6 Money Moves You Should Make If You Have $70K in a Checking Account

08/05/2024

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You’ve gotten a taste for saving money — which is great. But your money is now just sitting idle and losing value to inflation — which is not so great. So where do you go from here to keep enough money in the right cash accounts, and start investing the rest?

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Follow these basic tips to lay your financial foundation and begin putting your money to work for you.

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Set Aside an Emergency Fund

Everyone needs an emergency fund. But unfortunately, that’s the only universal law for emergency funds. You never know when you’ll get hit by an unexpected home repair, car repair, medical bill, or broke family member hitting you up for a crisis of their own. So you need some money set aside in a high-yield savings account that you can access instantly.

As for how much, that depends. You’ll need to access how stable your expenses, income and job security are. People with extremely stable jobs and salaries, with comprehensive insurance on all fronts, and Steady-Eddie expenses don’t need as much in their emergency funds. They may be able to get away with one to three months’ living expenses.

At the opposite extreme of the spectrum, a self-employed person with wildly fluctuating living expenses might need a year or more’s worth of living expenses set aside. Know thyself. And when in doubt, consult an expert (more on that later).

Start Maxing Out Matching Contributions

If your employer offers you free money toward your retirement account, by all means, take them up on it. Don’t be shy — it’s part of your pay package, and you squander it at your peril.

With $70,000 in cash, you stand on solid financial footing. Ask your employer to start setting aside part of your paycheck to go into your retirement account and take full advantage of every matching dollar available.

Pay Off Unsecured Debts

It’s hard to get ahead when you’re paying double-digit interest on debts. If you have any unsecured debts, now is the time to knock them out. Or at the very least, as much as you can afford after setting aside your emergency fund.

Try the debt snowball method to knock out your debts sequentially, starting with your smallest. With each that you pay off, you free up more money to put toward the next. Eventually, you may wake up to realize you’re debt-free.

Contribute to an IRA

Still have money available after setting aside your emergency fund and paying off your unsecured debts? Open an individual retirement account (IRA), or contribute to your existing account. You can open these for free at any investment brokerage firm.

These come in two flavors: traditional and Roth. Traditional IRAs give you an immediate tax write-off for contributions, but you pay money on withdrawals in retirement. Roth IRAs don’t give any immediate tax benefit, but your money compounds tax-free, and you pay no taxes on withdrawals in retirement.

As a general rule, younger adults should invest through a Roth IRA. Your money has longer to compound tax-free. If you’re closer to retirement and earn a pretty paycheck, consider taking the immediate tax deduction.

Start Dollar-Cost Averaging Your Stock Investments

If you have a significant amount left to invest even after making all of the money moves above, consider investing it in stocks with a standard-issue taxable brokerage account. But you may not want to invest it all in one giant stock purchase (Imagine how miserable you’d feel if the stock market crashed tomorrow!).

Instead, consider spreading the investment over a few months, or even a year. Known as dollar-cost averaging, it helps you earn market returns rather than subjecting you to the whims of one moment in the market.

Talk to a Financial Advisor

Even savvy investors periodically check in with a financial advisor. They ask about an ideal asset allocation for their goals and risk tolerance, the best places to hold cash and ways to fend off inflation (as well as the tax man).

You may or may not consider yourself a savvy investor. But if it’s been a while since you spoke with a financial planner or other expert, you’re probably due for a checkup. Find a financial advisor who charges a flat hourly rate and book an hour of their time. It’s money well spent — not least because you’ll sleep soundly knowing your money is working as hard as it possibly can to multiply on your behalf, without sacrificing your security.