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Greg>> You may be more overweighed in foreign investments than you are planning because a good percentage of large cap companies earnings come from international operations.

This is a good point. I've thought about this when I was deciding on allocations, but I'm assuming that the foreign large cap have a similar domestic exposure to offset this affect. If I did reduce any of the foreign stuff, it would be the large cap...

Greg>> I didn't see any mention of collage savings for your kids.

I didn't mention it, but its on the near-term agenda. What I'd really like is to set up LSAs for them if they get passed this year. If in a few months passage doesn't look likely, I'll probably set up a 529 or one of the other college savings accounts.

Greg>> Likewise I didn't see any mention of an emergency fund of at least six months take home pay.

Yeah, I know :) Depending on your criteria, I probably don't strictly follow that rule. The amount of cash in a savings account is considerably less than 6 months worth. But the amount of money I have access to if necessary is considerably more than 6 (or 12) months worth.

Most purchases are done for cash. If money became tight, we would stop buying a lot of optional stuff. We do have some cash (~2 months worth). If I really needed it... I could withdraw the contribution to the ROTHs for the current tax year without penalty (I think?). That sure wouldn't be a good routine practice, but for a true emergency... We plan ahead and haven't had an "emergency" ever. I also have vested but unexercised stock options that are worth a lot on their own. The options of course could decline in value, but I don't expect to ever use the options in an emergency situation. They're just another of potential source... Also most home/auto repairs necessary I am capable of doing myself if necessary (I do almost everything when its not financially necessary anyway).

If the LSAs are passed this year, I'll put in the max quickly, and have some of it in a more stable investment just in case... I would view part of that as an "emergency fund"

If you're not familiar with the LSA proposal, check out this site explaining it: It's similar to a ROTH IRA in that contributions are after tax, and all withdrawals are tax free. It is different in that (partial or full) withdrawals can be made at any time for any reason without penalty. Its like a "ROTH savings account"

I've considered paying off the house, its fixed 6.74%. But its only got about 4 years left anyway... In the past, we have paid extra on it. Which gives another option for emergency cash. We have some credit cards with high maxes (but 0 balance). If an emergency required cash tomorrow, I could get a cash advance on the cards, and pay it off with a home equity loan before the bill came due (0 blemish credit, so it wouldn't be a problem). In fact, this was our strategy for several years. We paid extra on the mortgage for just this reason, but never had a need to get the cash. In the mean time, instead of having "emergency cash" earning a low interest rate.... It was paid towards the mortgage where it provided a risk free return of 9.9% (home loan rate for a 19 yo) for the first few years, and 6.74% (refinanced rate) since.

I view debt as essentially a short mm/bond/cd position. It can be offset by holding mm/bonds/cds, but the difference between the rates will be at least 1% or 2%. So basically, rather than holding a short and long mm/bond/cd position at the same time, for the most part I reduce the "short position" (except for mm/bond stuff in the 401k)

Many would not approve of this thinking, and for most I would not recommend it. It certainly leaves less cash setting in the savings account. But our track record makes me think this is fine for us. The only credit card balance we have ever had was a $100 for 2 weeks. And that was (back during college when money was tight) because over a couple months we had: several large planned expenses (car/remodeling), one unplanned and optional large expense, and what kicked it over the top was the next week the $100 microwave died.

I am curious what the rest of you think about this...

Thanks for the feedback.
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