Asked on 27 Dec 2019
If not, where should I park the fund?
I would recommend 3 months of your salary as spare cash on top of your emergency fund.
In the event, if you fire your boss or your boss fire you, you have 3 months while you find another job.
I'd recommend to consider an additional 1-2 month's of income for daily expenditure and slightly above average purchases like furniture, accessories, repair.
This can be kept in a High Interest Savings Account as it needs daily liquidity.
Great, simple question :)
Since you've already prepared an Emergency Fund, how much 'spare cash' depends on you.
As mentioned earlier, an additional 2-3 months of salary, while taking into account factors such as lifestyle & commitments are great rules of thumb as guidance.
For some, they'd wanna create a liquid cash budget for house renovation or car / house purchase downpayment, while others, in case they want to go for a 3-6months travelling holiday, without touching their endowments and emergency funds. Others just want to see $250,000 or more cash in their bank accounts.
If you prefer to grow your spare cash, then it all depends on your preference, ie either a savings account with higher interest, unit trust, ETFs etc.
At the end of the day, the question still boils down to how amazing do you want your financial castle to look like? :)
I think we need to have at least 2-3 months salaries as spare money. Why? This is for prepare if there will be a problem with our career. So we still can have enough money to find another job for next 2-3 months.
Firstly, we need to have a complete understanding on our cashflow. Through this process, we will understand our earning ability and spending habit. Here is a guide to help you: https://www.blog.pzl.sg/understanding-your-personal-cash-flow/
As a general guideline, keep 3 to 6 months of your expense as emergency fund (details in the post). That being said, the exact amount of cash that you should have on hand depends on your needs and situation. For instance, if I have a huge expense coming relatively soon, then I will want to hold more cash than the general guideline.
Therefore, it depends on how you plan your future in a way such that you will be confident and comfortable with your finances, while optimising its value.
There are various places where you can park your funds depending on how you plan for your future and your needs. For instance, if I were to plan for my retirement and I have 30 years to go, the last place to put will be in the bank.
All in all, comprehensive cashflow planning helps to ensure that you are optimising the value of your money. This is because time is a precious resource and the worst thing to do is to waste it.
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