254. What to Do With $50K in Savings? A Practical Framework

So the first thing that I tend to, to think about when we do have these conversations with people is basically saying, "Okay, what does your emergency fund look like?" So basically saying, "Okay, uh, you've mentioned that you've got 50K.

Now, is that 50K that sits on top of an amount that you've got that you set aside to say, 'Hey, this is my emergency fund,' and, and I've got 50K on top of, you know, that, and that represents three to six months of living expenses?" We've spoken about that on the podcast, uh, previously.

Um, so just checking that first because you don't wanna use everything that you've got.

We're obviously big advocates of making sure that you've got an emergency fund, so that's if the proverbial hits the fan.

And usually the rules of thumb that we're talking about, between three and six months of living expenses.

So you kind of check that box and say, "Yep, got the emergency fund.

Is this amount of money above and beyond that?" Because we don't wanna dip into that, and you don't wanna run yourself too low.

You don't wanna run yourself short because if something then does happen, something blows up in your world, car, emergency dental, you know, hot water service, whatever it may be, you leave yourself short, and all of a sudden you're scrambling.

And what it can lead to is that money that you had, that potentially you did something with, you then need to go back in and get it.

And it's usually the worst thing you can do with any investment, right? It's the worst thing.

You're, you're trading, you're spending, uh, you know, in terms of fees.

There might be tax implications as well, too.

But basically for us, number one, I'd say check the emergency fund first, uh, to make sure that you've got that sorted and then what is the amount that you've got above and beyond that.

Yeah.

Um, so what you're trying to do is look at, okay, well of that, you know, 50K, um, or, you know, whatever that money is, how much of it is actually investable versus how much- Yeah ... of it I just need to, you know, keep aside.

Um, and is it, you know, 50K or is it less? And look, in a, a similar vein, which, I mean, look, it does happen rarely, but I've seen it happen often enough, so calling out the obvious here.

But one is how much of it is emergency funds.

Yep.

Two is, okay, well how much consumer debt do you have? Um, and primarily what I'm talking about here is maybe not necessarily car loans, but, um, your personal loans, your credit cards.

Like, if you've got 50 grand in savings and you've got hang over credit card debt, like you're just making yourself feel better at night, pay that off and, you know, get rid of the, the consumer debt, um, particularly that really high interest debt.

I mean, getting a, you know, 7, 8, 9, even 10% rate of return and paying 20% in- Mm-hmm ... after tax interest makes absolutely no sense.

So again, what you're really trying to do, and what we're trying to do in this situation is determine, okay, well, how much of this is actually and genuinely investable- Mm-hmm ... and how much of it is, okay, well, you know, that's, that's not necessarily funds that, that I can put aside for investment.

Yep.

Got that.

So we've got emergency fund, uh, first.

So the first thing that I tend to, to think about when we do have these conversations with people is basically saying, "Okay, what does your emergency fund look like?" So basically saying, "Okay, uh, you've mentioned that you've got 50K.

Now, is that 50K that sits on top of an amount that you've got that you set aside to say, 'Hey, this is my emergency fund,' and, and I've got 50K on top of, you know, that, and that represents three to six months of living expenses?" We've spoken about that on the podcast, uh, previously.

Um, so just checking that first because you don't wanna use everything that you've got.

We're obviously big advocates of making sure that you've got an emergency fund, so that's if the proverbial hits the fan.

And usually the rules of thumb that we're talking about, between three and six months of living expenses.

So you kind of check that box and say, "Yep, got the emergency fund.

Is this amount of money above and beyond that?" Because we don't wanna dip into that, and you don't wanna run yourself too low.

You don't wanna run yourself short because if something then does happen, something blows up in your world, car, emergency dental, you know, hot water service, whatever it may be, you leave yourself short, and all of a sudden you're scrambling.

And what it can lead to is that money that you had, that potentially you did something with, you then need to go back in and get it.

And it's usually the worst thing you can do with any investment, right? It's the worst thing.

You're, you're trading, you're spending, uh, you know, in terms of fees.

There might be tax implications as well, too.

But basically for us, number one, I'd say check the emergency fund first, uh, to make sure that you've got that sorted and then what is the amount that you've got above and beyond that.

Yeah.

Um, so what you're trying to do is look at, okay, well of that, you know, 50K, um, or, you know, whatever that money is, how much of it is actually investable versus how much- Yeah ... of it I just need to, you know, keep aside.

Um, and is it, you know, 50K or is it less? And look, in a, a similar vein, which, I mean, look, it does happen rarely, but I've seen it happen often enough, so calling out the obvious here.

But one is how much of it is emergency funds.

Yep.

Two is, okay, well how much consumer debt do you have? Um, and primarily what I'm talking about here is maybe not necessarily car loans, but, um, your personal loans, your credit cards.

Like, if you've got 50 grand in savings and you've got hang over credit card debt, like you're just making yourself feel better at night, pay that off and, you know, get rid of the, the consumer debt, um, particularly that really high interest debt.

I mean, getting a, you know, 7, 8, 9, even 10% rate of return and paying 20% in- Mm-hmm ... after tax interest makes absolutely no sense.

So again, what you're really trying to do, and what we're trying to do in this situation is determine, okay, well, how much of this is actually and genuinely investable- Mm-hmm ... and how much of it is, okay, well, you know, that's, that's not necessarily funds that, that I can put aside for investment.

Yep.

Got that.

So we've got emergency fund, uh, first.