My annual spending is around $85-90k. One of my major goals over the next 2-3 years is to bump up my emergency fund to a full years worth of regular spending (not "oh shit I lost my job time to cut back" spending).
I'm already close to maxing out all the tax-advantaged accounts available to me unless there's some wacky loopholes I don't know about. So I don't plan on using Roth vehicles for any portion of my e-fund.
I don't know much about bonds, so I may be way off base here. But what do you guys think about splitting this eventual e-fund roughly 50/50 with half in HYSA and half in muni bonds? If I'm reading Fidelity's calculators correctly, the tax-equivalent yield of the California bond funds I'm looking at is >5% net of fees, which is better than almost all HYSAs. My thinking is for a 50/50 HYSA/muni bond portfolio:
- When interest rates go up, bonds go down. HYSA yield goes up, bond yields go down, net effect zero.
- When interest rates go down, bonds go up. HYSA yield goes down, bond yields go up, net effect zero.
I also have to admit there's some level of pride in my state here too. California has been VERY good to me, and it would feel good to "vote with my dollar". While I know bond trades on the secondary market don't directly help the issuer, at least I'd feel good signaling demand for California bonds.
