Eric

I don’t understand. While your suggestions are sound in general, I don’t see anywhere in Mike’s response where he said he didn’t do any of those things. Nor did I see anywhere in Mike’s response where it said his constant switching of banks cost him a lot of time. What if he does all of those things? Isn’t that extra $300 worth it then?

Anne Keckler | ACSM Certified Personal Trainer

It’s not 82 cents per day if it only takes him a few minutes three or four times a year to do it.

And how do you know he’s not optimizing his asset allocation, starting a side business, or reading finance books, as well?

Bethany

It’s not like it really takes all that long to switch your savings account. Why not take a few minutes to get an extra $300 or so?

Anyway, the posts here have been pretty bad lately and this is just another example. Unsubscribed.

Tom

Well, I know the other people are saying Ramit is coming across as a dick, but that’s the reason I like him: he doesn’t sugar coat it. The guy should really consider diversifying, or just putting it all in a good long term stock. Berkshire Hathaway typically does 5-10% of growth a year, and right now it’s at an extreme discount. Put his 40k in a few shares of BRK.B, come back in a few years, and he’ll be doing much better than $300/yr.

Eric

@Tom

The money is his emergency fund. He needs it to be liquid. Investing it in stock kind of defeats that purpose.

I don’t even know what the reason was behind Ramit’s surly response, but it was uncalled for IMO. There is a big difference between not sugar-coating something and being an a**hole.

ekrabs

Peace, everyone. Let us be calm and consider what both sides have to offer.

Cash investments have their place (such as parking your emergency fund) but there are also times when over-using it would not be appropriate.

There’s an issue regarding whether 0.25% is worth chasing after. Normally, I would say no, but with a 40k balance, I can see why it would be worthwhile to chase after.

However, there’s is also a bigger issue regarding whether having 40k in cash is even necessary. If one does not need all of the money liquid, then one could be missing out on much better investment opportunities for your money. For example, not out-pacing inflation is also a form of investment risk.

But I’ll give the benefit of the doubt since only the original commentator knows for sure whether keeping such an amount liquid is truly necessary in cash….

Personally, I am lucky that my credit union is paying 5% (yes, 5%) interest, but even then, I only have my emergency fund and various short-term money in that account. The majority of my money are put into stocks and mutual funds.

Why?

Because let’s face it: Even with 5%, it won’t do much to fight off the current level of inflation. Also, as a contrarian investor, I believe this bearish market represents a tremendous buying opportunity that could pan out years from now. That and I just don’t need that much liquidity right.

Please remember that guaranteed cash investments are a double-edged sword: What guarantees you the 3 to 5% also locks you into that 3 to 5%. It’s great if you actually need the protection or liquidity, but beyond that, it can also bottleneck your portfolio.

Ok, I’ll stop ranting now.

Igor L

maybe ramit is trying to tell us something, I just thought of.. well.. why put my money into an IMG account when I can invest that money into IMG lol =)

Jim

It’s just opinion. That’s what a blog is for! He’s not writing an encyclopedia of personal finance here. Ramit, don’t let the naysayer(s) get you down. I enjoy this blog a lot. I don’t blindly follow your advice, mind you. I find some of your arguments convincing, and others don’t appeal to me as much.

In a similar way, my boss uses Dave Ramsey’s method (to the very last word), and that’s great, because it works for him. I’ve heard a whole lot about it, and I’ve gleaned some good ideas from him, but a lot of what he says doesn’t quite work for me, personally, so I decide not to use those parts.

Honestly, though, I like reading opinions on why X is good and Y is bad, just as much as, reading on another blog, why Y is better than X. It helps me make personal informed decisions. As Moneymonk said, personal finance is “personal.”

Anand

Ramit, I must admit I’m a HUGE fan of your blog; but with each day I visit it, there’s more ads, more giveaways, less quality posts, less interviews with entrepreneurs…The quality has gone down remarkably. I think of it as what happened to Myspace after it was bought by a large corporation.

Now, since its free, who am I to complain – but I have a feeling your blog has a LOT to do with your future, and your karma, and I’d love to see you go back to your roots and do some hard-core writing, the good ole way Even if you have to outsource most of it and only edit the posts !

Brandon Carroll

Hey Ramit,

I have money spread out in different banks. The majority of my money goes to ING -> in terms of liquidity. I also think it is important to put a small percentage in a local bank, as well as a small percentage in a commercial bank.
Here is why:

1) ATM fees ->talk about wasting money. A finance instructor told me that if you compounding the interest on say the ATM fee over your life, you end up paying like 98258259838583% interest on your money. It is a complete waste
2) The service of a local bank ->wherever you live permanently, you should definitely have business at a local bank. One, a genuine relationship can help you later down the line (look at the bigger picture).
3) The commercial bank -> Goes back to the ATM fee. I personally only put like 250-300 in these banks, just in case I need money. I have it in BB&T -> the best customer service for the larger banks
4) ING – Obviously, the best bank in terms of ROI.

So in terms of liquidity, I’d say 1) ING, 2) Local, 3) Commercial.

Ramit, agree or disagree? And please, don’t post your reply into a new blog

-Brandon

NM

Ramit, I still love you and appreciate the time you take to share your knowledge.

Would have loved to hear suggestions as to what to do with that 40k. Did you mean diversify within his 401k? i wasn’t sure.

thanks!
NM

ehcomunicacion

$300/year is nothing

Carlin

$0.82 a day makes it sound like he’s wasting an entire day for $0.82 cents. The invested cash is earning $0.82 more a day passively with much less active time on his part to move the money. I can’t say how long it takes, but if it’s every 4 to 6 months, and let’s guess he’s got a few banks bookmarked to check the rates since he’s done this before so say it takes an hour to switch (generous, since opening an ING account takes like 10 minutes). That’s 3 hours a year. That’s $100 an HOUR.

Ryan McLean

I love your savyness in this post. I also write a financial blog at http://www.smarterwealth.net and I love the way you have responded to this reader.
Time is so valuable, and to be earning less than $1/day making all this effort it could definately be spent better by starting a side business or something. I definately would
Thankyou for your advice

Robin Majumdar

Ironically, while many commenters here mention unsubscribing, this is my first visit to Ramit”s blog from a link on another site… watched the 2 minute CNBC video clip and read this post.

Subscribed – at least for a few months