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Leo and Ava Bryant together earn approximately 9200 a year after taxes. Through an inheritance and...

Leo and Ava Bryant together earn approximately 9200 a year after taxes. Through an inheritance and some wise investing they also have an investment portfolio with a value of almost $200,00. How much of their annual income do you recommend the Bryants hold in some form of liquid savings as reserves? Explain.

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Answer #1

There is no concrete answer with regards to how much liquid reserves should be kept to take care of any exigency. However there is a general thumb rule which states that 6 months income should be kept in liquid funds which can be liquidated or used in any kind of emergency situation.
Now income post taxes: $9200
6 months income: $4600
So it is recommended that around $4600 should be kept in liquid funds to take care of any unforeseen circumstances in addition to $20,000 of their investment portfolio.

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