As I try to get my finances in order I keep discovering things that I am not sure how to incorporate into my plan. I thought the best way to figure out the kinks is to lay out a hypothetical guy we will call Dogberry and layout his current situation and ask for input. So if you see any area that needs to be changed or needs more work please don’t hesitate to supply ideas, suggestions, and any other input you feel necessary.

Dogberry and his wife, Daisy May, are 45 years old and have 3 children, ages 3, 8, & 15.

Dogberry’s Financial Statement

• Income: $6,000 month
• Credit Union Checking: $2,000
• Credit Union Savings: $3,000
• ING Savings: $18,000 (Emergency Fund = 3 mo. salary)
• Schwab Account: $50,000
• Traditional IRA: $50,000 (his)
• Traditional IRA: $8,000 (hers)
• Roth IRA: $8,000 (his)
• Roth IRA: $8,000 (hers)

The IRA & Schwab money is divided 70% into no-load equity funds and 30% in a no-load bond fund.

Now for Dogberry’s first questions:

• Should all $18,000 of the Emergency Fund be kept in cash? Even at appox. 5% interest, $18,000 is alot to just have sitting in a savings account since the Schwab money can be accessed within a couple days if necessary.
• Should the $18,000 cash be counted as part of the ‘bond’ portfolio since it is serving the same function? If it can be, then more money could be directed to the equity funds.