[James]

How do you all manage cash flow when you have variable income? Our monthly expenses are around $10,000, including the mortgage.

I usually keep about $100,000 in a Vanguard brokerage money market account and have $2,500 automatically transferred each week to my bank account to cover bills and other expenses.

When I get paid, I make sure to “top off” the Vanguard money market account. Any amount over $100,000 goes into investments.

This way, I maintain a $100,000 emergency fund, which gives me peace of mind even if I don’t earn anything for a month or two. Plus, the money earns 4–5% interest while it sits there.

( I use credit card and pay it off every month from my bank account )

I just wanted to check—are there any other creative cash flow strategies people are using?

[Megan]

You could do some higher funds held bank bonuses and get a higher yield.

[Tony]

What the what now?
I have to read this a few times.

You transfer $2,500 a week from vanguard to bank account. Then get paid. Then move there to vanguard? Then start over again?

Why the heck don’t you just use your salary to pay your bills, and leave the original $100k in vanguard?

And why is your EF so high?

[Frank]

That sounds fine. Most plans are like that when income is variable or you are in retirement.

[Stef]

My approach is very similar to yours. Fat emergency fund, because my income can drag out and there are monthly swings.

Transfer excess to permanent savings periodically.

Peace of mind is priceless when big swings are inevitable.

[Stephanie]

My income is 6 months on 6 months off. I pay myself a set wage, monthly, and just keep the 6 month off in my business checking which earns nothing.

Probably need to rethink that

[Christopher]

Sometimes there are “prime” or “premium” money markets that have higher minimums and a higher yield (I don’t think vanguard has anything like this any longer though).

If you’re in a high income tax state, you can consider a “treasury only” money market fund like VUSXX, which will earn state income tax exempt interest for a higher tax-effective yield.

You can consider T-bills (also state income tax exempt) for longer durations (3-12 month for example) if the yield is higher.

When the maturities are in the following year (I.e., a 3-month bill bought in November), the interest earned is taxable in the year the bill matures, so you delay tax liability a bit.

With consistently high spends, credit card signup bonuses can be useful to systematize.

At least, they were 5-7 years ago, I haven’t looked too closely for several years now.

[Cristian]

Your methodology sounds simple and very effective to me. Don’t over complicate it and focus your energy on how to keep generating revenue.

Since you’re self-employed, consider introducing a subscription-based service that would allow you to charge a recurring fixed fee for some basic services.

Several of those added to your portfolio could generate a solid base recurring revenue stream.

[Matthew]

Mine is about the same. I work six months with lots of overtime and bonuses, and so have a huge cash buffer for summer if unemployment doesn’t cover it.

But my expenses are like $3000 -$4000 a month and I’m largely debt free.

[Author]

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