April Captain’s Log
How Much Should Someone Keep In A Money Market Or CD?
We’ve all heard the analogy “cash is king!”
If you’re still working and earning a living while being more than 24 months from retirement, a three- to six-month emergency fund is sufficient. There could be exceptions to this rule if you do not feel confident that your employment is secure, etc.
If you’re within 2 years of retirement or already retired, my suggestion is to increase your three-to-six-month emergency fund to 12 months. For example, if your monthly expenses are $6,000 per month, multiply this by twelve months, and your emergency fund should be $72,000.
This approach is simple and straightforward. Your emergency fund should sit in a high-yield savings account or money market product. The idea is to only use the $72,000 for emergencies!
Here’s how your risk versus reward comes into play with your investments. Let’s say that you need $2,000 per month from your investments in addition to $4,000 per month from other sources of income in retirement to meet your $6,000 monthly expenses. The $2,000 per month would come from the bonds in your investment account directly to your checking account automatically every month.
Your Anchor Wealth advisor will have the appropriate amount of your investment portfolio in bonds versus stocks to meet your monthly liquidity needs of $2,000 from the bonds in the portfolio. The reason I choose to take the monthly amount needed from bonds is that the principal is more protected than stocks. When stocks are doing well, your advisor can take money from stocks and fill back up the bond bucket, eliminating the temptation to try to time the market or predict future events.
Utilizing this approach, you will always have 12 months of living expenses in your emergency fund if you should ever need it. Let the money that you do not need to live on grow in your investment portfolio, and over time, your investment portfolio will have a better return and have a better chance to outpace inflation than your money market or CD.
An additional recommendation is that any major expenses, in excess of $25,000, over the next 24 months, it could be the right decision to keep this money in a high-yield savings or money market product in addition to your emergency fund as well. If you know you’re going to spend the money, then the purpose of the money is no longer for long-term investments.
Navigating Financial Milestones Across the Decades
Whether you’re just starting out in your 20’s and 30’s or basking in the retirement glow of your 60’s and 70’s, Anchor Wealth Management is here to provide insight and advice on how to achieve financial success at every stage of your life.
Your 20s: Build the Foundation
In your 20s, you’re likely finishing college and embarking on your first job after graduation. This is the time to start laying the groundwork for your financial future. Key goals include:
Initiate a 401K plan and maximizing company contributions
Establish a savings goal, whether it’s for a house, car, wedding, or dream vacation
Tackle credit card and student loan debt responsibly
Avoid big spending and focusing on building a solid financial base for the future
Your 30s: Grow and Set Priorities
As you enter your 30s, life may become more complex with marriage, home ownership, and possibly children. Here’s what to focus on:
Set aside at least 15% of your income into your 401K
Continue to pay off student loans and any remaining credit card debt
Build an emergency fund for unexpected expenses
Start to save for your children’s college education, if applicable
Be aggressive with your investments to maximize growth potential
Your 40s: Strengthen Your Financial Position
In your 40s, it’s time to ramp up your savings and focus on professional growth. Here are some milestones to aim for:
Strive to have three times your salary saved by this decade
Invest in professional development and aim for salary increases or promotions
Start envisioning your dream retirement and create a bucket list with your spouse
Consider investing in properties such as vacation homes or real estate for additional income streams
Your 50s: Prepare for Retirement
As retirement looms closer, your focus should be on shoring up your finances and eliminating debt. Key goals include:
Aim to have saved six times your salary by your 50s
Take advantage of catch-up contributions to your 401K or IRA
Pay off your mortgage before retirement to reduce financial burdens
Maximize contributions to your retirement accounts and pay off remaining debt diligently
Your 60s: Embrace Retirement
Finally, in your 60s, it’s time to enjoy the fruits of your labor while safeguarding your assets for the future. Here’s what to prioritize:
Focus on protecting your assets and ensuring they last through retirement
Aim to have saved twelve times your salary by this stage
Set aside funds for potential long-term care or emergency healthcare expenses
Spend quality time with loved ones and enjoy the freedom that retirement brings
At Anchor Wealth Management, we understand that navigating financial milestones can be daunting. That’s why we’re here to offer personalized guidance and support tailored to your unique journey. Whether you’re just starting out or preparing for retirement, our financial advisors are dedicated to helping you achieve your financial goals and secure a brighter future.
By Dan Leonard, Lead Planning and Trading Associate
Learn More about Dan and the AWM Team
Adam’s Nightstand
I am currently reading ‘Cleaning Up Your Mental Mess: 5 Simple, Scientifically Proven Steps to Reduce Anxiety, Stress, and Toxic Thinking’ by Caroline Leaf.
Caroline Leaf is a communication pathologist and clinical neuroscientist specializing in psychoneurobiology. I still have no idea what psychoneurobiology is, and spell check doesn’t seem to recognize it either, as it’s telling me that ‘psychoneurobiology’ is spelled incorrectly!
Caroline was a speaker at Dave Ramsey’s 2022 EntreLeadership Summit in Orlando, which I attended. Everyone was given her book as a gift. It has taken me almost two years to pick it up, mostly due to the fact that the first half of the book delves into the scientific ins and outs of how our minds work (or don’t work), along with the clinical research to back it up. With this background, the second half of the book, focusing on application, made so much more sense!
Caroline presents a 5-step plan to find and eliminate the root causes of anxiety, depression, and intrusive thoughts in your life so that you can experience dramatically improved mental health. I’ve really thought about how I can improve in this area and especially how I can provide this information to my children to help them have great mental health. It’s a great book to overcome your mental mess with a simple 5-step plan.
You Say Goodbye And I Say Hello
It was the Beatles that sang “you say goodbye and I say hello.” On Monday, April 15th Andrew Burgess , our Operations Manager, said goodbye to his role with Anchor Wealth Management.
Andrew began his journey with AWM in 2020 at the beginning of the Covid-19 pandemic. He helped CEO Adam Ludwig grow Anchor’s footprint during his tenure.
Andrew helped onboard eight new team members and open the Freeport office while at AWM.
Andrew left to begin his own consultancy firm, helping other financial advisors grow their businesses, while taking time to travel.
We wish him the best of luck with his future endeavors.
Melissa Wenger began her journey with Anchor Wealth Management in January. Melissa is the new Chief Operating Officer and works in the Rockford office.
Let’s take a minute to get to know Melissa:
What does your day-to-day look like in the office?
The neat part about my job is that the day-to-day looks very different every day. Some days I am working on policies & procedures, other days it is filled with IT updates, and some days are spent researching the next best tools for our team to do their job most efficiently. And then there are days when I am working on the Human Resource side with payroll and benefits and handbook updates to make sure our employees have a great work experience.
What has surprised you the most about your time with Anchor Wealth?
I have only been here a few months and I am delighted that everyone is so welcoming and pleasant. I enjoy getting to know everyone and what their goals are and where they want to go in their careers.
Do you have a particularly meaningful moment with a client you would like to share?
My “clients” are the employees. I love that are team is so diverse in backgrounds, industry experience, and life. It has been fun getting to know each of them and I look forward to working with everyone and getting to experience more meaningful moments in the future.
What is something that your coworkers would describe as “so Melissa?”
Well my co-workers have not had a long enough change to learn the “so Melissa” characteristics yet, but if you asked any of my past co-workers it is likely giving IT a new headache to fix. I am not technologically gifted and tend to always come up with a new mysterious tech oops!
Background/Experience
I have been in the finance industry for over 20 years. I spent my most recent 7 years in a split role as a Director of Human Resources and an Investment Advisor working directly with up to 190 financial planning clients and prior to that have a career of managing banks and credit unions.
Education
I have an MBA in Human Resource Management, am Series 7 and 65 licensed, and have held 5 lines of insurance licenses for over 18 years.
If you could only tell potential clients one thing, what would it be?
If you focus your goals on proper planning and preparation for your future, the return of your investments is minimally significant. Also look to have a good solid financial plan in place.
Fun Fact:
Fun fact about me is that I come from a very large family. My grandparents had 9 children and from then till now we are currently at 106 family members and more on the way.
A quote:
“Success is not final; failure is not fatal: It is the courage to continue that counts.” —Winston Churchill