The budget breakdown of a couple who lives ‘comfortably’ on $200,000 a year in San Francisco

Overall, Shinto and Johnston are doing a great job putting money away for the future. “I love that they’re saving a regular amount of money each month,” Capalad says.

However, their decision to put the majority of their savings into the market, rather than a traditional, FDIC-insured savings account, gives her pause. “When it comes to investing versus liquid savings, the point of liquid savings is not to beat inflation, the point of liquid savings is to keep your money in a safe place so it doesn’t lose money,” Capalad says.

When your money is invested, if the market takes a dip, so do your savings. “At the end of 2018, for instance, people saw their portfolios go down by 20%,” she says. “If they needed to access that money and needed to sell off some stock, what if they were selling their stock off at a loss?”

In general, Capalad recommends investing for long-term goals, which she defines as anything more than five years out.

However, investing is a personal choice. While she wouldn’t tell Shinto and Johnston to pull all of their savings from the market, she recommends they keep at least three months’ worth of living expenses in a savings account that won’t fluctuate with market ups and downs.

“Everyone has a different stomach for risk, and if Johnston’s comfortable knowing that it could potentially be lost at some point if he had to take it out, then that’s fine,” she says. “But in general if you want to know that that money is going to be there for a certain amount of time, it makes more sense to put it into a liquid savings account at a bank that’s FDIC-insured, where the balance is only going to go down if you spend the money.”

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