Making Over Janet

Since she needs some emergency reserve, she is probably best off by keeping the money in her savings account (even though she is paying 4.875 percent after-tax and earning 3.25 percent after-tax).

If Janet is comfortable with the long-term risk associated with investing in equities and she has other sources for an emergency reserve, she would expect to earn significantly more money on the $10,000 by investing in a low-expense S&P 500 stock index fund.

One final reminder — it's not always about earning the highest return available. It's good to keep a liquidity reserve of say three-six months living expenses in a highly liquid savings or money market account. Fewer months if you are in a secure job or industry or if you have other resources, closer to six months if you don't.

Guest columnist Kacy Gott, CFP, is president-elect of the Financial Planning Association of San Francisco (www.fpasf.org) and a principal with Kochis Fitz, a wealth management firm in San Francisco, Calif. (www.kochisfitz.com). He's also an instructor in the Personal Financial Planning program at U.C. Berkeley extension.

Page
  • 1
  • |
  • 2
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...