful community but amongst Bert, friends and family. It’s a debate in the investing community and personal advising arena, all of the time, as well. Given thad I had established steep goals for the year of 2015 – paying down an extra $500 per quarter was one of those goals. As of this writing, I have fulfilled half of that goal and actually have another $500 set to go out at the end of June – as I like to do my quarterly paydown at the beginning of the quarter, rather than the end. That is another $1,000 and as soon as more savings comes in this week – another $500 will go down to it, to round that to $1,500. However, keeping the math simple – the $1,000 so far plus the additional $12,077 in investment purchases comes to a total capital outlay of $13,077 this year… holy smokes. This obviously doesn’t even consider my normal fixed monthly payments for my mortgage, P&I, auto, etc.. Yet another reason why I have been running on thin ice. Wait, we aren’t finished… yet.
Wedding season. Wow is it wedding season. I currently have or have had 8 save the dates on my refrigerator. Not just that, but I am also in 3 of the weddings. As of this writing – I have been to 3 and in 1 of those and have 5 more to go. I have had to buy 2 full suits, rent a tuxedo, dry clean my other suits/dress shirts and also drive quite a bit. This doesn’t even consider bachelor parties, gifts and time. Would I trade these occasions for anything in the world? Hell no, but damn… does the price tab add up. I would say just thinking of those items, which I can easily drill down to how much it truly has cost me – is somewhere in the ballpark already of $1,350. Damn, that’s an investment purchase right there! I have 2 weddings that I am in on July 3rd and July 4th, yes back to back and guess what the kicker is – they are in different states… talk about madness, but I’m looking forward to it all. I guarantee at the end of July, I’ll be down approximately $1,700. Then I’ll be on cruise for almost two months, until the last 3 come towards the fall time. Phew. When you add this amount to the earlier section above – that is over $14,350 in capital outlay, with the $1,350 extra being a rough swag number. No wonder I am running on thin ice. Good thing my skates haven’t gone out on me.
How does it feel?
Honestly, it actually makes me focused more. It’s very weird. I thought my budgeting tactics and financial sense of where I am during the month was sharp before – it that much more on point. As you can see from my monthly updates (though May hasn’t been posted yet, but I can tell you for a sneak preview – I was either just at or above 60% savings…), that it hasn’t impacted the goal to save 60% every month, I am just that much more aware of what’s on the horizon and have made more selective choices on what I have spent my money on. I haven’t gone shopping for clothes, at all, this year for myself outside of wedding attire, I haven’t gone on any trips yet and haven’t purchased a laptop that I was considering for the blogging endeavors just yet. I feel focused.
It’s also exhilarating, in a way. Yes, I do have some cash left to the side in another account (~$1.5K), but I think running on thin ice has allowed me to worry less. I have ran this thin for almost half a year and guess what – NOTHING has happened. Not saying that that could change, but it makes me feel that I have more control than I thought – with events, with purchasing, forceful savings, etc.. It makes me feel that I am in control of money, essentially – and Tawcan recently wrote an article about respecting your money.
How else do I feel about running on thin ice? It makes me be strategic also – is there anything extra I can do to bring in more income/cash? I had been more selective in credit cards I’m using for purchasing on what gives the most cash back, I have sold gift cards I never used before, I sold my old smart phone that I didn’t use for almost a year – it’s making it more of a challenge to bring in more cash. Currently, I have around $75 in my main credit card for rewards that I’ll simply cash out today and place in my account as more savings – which this instance has also showed that I’m cashing out more often, because there is no further benefit of letting the reward “ride up”.
Concerns at This Level
Do I have any concerns of running at this level? Of course I do. What are those concerns though from running on thin ice every month? It honestly comes down to missed opportunities in the market place! A lot of stocks are still on sale, and if I had $5-$10K laying in the account, I would be firing, just like Mantra has been over the last 30-60 days, he has been on a tear! I do have other concerns though – such as maybe pushing back other expenses that I should be doing, just so I can keep saving to keep my investments going. Expenses such as – making more trips to see people, as gas is still around $3/gallon and for me to drive a few hundred miles over the course of a few days is expense, not including food and entertainment. However – I haven’t even come across any “experiences” that I have turned down or that I simply didn’t look into simply because I wanted a high savings rate still. That hasn’t been the case at all.
My other concerns, as I’ve done a better job with it, as earlier it wasn’t the case – was the size of the investment I was making. I changed my approach and internally decided I like making purchasing of $1K at a minimum or more, and actually has become trending towards the $1,500 mark. Why do I like doing this? It reduces my expense/fee exposure on a trade and also – it makes the dividend reinvestment and when dividend growth/increases come – that much more impactful. So running on thin ice has me concerned that it’s that much harder to make those sizable purchases. That’s OK though, as I’ve done a decent job at consistently doing that, just not as often now. Overall, my concern levels aren’t high, actually – even if I’m running on thin ice, I know where I can “tweak” things and then be flexible with the life I have and following the 5 money lessons we have learned.
What have I learned from Running on Thin Ice?
I have learned quite a bit about myself from this state of account being, as we’ll call it. I have learned that I do not need a large cash emergency savings account. I have learned my tolerance levels – which is at least having $1 in this account is my level I like it at. I have learned how to stretch myself and be flexible when the time comes and be more strategic, as I said before, with savings and spending, ways to bring more cash through the door, etc..
Most importantly – I have learned that you don’t miss out on life if you don’t have much in your cash/savings account. You can still be able to do everything you want, even if you are sitting that low every month. I have learned that there are many things you can do on a daily basis that does not cost $300 to go out and do. You don’t have to go to a bar and buy 5 rounds for everyone and the only thing you walk in the door with is a hole in your pocket. I have learned that you don’t have to go on a $2,500 trip and spend, just to spend. I have learned that wow – you can still keep up with your goals, though in a more rigid way, even if you don’t have thousands of dollars sitting in your account. Now, I’m still so damn fortunate to be able to save and invest thousands of dollars every month, but my most liquid asset of cash – is at a minimum, that’s the more focal point I believe to this article.
Actually scratch that most importantly above. The MOST important piece I have learned is – wait, I am investing into huge companies. I own a piece of them. If any big emergency comes and I need cash, there are SO many options that I have. I can turn off dividend reinvestment and start collecting the cash instead. I could actually sell this on the market place, as this has become easier and more liquid than ever to do so. I love when individuals feel like if you invested into a stock that there is no way you could ever get your cash back. Couldn’t be more far from the truth. I’d argue that investing in a highly valuable, fundamentally sound company is worth more than a fiat currency – being the US dollar. It’s amazing and riveting knowing I have many options in case a big emergency comes – I now have built this cash flowing, dividend paying portfolio that could aid in these situations – almost like an employee/employees working for me, and do I feel stronger than I ever have been. This reason is something I have taken away from running on thin ice, for sure.
Conclusion
Okay, the big conclusion. To summarize, I have learned much about myself from having very little in my cash savings investment account. It has been exhilarating, life discovery on tolerance levels and has pushed me to think differently on things. I feel safe, I feel ready, I feel “fine” actually. My biggest question now is – how do YOU feel about running on thin ice? How would YOU feel if you only had $161 in that savings account? Have YOU been in this position before? What have you learned? Please, do share with us and everyone, I love any debate, insight, feedback and guidance! Thanks everyone and talk soon.
-Lanny