A Podcast for Those who crave deeper conversations about Money and Life in the new roaring 20s.

Show Notes

Emergency Funds & The Fight Against Inflation | 30

Episode Recorded On: February 17, 2022

We all need an emergency fund but how do we keep it from losing purchasing power during times of high inflation? Oh what a question! We get into HYSAs, the Ultimate Liquidity Portfolio, interest bearing USD Crypto Stable Coins, Treasury Bills and the hot new kid on the block that’s catching everyone’s eyes… I-Bonds!

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Fundamental Premise: Retirement Accounts VS Emergency Funds

  • Retirement Account (sub 40 years old)
    • Goal is to maximize growth; focus on higher risk, higher longterm return assets
    • Long enough time horizon to absorb market fluctuations
  • Emergency Fund or Cash On Sidelines
    • Goal is to minimize loss and hedge against risk.
    • Short time horizon, high liquidity need.

Cash Buffers, Emergency Funds and Opportunity Funds

  • Cash Buffer – ie. 1 month’s expenses on hand, in cash so it’s ready if you need it today
  • Emergency Fund
    • Might be enough to cover things like…
      • 3 to 6 months of unemployment
      • Insurance Deductibles for your healthcare, house, car, pets
      • Typical, hard to predict expenses like replacing the transmission on your car
      • As much as you need to sleep at night!
    • Able to be liquidated to cash in your bank account before your Cash Buffer runs out.
  • Opportunity Fund
    • Money you are saving for investing but need to keep on the sidelines for now and out of risky or longterm lock up investments. Examples might include a down payment for a house or money you’re saving to start a business or take advantage of an unexpected investment opportunity.
      • Similar liquidity need as your Emergency Fund

Strategies for hedging against inflation for short-term cash on the sidelines:

  • HYSA – High Yield Savings Account
    • Interest on these is pretty abysmal and may not be worth the effort of setting up the account and moving your money back and forth plus paying taxes on the pittance of interest earned.
  • ULP – Low Risk ETF Portfolio
    • Goal is to preserve purchasing power and this portfolio has achieved that goal more frequently than stocks or cash, before or after inflation and taxes, during a wide variety of economic conditions, and over a wide variety of time periods.
    • How It Works:
      • 88% US Intermediate Term Treasuries (ie. VGIT ETF)
      • 12% Total Stock Market index (ie. VTI ETF)
      • Rebalance once per year
  • USD pegged Stable Coins
    • Companies offering the stable coins hold other assets equal to or greater than the value of USD stable coins they’ve minted & adjust the assets they’re holding to maintain a 1:1 value with USD.
    • Providers: Celsius and BlockFi
  • Bonds
    • You are loaning money to a government or corporation; they are paying you interest on the loan.
    • One Month Treasury Bills “T Bills”
    • I Bonds
      • Rates are published as annual percentage but the rates actually change every six months (May 1st & Nov 1st). So, if you buy an I Bond during the current cycle, you will earn 3.56% (half of 7.12%) during the first six months you own the bond. During the second six months, you will earn the new rate that will be published May 1st.
  • Not covered: CDs, Money Market Accounts, Money Market Funds

More Info On the “ULP”

This is an idea put forward by Christopher Kawaja in his book How To Stash That Cash: The Ultimate Liquidity Portfolio which is a short read and highly recommended before deciding whether this is a good fit for your individual needs. Here are two interesting charts from the book that we referenced in this podcast episode.

Disclaimer

This is NOT financial advice. With a name like Vaginance, this is obviously for entertainment and educational purposes only and we have not considered your individual circumstances.

Full Transcript

Becca:
[0:02] So in tonight’s episode of Vaginance, we will be discussing ways that we can store our liquid assets or hold onto our cash that isn’t just storing your cash under your mattress or just storing your cash in your bank account. So we’ll be talking about alternative places like high yield savings account, savings bonds and other stuff like that. And more creative things. And some might argue more sexy things than that, even.

Taylor:
[0:28] In between your butt cheeks.

Becca:
[0:32] In which, well, that’s where I keep mine.

Jewels:
[0:32] The sexiest of places.

Becca:
[0:32] Yeah, if you don’t…

Maggie:
[0:35] It’s very important to know that it’s in wads.

Becca:
[0:41] So if you want to stop storing your cash in wads between your butt cheeks or your cleavage, keep listening.

Jewels:
[0:46] It’s got some pros.

Maggie:
[0:46] Yeah. I think we should acknowledge this is a listener requested episode.

Becca:
[0:48] Yes. This is from listener Ellen. She sent me a thing about Series I savings bonds and the lauded 7.12% that it is offering right now.

Maggie:
[1:07] What? Yeah.

Becca:
[1:09] Yeah, and she asked and uh this was, this was a blog post from a few months ago when it was announced what the interest rate would be for the first six months essentially of 2022. And um yeah, she was like, is this too good to be true? Also, what’s the deal with high yield savings account?

Taylor:
[1:37] I also want to know that.

Becca:
[1:36] Right? These are great questions.

Becca:
[1:39] So that’s why thank you Ellen.

Maggie:
[1:40] Thank you Ellen.

Becca:
[1:42] Um yeah, there’s something we really want to talk about, especially for people maybe like myself who have lower risk tolerance and are very scared to do anything besides hold cash like a hoarder.

Taylor:
[1:54] So I’m sorry Becca. I have to call you out though. When we, when Becca until like very recently Becca would stash cash by just like having crumpled up money, like it’s scattered around the apartment.

Becca:
[2:08] That’s still happening if you look in our closet, it’s like.

Taylor:
[2:13] It’s the funniest thing I’ve ever seen. Like literally I would come over to hang out with her and there’d just be like ones, like a little trail of dollar bills crinkled up on the floor leading to something.

Becca:
[2:21] Yeah, no that’s still, that’s still very much in my reality. Like if you look on my dresser there’s like $120 in cash literally crumpled and then inside of Andy’s closet, no one come to my house! Inside of Andy’s closet, I have no idea how much money is in there, but it is.

Jewels:
[2:43] It’s just like a cookie crumb trail of crumpled up cash, amazing.

Becca:
[2:47] Yeah. Anyways, so yeah, that’s very much why we’re talking about this and alternatives to storing your cash but remaining relatively liquid if not entirely liquid. So that’s the big motivator today. I’m really excited. I learned some interesting things. So I’m excited to discuss that. Oh yeah, by the way this is Becca,

Taylor:
[2:48] Taylor.
Jewels:
[2:49] Jewels.
Maggie:
[3:53] And Maggie.
Becca:
[2:47] We’re Vaginance. So places we can store our cash. So we’ve got Andy’s closet, we’ve got the top of my dresser. So there’s some problems with the keeping the cash in your closet or an equivalent with that, is that as inflation continues my cash in Andy’s closet loses value. So we want to talk about options where you can store your cash and maybe allow your cash to grow with inflation without having to directly invest your cash and make it difficult to retrieve. If there’s an emergency or you need to make a down payment or something like that. So Julie, do you want to start?

Maggie:
[3:53] Well I was gonna say I have a suggestion as a good jumping in point because I find it useful for much of what this entire conversation will be about. It’s just what is the definition of a liquid asset? So when we say liquid, like you automatically think cash but it can be more than just cash. So I have a definition, I will just read from the internet so I don’t butcher it myself. Yeah.

Taylor:
[4:15] Dictionary.com

Becca:
[4:17] Defines liquidity as a lack of viscosity.

Maggie:
[4:17] But yeah, basically a liquid asset is any asset that can easily be converted into cash in a short amount of time and which is sort of vague right like who decides what short is. But liquid assets include things like cash, money, market instruments and marketable securities. So yeah, basically something that can be turned into either is cash or can be turned into cash quickly.

Jewels:
[4:42] Beautiful. Amazing. And I think it is very important to highlight that. We’re talking about short term cash that you don’t want to put into long term investments. So we’re not talking about cash that you’re putting into retirement accounts, we’re talking about emergency funds, you may need to liquidate in order to cover an expense on your car or your few months of unemployment if something happens like a global pandemic or opportunity funds like saving up for a down payment for real estate or investing in a business or anything like that. So we’re talking about cash that you’re kind of keeping on the sidelines but you don’t want it just totally losing value with the inflation we’re dealing with right now.

Becca:
[5:25] And it’s something that cash that you can’t lose and the chance that the market takes a dip right now. So when we invest, we hopefully, unless we’re very knowledgeable swing traders, day traders or future tellers.

Jewels:
[5:40] Or unless you have a time machine.

Becca:
[5:45] Unless you have a time machine um or you’re a psychic, like a real one. Then you if you’re investing then you’re assuming that there’s a very good chance that your money value will go down periodically and it’ll go up periodically. And you’re trusting that the entire history of the stock market has showed us that value goes up, so you’re trusting it’s gonna continue to go up even with these little dips. So that’s why you might not keep all of your cash in a taxable investing brokerage account, because there’s a chance it’ll dip and you’ll lose a lot of value for a period of time, so you don’t want to keep your emergency fund in that if you don’t can’t afford for it to lose 50% of its value if something awful happens.

Taylor:
[6:25] That, and you will have to pay higher capital gains on it if you try to withdraw it within a year of investing it.

Jewels:
[6:33] But there won’t be capital gains if you’re taking it out at a loss.

Taylor:
[6:37] True. Yes. I’m just saying another scenario is if you put money into your investment account, even if the economy is doing well, if you try to remove it, you’re gonna have to pay a higher capital gains on removing that money within a year, then um if you had to wait or if you took it at a loss. So there’s really if you’re trying to get that money out of one of those accounts, even if it’s not a retirement account, there’s no like quick and easy way to do it without paying money of some kind or losing money.

Jewels:
[7:02] Right. Now, what’s interesting about that is that most people are not aware that the interest they gain in their savings account is also taxable. So if I were going to pick and choose and I had a time machine that was going to tell me that the stock market was going to go bonkers I would happily pay the taxes on my massive capital gains over paying the same tax rate on my savings account, 0.5.

Becca:
[7:27] Yeah, I’m in the process of filing my taxes right now and I had to submit my like, uh yeah, interest I earned from my money market account. So I’ll be paying, I’ll be paying taxes on my $81 that I got from my money market account.

Jewels:
[7:38] Brutal. It’s so brutal.

Taylor:
[7:48] Oh yeah, I’m kind of scared to do my taxes because like I have all these random investment accounts now.

Maggie:
[7:53] I have no concept of what my taxes are going to be this year and that makes me nervous because I’m like, well, I’ve done all these different things and like, normally they have a ballpark idea of what it will look like, and I’m like, I don’t even have a slight idea. I might even owe money. I don’t know. But anyway, um, what are some liquid assets that aren’t cash?

Becca:
[8:15] So like some places that we could store cash do you mean?

Maggie:
[8:19] Sure.

Jewels:
[8:22] What?

Maggie:
[8:23] Yeah, let’s go with that. Where are some places you can store cash that aren’t retirement accounts, your traditional, like stock market. High yield savings account.

Jewels:
[8:32] Yeah, jump in on that, jump in on everyone’s favorite crappy place to store.

Taylor:
[8:36] Let’s do that. So high yield savings accounts are accounts where you can put your money that earn a little bit higher of percentage than if you were to put them in just like a savings bank account. They’re high yield savings bank accounts. So like instead of earning 0.1% from your Schwab account, your high yield savings account gives you 0.1%. And so they used to be like kind of decent, like I think maybe a few years ago or maybe five years ago, a few decades ago. Yeah, it all kind of blurs together.

Jewels:
[9:12] A few decades ago.

Taylor:
[9:15] You could get like 2-4% kind of high yield savings accounts. But now if you google it, like you could google like best high yield savings accounts right now and like a list will come up. They’re usually like, I think I was seeing like 0.1.2%.

Jewels:
[9:25] You can get like 0.5 to 0.65% Which still is like what is that? If you put $1000 in you get 50 bucks at the end of the year and then you have to pay taxes on it. Did I do my math right?

Becca:
[9:44] I don’t think you did actually. I think it’s less than that. I think it might be $5, but now I’m second guessing.

Jewels:
[9:46] Do you think it’s $5?

Taylor:
[9:56] 1000 times .5.

Maggie:
[9:57] 1% of 1000 is 10.

Becca:
[9:59] 100.

Jewels:
[10:00] No that’s 10%. It’s $5.

Becca:
[10:03] Okay. It’s $5.

Maggie:
[10:06] Yeah. It’s even worse than any of us could have imagined people.

Taylor:
[10:06] Is it times .05 or times .005005?

Jewels:
[10:15] .005.

Taylor:
[10:17] It’s $5.

Maggie:
[10:20] And then you have to pay taxes on the $5.

Jewels:
[10:21] So worth the pain and effort of setting up the account, transferring your money in and getting your money out when you need it.

Taylor:
[10:27] You won’t even be able to buy a cup of coffee with the amount of money you’ve saved.

Maggie:
[10:34] Yeah. So basically what we’re saying is a high yield savings account really no difference from regular savings accounts in the long run unless you have a shit ton of money in cash for some reason. And even then even then you’re making some bad choices like.

Taylor:
[10:44] Yeah. Like yeah millionaires. Yeah. Like you would never put that in a high yield savings account. You would only have, like you would own a bunch of assets.

Maggie:
[10:50] Right. Yeah. So like I mean if you want a high yield savings account sure. But like don’t lose sleep over it.

Taylor:
[10:55] But like how much would you have to have for it to be worth it?

Becca:
[10:58] I have I have $2,000 in my high yield savings account in Betterment, and I made $6.31 in the year of 2021.

Taylor:
[11:06] If you had $10 million in a high yield savings account, you would make 50,000 in a year.

Jewels:
[11:10] 10 million.

Taylor:
[11:11] You’d have to have $10 million dollars in a high yield savings account.

Becca:
[11:14] It’s quite an emergency fund.

Jewels:
[11:18] So not to bash on anyone who has a high yield savings account if you already have one set up and you’re using it and love it. That’s great. But depending on how much cash you’re keeping in there, it may not actually be worth it for you to set it up and send money back and forth from it.

Maggie:
[11:32] Yeah like how much do you value your time? Well I have a high yield savings account but it’s because I already have it set up and like I’m not gonna go through the effort of unsetting it up. Like there’s no difference to me either way.

Jewels:
[11:34] Yeah, I value mine way more than $5 for every 1000.

Maggie:
[11:47] But yeah I don’t make money on it, it’s just like a savings account, like a banking account.

Becca:
[11:51] I need,and Maggie’s and mine and hopefully anyone who has a high yield savings account is F.D.I.C. insured. So it does work the same way as a savings account does and that if something tanks you’re not going to lose your money, it’s insured. But do make sure that year is F.D.I.C. insured because it’s not all of them. It was a very sexy thing especially in the last couple of years. It got really sexy where people wanted to open up high yield savings accounts. And there’s some like online banks that aren’t F.D.I.C insured. So just make sure if this is something you want to try. You’re welcome.

Jewels:
[12:22] Since there is potentially a run on Canadian banks happening right now, which does put people’s money at risk. So it is good to have F.D.I.C insurance, your bank.

Becca:
[12:30] Wait what is happening with Canadian banks?

Jewels:
[12:33] This is a much longer conversation that I don’t…

Maggie:
[12:35] Don’t ask Julie about Canada. Number one rule of podcast.

Becca:
[12:36] I’m sorry.

Jewels:
[12:48] There’s just like an emergency order going on and a big pissing match between the government and some of the citizens and blockades and bank runs and anarchy.

Maggie:
[12:48] Anarchy in Canada.

Becca:
[12:52] Okay so we’ve heard a little bit about high yield savings account, and then the things that a lot of us might be already exposed to, it’s just your normal savings account, your normal checking account, maybe a money market account if your bank offers that maybe that’s um maybe those are some accounts that you’re very familiar with. So we’re kind of shifting the conversation to the stuff that maybe we have less exposure to like high yield savings account and if we want to jump into it Series I savings bonds.

Maggie:
[13:20] So what I was thinking and y’all can ixnay this, but Julie made a beautiful table that is extremely helpful.

Becca:
[13:20] It’s gorgeous

Maggie:
[13:26] Um and really good. And I was thinking we could just go down the table because we already started cash, high yield savings account. We’re already two steps down the table. Let’s just continue this trend and that way the podcast kind of follows the table.

Becca:
[13:34] Yeah, I love it.

Maggie:
[13:41] Alright, well, the next thing on the table, which I know nothing about, so I will definitely pass the baton over to Julie probably is the ULP low risky ETF portfolio.

Jewels:
[13:50] Yeah, so this is something really surprisingly compelling that I came across as somebody who does not typically invest in stocks and and whatnot. Um and particularly not bonds, but this is something that some guy coined called the ultimate liquidity portfolio and it’s a way to invest your cash to try to stay ahead of inflation, but still in very liquid ETFs. And so it actually mimics a lot of retirees’ portfolios because it’s really bond heavy, but just enough stocks in there and having both in, he has like an 88% intermediate term bond portion, intermediate term bonds have maturation dates between two and 10 years.
Um and then a 12% stock total stock-market index allocation that actually makes the entire portfolio less volatile than having it all in bonds or all in stocks. And he was actually making a lot of tax arguments on this because the federal treasury bonds are exempt from state taxes, which doesn’t really matter to us in Texas because we don’t have state income taxes, but in a lot of the country, that’s a big deal because…

Maggie:
[15:00] I didn’t know that. That’s cool.

Jewels:
[15:01] Yeah, like if you have your stuff in a high yield savings account that’s not making any money and you’re in a high income tax state, you’re paying state income taxes and federal income taxes on your $50… $5.

Maggie:
[15:04] Your $55. Don’t exaggerate here.

Jewels:
[15:17] Um and this would actually make more money and have a lower tax burden, which is fascinating. So there is a chance that you are invested in bonds and stocks, there is a chance that in a really bad year it could go down. But the performance of this thing historically is actually pretty impressive compared to cash and especially compared to stocks as far as like down years when there’s a really bad year, it might go down but it doesn’t go down by much. And there are some charts I’ll put in the show notes that are really interesting to kind of compare cash, this portfolio and stocks and it will give you, there’s a chart that’s phenomenal values like in dollar amounts what the trends are and then in the real value of these things. So after inflation and taxes have been taken out, I thought this was actually really compelling because you can literally invest in something like, so there are two vanguard funds. There’s the VGIT which is the intermediate term treasuries and then the VT which is the Vanguard total stock market index and you just take the amount of cash you want to put in, put 88% into the bond ETF, 12% into the stocky ETF. Rebalance once a year. Whenever you need to withdraw it – this is in a normal brokerage account. So however long it takes you to sell an ETF and transfer that out to your bank account.

Becca:
[16:34] So this is a DIY. You don’t buy a ULP ETF. You are DIYNG 88%. Okay, got it cool.

Jewels:
[16:40] Right. So you’re investing into two different ETFs. One’s for bonds, ones for stocks but it’s pretty low effort.

Becca:
[16:46] That’s brilliant.

Taylor:
[16:49] I have a Vanguard balanced index fund that is like half bonds and half stocks.

Jewels:
[16:49] Yeah and you would want to look at it and make sure it is intermediate term bonds. Because there are bonds that are up to like 30 years or there are short term bonds, like treasury bills can be one month. So this is very specifically intermediate term bonds with maturation dates of 2-10 years. And that just happens to work out really well.

Maggie:
[17:13] So because we’re just throwing the term out a lot. Can we define bonds?

Jewels:
[17:18] Yes. So bonds can be issued by like government or corporations and it’s basically we buy the bonds so we’re loaning money to them and they’re going to pay us back that principle on the maturation date and in the meantime they’re going to pay the interest rate that they have offered for that bond.

Maggie:
[17:33] So yeah, it’s different from a stock because it’s like not based on a company’s success, you’re lending money, your money to the government essentially.

Jewels:
[17:35] Mhm.

Maggie:
[17:45] Um also you did mention that for in this scenario, the ETF portfolio, the processing time is based on, you know, how quickly you can sell and get the money from your brokerage account into your bank account.
We didn’t talk about cash and high yield savings account being like the quickest. So I was just going to add in timeframes – cash, obviously the fastest way to get cash is having cash. Second, having it in your bank account that’s pretty fast. Third, this ETF portfolio is probably a pretty safe bet. And I’m only mentioning this because it’s kind of, the order we’re going in is how quickly you can move cash. Thanks for putting this table together. Also, I found it very helpful having zero knowledge about this topic before preparing for this podcast.

Jewels:
[18:34] Very welcome. I was quite happy with this table because I was like, oh, this actually gives me a framework to think about, like, oh, should I be sticking some of the cash that I’m saving up for real estate or whatever into some of these things? And I think the table is helpful because it doesn’t necessarily say here’s the one place everybody should stick their cash, but it says like, oh, maybe I’ll put some in this and some in this, because I like the balance of splitting my risk over those two options.

Maggie:
[19:00] Well, that’s something that we had kind of talked about in our group text as well, is like it’s very dependent on your personal situation. Like how much cash do you need? How quickly do you need the cash? What are your risk tolerances? Like all of that’s going to depend on this. Obviously we’ve talked about that and other podcasts in relation to stocks, but it is relevant here as well.

Becca:
[19:22] Yeah, and the idea is to appeal to people even with the most conservative risk tolerances, because essentially this is where you could keep your emergency fund. And your emergency fund is something that you want to remain extremely stable. We just want to also beat inflation. Well, at least somehow, keep some sort of pace with inflation, if not beat it.

Jewels:
[19:45] Um okay so just a couple quick stats on that ultimate liquidity portfolio of the bond ETFs and the stock ETFs. Um in the data since 1972, like when we came off the gold standard. Since 1972 the real return. So that takes into account the inflation and taxes, of this portfolio comes out to approximately 1.8% per year. Which is not a ton. But it’s way more than the other options we’ve discussed so far.

Becca:
[20:14] Well and that includes, that adjusts for inflation right?

Jewels:
[20:14] Correct. So that’s 1.8% beyond inflation. And compared to cash, cash is usually negative 0.5% over that timeframe. And stocks are up 4.7% over that timeframe of real returns. So that’s beyond inflation and taxes.
So that’s not bad for something that’s like a fairly low risk investment to have your money in. The dude who wrote about this, he’s got a book on Amazon that’s a really short read. Very concise. So I’ll drop a link to that in the show notes as well.

Becca:
[20:51] Cool. But I’m very excited for the next thing on the chart that is going to be a Julie heavy explanation.

Jewels:
[20:55] Okay. Next up. This is the thing that I find (you will not be surprised) I find most compelling. And these are USD pegged stable coins. So that’d be cryptocurrencies, that are in interest bearing accounts.
So there are a couple of financial institutions you might have heard of BlockFi or Celsius. And both of these offer the ability that if you buy stable coins that are tied to the US dollar. So the value- this would be like, even Coinbase, they have like USDC which is a cryptocurrency that they keep pegged to the same value as the US dollar. So one of these should be equal $1 no matter what. But if you keep those stable coins in an account with one of these institutions they’ll actually pay you 8 to 9.5% annual interest on the stable coins.

Becca:
[21:51] What? Okay, how consistent is that? Is that just like maybe some years it will do that, or maybe some months it’ll pay you that much? How long do the rates last?

Jewels:
[21:52] Those are the current published rates. They’ll tell you if they’re changing them but it’s been that way for a while now.

Taylor:
[22:10] How do you set that up?

Jewels:
[22:19] So if you google Celsius crypto or go to our show notes, and then yeah you just go on there. Celsius is great. They don’t have any fees for withdrawing. So on BlockFi if you happen to already have one of these interest bearing accounts you can make one withdrawal per month, fee-free. And then if you need to make more than that then they charge you a fee and that’s published on their site. Celsius doesn’t have any fees for withdrawing stuff and the reason that they do this is because these institutions provide liquidity to markets. So basically if I store $1,000 of my stable coin with them, they get to loan that out to other people who are using it, and those people are paying really high interest rates on it right now, and they’re actually giving back the kickback to us. So this is how banks used to work. We had higher interest rates on our savings, but banks don’t have to do that anymore. But in the crypto market, they are.

Becca:
[23:14] So I know I warned or mentioned that some high yield savings accounts are not FDIC insured. Is something like this FDIC insured or some sort of equivalent.

Jewels:
[23:24] So these are not FDIC insured and you should definitely look into each platform specific things. For both BlockFi and Celsius I believe they are asset backed so they’re collateralized or at least 50% collateralized.
So like the people who are borrowing all of our pooled together money from something like BlockFi they’re putting half of the cash up upfront in order to borrow 100% of our funds. Which is like an impressive amount of collateralization. BlockFi also stores their assets at some of the big, is it like Gemini or? Yeah, so they do store them with all these other… there are different types of insurance. So it’s not FDIC insured like a bank account but legitimate providers of this do you have large collateralized backing and other types of insurance. So it might not be a place where you want to stick your entire emergency fund but it might be worth trying out with part of it and then seeing how you feel comfort wise.

Taylor:
[24:21] I’m downloading the app. Do you, can you link it to your bank account and then literally just transfer over like USD to it or does it have to be in crypto?

Jewels:
[24:32] I haven’t set up Celsius yet because I don’t have any cash to send anywhere. So I don’t know if you can send… actually I think I think they do accept like ACH bank transfers which means you could send USD in just like you would at Coinbase and then get it transferred into a USD pegged stable coin.

Taylor:
[24:47] Interesting. So right now I have Coinbase Pro and I invested a bunch of money and stuff.

Jewels:
[24:56] I’m so impressed with you.

Taylor:
[25:03] Thanks. I’ve like gained and lost $1000. Like in a day. I was like up 1000 and then I lost 1000. Then I was up, like it’s just constant.

Jewels:
[25:07] Welcome to crypto.

Taylor:
[25:15] Okay so sorry I’m totally derailing this conversation now into crypto. I have 2.5 coins in Ethereum.

Jewels:
[25:20] That’s not insignificant.

Taylor:
[25:24] Yeah. I have, I basically bought like all of this stuff Zach told me to get,. I bought Avalanche, Polygon, Chain Link, Solana, Cardona, Polka Dot, Wrapped Luna. Anyways, I’m very confused because now it’s like I gotta download those other two apps thatZachzack told me to do and I don’t even know what those do.

Becca:
[25:47] Honestly though, this is a good insight into your first steps into crypto. It’s a bunch of like wait what,what? Actually you have to download Coinbase if you want to use Kraken because you can’t transfer. Like there’s a lot of that.

Taylor:
[25:58] And then you’re like what is, wait and then to get Kraken, you have to have this other thing and then you should transfer it here and I’m just like I don’t know what’s happening.

Jewels:
[26:07] Kraken does have the best logo out of all of the exchanges. Yeah, so I found that very compelling because it’s a really decent um annual interest rate, fairly liquid because you could withdraw the asset at any time and transfer back to your bank, so as long as you have a week’s worth of cash on hand, you could probably get that back in your bank account.

Maggie:
[26:30] I have a hypothetical for you. So we’ve talked about this before on our podcast, but I have changed the way that I pay my mortgage, so that I now pay taxes and every month I put 1/12 of what I’m predicting my property taxes going to be into my savings account, which is doing nothing for me. As we discussed, I might get $5 out of that. What if I put it into this?

Jewels:
[26:57] I would. That is not financial advice.

Maggie:
[26:59] I’m gonna try it listeners and I will let you know how much I regret that or am excited about it at the end of the year.

Jewels:
[27:07] Well, so this is what I’ll tell you since you’re doing it one month at a time. The first time you put money in, it’s 1/12 of your total risk.

Maggie:
[27:12] Well right now we’re hitting 3/12.

Jewels:
[27:20] Okay. Okay. So you put three months worth, that would be a quarter, you’re putting a quarter of your total funds in and then by the time you have to do it again next month, you can kind of look at it and be like, oh yeah, it seems like it’s working. Seems legit.

Maggie:
[27:31] I think I’m gonna try it. I think I’m gonna, I think I’m gonna see what happens.

Becca:
[27:35] Okay, I’m interested in this. I’m interested in Celsius.

Taylor:
[27:38] I’m verifying my identity right now.

Maggie:
[27:41] I’m gonna do it as well and potentially use this as my um property tax account.

Becca:
[27:46] Cool. Well Julie’s got some converts. Write in listeners, has it worked on you? Are you also downloading the app like the rest of us are?

Maggie:
[27:55] Me? No, I’m making myself a note because if I don’t write things down, I won’t remember them. So I’m writing myself a note that says create stable coin account, transfer money.

Jewels:
[28:05] Someone else want to take a short term treasury bills? One month ones. They’re not sexy

Becca:
[28:54] They’re not sexy. But it’s what it sounds like guys. The bill expires within 30 days, which means it qualifies to be something in your emergency fund.


Jewels:
[28:58] Right. It’s not super liquid, but it’s liquid enough if you have one month’s worth of expenses on hand in cash. But the interest rate paid on this is abysmal these days. Currently they’re paying out like 0.03% on a one month. That gives you basically 0.36% in a year, which is not worth it in my opinion. But people like to talk about T bills, treasury bills. So I thought we should throw it on there.

Becca:
[29:04] And then don’t, you just go to the website, treasury, whatever, .gov? And you just fucking buy it guys. It’s like something your grandma would have done if you want to be like your grandma. My grandma did. My grandma bought some T bills and I got to cash them out. I like, something like 25 years later and they were worth like $300. So that’s something. That’s fun. Maybe there’s like, because what was cool about that is that it was like a paper certificate I got to bring into a bank. I liked that. If it were me now, I feel like that was like 23 year old Becca. 32 year old Becca would probably hang on to it just for the sentimentality. 23 year old Becca did not have those feelings.

Jewels:
[29:32] Right. Now it’s like, oh that in a frame is worth more than the interest it’s gonna pay.

Becca:
[29:34] Yep

Jewels:
[29:42] Kind of like a diploma.

Becca:
[29:42] It’s too depressing.

Maggie:
[29:47] Oh my god, I stumbled upon my high school, whatever diploma recently, and I was like, why did they even give me this? To put it in a box somewhere, see it once every decade and be like depressed when I look at it like.

Jewels:
[29:56] Nothing was more anticlimactic than getting my university diploma in the mailbox folded in half in an envelope that specifically says do not fold.

Becca:
[30:16] And I’m sure a lot of universities do this, but, AMN it’s a gaudy school. We were really big in the school spirit to the point where it’s nonsense. So my diploma’s in this like huge frame that’s like maroon and white and like gold and its Texas ANM university and now I just carry it around. What am I going to do with this? It’s not like me and Andy are going to decorate half a wall with our diplomas. That’s right team. I got a bachelors that I’ll never use again.

Jewels:
[30:46] You don’t want to hang it in your massage office? I kinda like that though. I feel like you should take it as decor.

Becca:
[30:50] I should, I also should get a master’s and a doctorate for that.

Maggie:
[30:51] I do have my bachelors hanging in my office, but simply because like, I don’t know what else, like I guess I could put it in the closet instead, but I like , have it and there’s wall space so I put it up. But I alsoam kind of sometimes embarrassed that I have it up.

Becca:
[30:58] We paid a lot of money for that diploma.

Maggie:
[31:07] That’s true. It did cost a lot of money.

Becca:
[31:19] Um so moving on, we have kept this for last because it’s been such a sexy topic since like November of 2021. Um, and the reason it is, is because for whatever reason, social media has really clicked onto this. Like it’s gotten a lot of people’s attention. Mine included because it sounds very sexy. A 7.12ish % return on an investment that only has a one year lockup. So what that sounds like is you could put some money into this and then take it out in a year and get 7-ish % interest on that. That’s not exactly what it is. There are some catches.


Maggie:
[31:51] You’re talking about I bonds?

Becca:
[31:52] Yes, sorry did I not say that?
Maggie:
[31:53] No.
Becca:
[31:54] We’re talking about I bonds.

Jewels:
[31:54] We’re we’re getting into what everybody wants to know about now. Series I savings bonds. These are inflation tied bonds issued by the government.

Becca:
[32:01] We’re like three months late for this to be the hot topic. Which I think conceptually is a sexy idea. So there’s like two things. There’s a fixed interest rate that you’re guaranteed which right now is 0.00%.

Jewels:
[32:14] Right? So if you hold yeah. So if you… back in the late nineties there was a fixed interest rate of like 3 to 3.5% on these babies and you can hold these things for 30 years. So every year it’s going to pay out that fixed rate. So if you bought it then whatever the fixed rate is when you buy it is the fixed rate you’re stuck with the entire time. So right now the fixed rate is 0%.

Becca:
[32:44] 0%. But there’s two things. You got the fixed rate and then you’ve got the intra inflation adjustment interest whatever rate. Um and that’s what’s that sexy high 7% number. Um so the issue with that is that this percentage can change every six months. So you could sign on with your 0% fixed rate and then your 7% interest rate for inflation. And then in six months they – theoretically though that should be tied to inflation. That’s the whole point of it. That doesn’t mean they have to abide by that. So theoretically in six months they could switch that 2.35% if they wanted to. There’s no limit on how much they can raise or drop that. So you can sign onto this with this high interest rate but you’re only going to get it for a few months and then you have no idea what you’re going to get after six months and we’re already a couple of months in.

Jewels:
[33:36] But if you buy it during the six month period when that rate is active you get that rate for the first six months you own it.

Becca:
[33:36] Yes. Oh okay.

Jewels:
[33:44] So if you, yeah, so it doesn’t end. Like you don’t just get it up until the new rate is issued, you get six months at that rate and then when your rate six months expires, you get the latest published rate for your next six months. So if you buy them now before the end of April, you will get that 7.12% rate for six months, which is actually 3.56 because the 7% is an annual rate. Which is why this is so hilarious.

Becca:
[34:11] Is that true though? Because I was reading about this and it seems like you’re giving, you’re getting that 7% for six months and then you just don’t know what it’s going to switch to after that.

Jewels:
[34:13] The 7% is the annual rate. You are getting that, but you’re only invested.

Maggie:
[34:27] So like if it’s 3.5% for the first six months and then it’s 1% for the next six months, then it totals to 4.5%.

Becca:
[34:28] Yeah. But that still doesn’t make sense.

Jewels:
[34:36] It’s weird that they publish it as an annual rate when the rate changes on six-month cycles. The current six month rate is actually 3.56% So they annualized it at 7.12%, but you’re not guaranteed to get that rate for the second six months. So that’s not the effective annual rate that you will get.

Becca:
[34:55] It’s just like when you stop to get gas. Interesting. So there you go guys.

Jewels:
[34:58] These are not the worst thing in the world. Although I would say that if you look at the historical rates, they are nothing like this anomalous 7% annual rate that we have right now.

Maggie:
[35:14] Right? Like to me, it feels very, not risky because you know, it’s still money that belongs to you, and you can take it out in six months, right? You’re not losing money, but like, you can’t in any way count on that 7%, like there’s no guarantee to that at all.

Jewels:
[35:29] Right? So if you’re happy with, you’re going to make a minimum in the next year of 3.55%, plus, there will be some sort of inflation tied rate In the next six month cycle. Could be more than the 7% that they’ve deemed for this one. More than likely it will be less. The bigger problem for me with these is that I think it’s a mismatch for the goals of cash on the sidelines. Because this cash we’re keeping on the sidelines typically is for emergency funds or near-term investments. So it needs to be more liquid than one year. And also if you pull funds out of these before five years have passed, you lose the last three months of interest. So if you pull it out at the year one mark, you’ll get that 3.56% for your six months and then you’ll get three months of whatever the next interest rate is. So that’s a pretty big hit. It’s not terrible with the current rate, but I think this would be a better fit if you’re actually like, so flush with cash but you don’t want to invest in something risky and you’re trying to build up some really big emergency fund for a few years from now. Sure, throw it in this. Like if you’re trying to convert your emergency fund into funds that will be liquid in a few years but you know you’re not going to need in the next year, you could start putting stuff into this. But I think the historical rates don’t give me a lot of confidence in holding something like this for 1-5 years.

Becca:
[36:57] And again it is, it doesn’t qualify as an emergency fund option guys because it is a lockup of one year.

Jewels:
[36:57] Right.

Becca:
[37:04] So it’s an investment.

Maggie:
[37:05] Apparently, according to Julie’s notes, there is a purchase limitation.

Jewels:
[37:16] You can only but $10,000 worth of these, in digital I bonds. And then if you have a tax refund, you can elect to have your refund by up to $5,000 worth of these in paper annually.

Becca:
[37:17] So if you have $10,000, like think about the money that you could pull in with your absolute max of a year, assuming this percentage holds out vs like if you have your high yield savings account of 0.5%, basically you have like a $600 gain on this account vs if you had put that $10,000 in a high yield savings account. Or money market account I guess of like 0.5%. So like $600 isn’t nothing. But like, isn’t it?

Maggie:
[37:52] Well, also, it’s assuming like Julie was saying that it’s not, that can’t be your emergency fund because you can’t pull it out for a year. So it’s got to be something beyond that. So is it really liquid? I don’t know where, Yeah. For me, a year is not liquid. Maybe for someone else it might be, but okay, well then, yeah, it’s not liquid. So yeah, I would, I wouldn’t call it that.

Becca:
[38:09] No, it’s not. I mean like by financial standards it’s not.

Taylor:
[38:18] I guess um is the benefit to something like this over just like putting your money in the stock market, is that, it’s not like affected by the stock market?

Becca:
[38:27] Yeah, there’s no risk. I mean, you’re not going to lose your money. You’re just, yeah, it might have it might not keep up with inflation even though the whole point is that it does.

Jewels:
[38:30] But you you could have a 0% return on these. That’s totally possible. Also, remember the inflation rate on these is based on what the government has decided the inflation was based on the CPI numbers and…

Taylor:
[38:49] What’s CPI again?

Jewels:
[38:51] The consumer price index I believe. So it’s like they take the basket of goods and they compare what it costs now versus what it costs before and that shows you the inflation but they pick what’s in the basket of goods and this could be an entire episode. But there are so many obvious flaws to this. Like the way that they determine housing costs for like renting a place isn’t by asking people who rent houses, it’s by asking homeowners who may have had mortgages for 20 or 30 years what they think their house would rent for. They have no idea what their house would rent for given current market conditions because they don’t rent and they’re not trying to rent their house out.

Taylor:
[39:33] Oh my god.

Jewels:
[39:33] Like ask people who actually rent in that market or ask a realtor. So, but they do this very specifically in my opinion because it depresses that number and slows down the appearance of inflation in the CPI. So I don’t happen to think that the inflation numbers they’re working with are accurate to the inflation that we are experiencing.

Taylor:
[39:56] Yeah.

Maggie:
[39:57] Everyone’s out to get us.

Taylor:
[39:58] Everyone is out to get us. We really do just need to get a compound out in the woods with a bunch of guns.

Maggie:
[40:03] Um so I had an idea of something. I was like looking at your table and I was like, what are some other liquid assets that are like maybe a little creative that aren’t on this table. And I had one that I have not invested in but I have desired to invest in although I’m a little afraid and something that I think is could be very liquid short term, um high value collectible items.

Becca:
[40:33] Oh, go on.

Maggie:
[40:35] Yeah, so if you, I don’t know, like invest in something that you know is highly collectible and is a hot market. The thing that comes to my mind because I have read about people having success with this and it seems like something that would be fun for me specifically, like I don’t know think that anyone else in this room would enjoy. Is Legos.

Jewels:
[40:55] This is a sexy lead up. I can’t wait. Oh, Legos is a crazy market actually.

Maggie:
[41:01] Yeah, and like you could invest in some really like hot Lego sets, like some of the Star Wars ones and stuff hold on to them for a little while, um they probably would always sell for at least what you bought them for.

Taylor:
[41:03] I have a bunch of legos.

Maggie:
[41:16] You could probably turn that over pretty quick on Ebay and have the potential of making a pretty good amount of money.

Jewels:
[41:19] Even individual lego pieces because there will be people who have a particular set, they’re missing a piece and they pay top dollar for that.

Taylor:
[41:33] That’s actually really interesting. Like buying those sets and then just selling them piece by piece. Yeah, because you could sell each for like $10 apiece.

Jewels:
[41:38] You’re like the Lego junkyard. It would, it would.

Maggie:
[41:39] Oh that would take up so much time, but like it could potentially, potentially make you some good money but when I was thinking about that because like, I can’t remember who was talking about this, but they have a friend who was telling me that she has a friend who invests in Legos and that he doesn’t make a ton of money but he just loves it. Like he just fucking loves Legos and has so much fun buying them like getting into it, reading about it and I was like I could see myself being that person like it’s just like so much fun even if you just make like 1% like that’s a fun thing to do.


Jewels:
[41:58] Lego broker.

Maggie:
[42:12] But then I was like what other collectibles? There’s fucking Pokemon cards, there’s fucking, I don’t know, all sorts of crazy nerd shit that could just be super fun. And I would consider pretty liquid.

Jewels:
[42:12] Thoughts on this? Thoughts on stash and cash?

Maggie:
[42:25] I feel like anyone else have anything else that you may have thought of that was a liquid asset that wasn’t covered on this list. No? Okay.

Becca:
[42:35] I mean, cash in your boyfriend’s closet. No, I think this is helpful because especially if you’re someone like me already said this was really hesitant to invest because I didn’t want to see all this money that I saved for a decade or more just potentially cut in half overnight because I invested at the exact wrong time. Especially right now the market feels a little volatile. So if this is something that gives you anxiety, but you also have the wherewithal to realize that just holding on to cash in a bank account isn’t accounting for inflation. These are really good options. Do your own research and figure out the one that’s gonna sit the best with you. But I would encourage you to like really genuinely explore these because I think over time you’re going to be really grateful that you did or else you’re just losing money to inflation like I have done for a decade.

Maggie:
[43:25] Diversity seems to be the key. So you know, just don’t put all your eggs in one basket. All your eggs in one liquid basket. So I feel like it’s not very late. Do we want to talk about personal stuff since?

Jewels:
[43:42] Can I ask you a question first?

Maggie:
[43:45] Of course, of course you can Julie.

Jewels:
[43:46] How much does everyone keep, or want to keep in liquid cash? Like emergency funds or semi liquid investments?

Maggie:
[44:00] Becca – $1 million.

Becca:
[44:06] Mine is over 50%. Mine is about 50% of my earnings.

Maggie:
[44:06] That’s mind blowing to me. But that is still better than you know, a year and a half, two years ago where it was 100%.

Becca:
[44:17] It’s because I’ve been in denial that I’m going to buy a house. That will never happen.

Jewels:
[44:23] Okay. So I was going to say that it is helpful to break it down based on like this is how much I keep for an emergency fund. But right now I’m also keeping X amount for a near term investment. So it’s like what’s your actual comfort level for like emergency fund? How many months?

Becca:
[44:33] It’s still too high. I mean, yeah, a year.

Jewels:
[44:40] How many years Becca? How many years of income?

Becca:
[44:42] I think a year is my emergency fund comfort level.

Jewels:
[44:46] I don’t think that’s insane. I think it’s on the high end, but I think that’s perfectly reasonable.

Becca:
[44:48] Yeah, because I have a stable job and I’m a single person without children and major liabilities. A professional would tell you that a year is far too much, but it’s fine. Um but I have far more than that because I want to potentially put a down payment down. What about y’all?

Maggie:
[45:12] So for me, I always have in like literal cash enough to cover me for the next month in the scenario that none of my tenants pay me rent and um like or bills.

Becca:
[45:12] Literal cash like in your home?


Maggie:
[45:29] No in my savings account. But I have yeah enough to cover my mortgage by myself with no tenants and enough to cover all the bills with no tenants. So I don’t need that much assuming that you guys are going to keep paying me rent, but like, no, but like, I don’t know like something detrimental might happen in your life, right?

Becca:
[45:40] Oh, we are dirtbags. Right. Right.

Maggie:
[45:49] And I, there’s no, neither of us can control that. So I have one month of that always and then in stocks that I can within a week or two weeks move into my savings account.

Becca:
[45:52] Which is like a taxable brokerage account.

Maggie:
[46:03] Yes. Um, I have enough to cover me for about, 3-4 months after that, but the same like standards of like assuming I’m not getting rent from anybody and nobody’s helping me pay bills like this is all just me taking care of myself, and hopefully that never happens, but like that’s my safety limit. And then beyond that, everything is kind of tied up outside liquid, solid assets.

Becca:
[46:36] Solid non-gaseous.

Jewels:
[46:38] Illiquid. Yeah, I’d say we usually fluctuate between one and three months of emergency fund, which would be the amount we need to cover personal and business expenses. And it it fluctuates wildly, but I’m usually happy if there’s at least one month in there and sometimes three months.

Taylor:
[46:58] I used to have no money set aside for emergency funds because I lived month to month off my paychecks for most of my adult life. So lately because I did that cash out refi I’ve been trying to like, figure out where to put all my money and how to like potentially diversify some assets and um, I put some in crypto and some of the stock market and like my Roth IRAs. I’m trying to keep at least, ideally I’d like to keep like 50 or 60K like cash for a down payment or something like that, like potentially I can, you know, buy another, um like house or real estate investment which doesn’t really leave too much left over. Maybe a month or two worth of stuff to pay my mortgage. And like if yeah, if everyone stopped paying me. Yeah probably about a month or two saved up.

Jewels:
[48:01] That was all. Please continue Maggie.

Maggie:
[48:03] No it’s a good question. Listeners tell us what you’re, you know, emergency fund limits are and how that affects what you’re investing in because we want to know.

Becca:
[48:14] I so want to know um thanks for listening, y’all. It was a lot of fun to talk about places that we can store cash or liquid assets. I know I definitely want to shift some things around. If this episode inspired you at all, or brought up more questions for you of how to manage liquid assets, how to manage your cash we would love to hear from you. Please reach out to us on our Instagram @vaginancepodcast, on our website vaginance.com where you can leave a little voice message, which we love so much. Please leave those for us or just message us. That’s great too.

Jewels:
[48:50] Should we also include the voice memo that we got?

Becca:
[48:50] From Caitlin? Okay, I’ve got it. I’m gonna press play everybody.

Hello, Vaginanciers. I just wanted to send some love, this is my favorite podcast. I love it so much. I get so excited when a new episode comes out. You guys are inspiring. I’ve always been interested in personal finance and listening to your podcast kind of helps me, you know, open up my spreadsheets, get them updated, take a look at my net worth again. You know, kind of check back in and keep track and you’ve also turned me on to some new interesting ways to invest. I think I’m gonna start Roth this year. Um, putting some money in a Roth IRA and yeah, just, you know, inspirational, it’s the best. I just would love nothing more than to sit around and fill out end of life documents with y’all and have some coffee, so keep on keeping on and I’ll keep listening And just much love from Houston, Texas.

So that’s from our lovely listener Caitlin and we love to get these voice messages, especially that one, that was so sweet. And we also would like to fill out end of life documentation with you Caitlin over coffee.

Maggie:
[50:12] Thank you Caitlin. That like almost brought tears to my eyes it was really, really sweet. Thank you so much.

Becca:
[50:13] It was very sweet.

Taylor:
[50:19] She sounds hot.

Becca:
[50:19] She does sound hot.

Jewels:
[50:20] Caitlin, you can come for coffee anytime.

Becca:
[50:23] Anytime girl.

Maggie:
[50:28] My, when I picture like the federal bank, have you guys seen.

Jewels:
[50:32] Harry Potter?

Maggie:
[50:36] Yeah. Have you seen Harry Potter?

Jewels:
[50:38] There’s a big bank in that.

Maggie:
[50:42] No the new Marvel show.

Taylor:
[50:43] I want my money protected by goblins.

Maggie:
[50:46] Oh Loki, the new Loki show on the Marvel show? Alright. Never mind.

Jewels:
[50:47] I haven’t seen it. I haven’t seen it.

Becca:
[50:49] No, you Marvel nerd bucket.

Maggie:
[50:53] Well essentially there’s like secret shit happening behind the scenes that nobody understands and like nobody can explain to anyone and they’re like what’s going on? Everyone’s like, we have no idea. Like no one knows what’s going on. We just do it, like kind of thing and like, watch the show Loki, that’s how I imagine the Federal bank.

Becca:
[51:17] That’s great.