How Much in Your Emergency Fund And Is It Used?

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Jack FFR1846
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Jack FFR1846 » Tue Mar 07, 2017 11:54 am

fantasytensai wrote:
Jack FFR1846 wrote:$360k in iBonds ($365k after federal return hits)
$10k in a 5 year 2% Ally CD
$50k in cash (but over the summer will pay somewhere in the $35k area for tuitions)
-------
$420k total

Back when iBonds could be cashed in 6 months, I'd use them when it was time to buy anything big like a car. I just pay for cars from cash now.


That 50k in cash is in Ally earning 1% right? I mean you already have an Ally CD account there is no reason to not put the 50k in an Ally savings account.


$20k in Ally 1% account ($10k in 5 year CD), $10k in a Redneck 1.25% account, 10k in a Citi checking opened to get a $400 bonus and $10k in my credit union split 50/50 between a 0.8% money market and 0% checking account.

I do constantly look for bonuses for moving money places. I have $20k coming in and will add $5k soon to open a TDAmeritrade account to get a $100 bonus, then buy either IVV (0.04%) or VTI (0.05%) ETF with it.

I'm always ready to pay for next semester's tuition, even if I lose my job today.
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ZeroWealth
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Re: How Much in Your Emergency Fund And Is It Used?

Post by ZeroWealth » Tue Mar 07, 2017 12:38 pm

We keep 6 months expenses + 20% invested in Vanguard Tax-Managed Balanced Fund Admiral Shares (VTMFX) as our safety net for anything financially catastrophic like job loss or prolonged healthcare expenses. The 20% is to account for any wild fluctuations in the market or for a long-term bear market.

We also throw $250/mo into an "Unbudgeted Expenses" savings account for non-serious/non-expensive emergencies (broken dishwasher, fence repair, etc.).
"I seldom end up where I wanted to go, but almost always end up where I need to be." - Douglas Adams

mister37
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Re: How Much in Your Emergency Fund And Is It Used?

Post by mister37 » Tue Mar 07, 2017 1:40 pm

We have about $20k cash in a savings account earning 2.5%. Over $25k in HSA that we max out each year. We cash flow all medical expenses, and there have been plenty for DW the past few years.
We also have a few different sinking funds; property taxes, vacation, new car, etc, that we have stopped/reduced contributing to for a period of time. We haven't needed to do this for an emergency yet, but more so for things like maxing my 401k before my contract ends, or other timing issues.
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Loandapper
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Loandapper » Tue Mar 07, 2017 1:58 pm

unclescrooge wrote: Several months ago, I had to come up with $1.3 million in cash after my wife insisted we buy a specific house. I had $160k available on hand (No joke), and the rest I got from friends and a private loan.


Nice friends.

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unclescrooge
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Re: How Much in Your Emergency Fund And Is It Used?

Post by unclescrooge » Tue Mar 07, 2017 2:32 pm

Loandapper wrote:
unclescrooge wrote: Several months ago, I had to come up with $1.3 million in cash after my wife insisted we buy a specific house. I had $160k available on hand (No joke), and the rest I got from friends and a private loan.


Nice friends.


Better than family!

Mr.BB
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Mr.BB » Tue Mar 07, 2017 2:54 pm

Right now we have $52,000 in our emergency fund. Eventually I would like to get it to at least $75,000. We have only used it twice about $2,000 each time for ct scans for our dogs. We have insurance on our second dog so I was able to replenish it about $1500 of it.
By the time we get to start collecting Social Security I will re-evaluate our holdings, but until then it really is a nice safety net.
A few years ago I even started a separate long term no-debt fund. I figure in about 15 years we will need a new furnace, central air, roof. $1,200 a year in that fund should help cover those expenses and not touch our retirement accounts when it is time to replace those items.
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BrandonBogle
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Re: How Much in Your Emergency Fund And Is It Used?

Post by BrandonBogle » Tue Mar 07, 2017 3:01 pm

Mr.BB wrote:Right now we have $52,000 in our emergency fund. Eventually I would like to get it to at least $75,000. We have only used it twice about $2,000 each time for ct scans for our dogs. We have insurance on our second dog so I was able to replenish it about $1500 of it.
By the time we get to start collecting Social Security I will re-evaluate our holdings, but until then it really is a nice safety net.
A few years ago I even started a separate long term no-debt fund. I figure in about 15 years we will need a new furnace, central air, roof. $1,200 a year in that fund should help cover those expenses and not touch our retirement accounts when it is time to replace those items.


So maybe this is just my ignorance here, but I am seriously curious. What would be the problem with paying for the ct scans, the furnace, central air, roof (if they would accept payment this way), etc. with a credit card and pay it off within 30 days? If you have bond fund holdings, CDs, individual bonds/treasuries, a taxable investment account, or a Roth IRA, why would one need to have $52k-$75k in cash?

For me, I have a similar "large expense - expected, date - unexpected" fund for a new roof, new water heater, new washer/dryer, new car, etc. That sits in Vanguard's Intermediate or Long-Term Tax Exempt bond fund in my taxable. For any of those, I could pay it on my credit card and have plenty of time to liquidate to cash to pay off the card. I have not considered this part of my "emergency fund". Am I doing the mental accounting wrong? I have $10k sitting in a 1.5% savings account that is for cash-flow handling, but the rest are sitting in less liquid holdings.

adksherm
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Re: How Much in Your Emergency Fund And Is It Used?

Post by adksherm » Tue Mar 07, 2017 3:04 pm

My emergency fund balance is $-0-. It has always been zero.

I have a plan for emergencies and normal cash flow needs included in my financial plan and reflected in my asset allocation that includes the use of credit cards and HELOC. I do not need a cash emergency fund. The penalties, unplanned capital gains, extra taxes, etc. related to selling investments are more than offset by higher returns over a 60 plus year investing lifetime.

People who need an emergency fund can not afford one. Those who can afford an emergency fund do not need one.

Dirghatamas
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Dirghatamas » Tue Mar 07, 2017 3:08 pm

I don't have an emergency fund. This to me sounds just like mental accounting. Money is money. It doesn't know where it came from and doesn't care how it will get used. So, I treat my entire assets holistically.

The only practical issue is time/liquidity. If I need money at time 0, I have credit cards and very small checking account (less than 0.1% of assets). All my taxable investments are available in time 0+ 2 days using ACH of mutual funds. Obviously tax deferred investments are not available/liquid. I keep all my assets (except tiny checking account) always in 100% global stocks. Yes, their value moves a lot day to day. I don't worry about it.

I don't want a significant amount (say 20% of my assets) in cash earning nothing while waiting for an emergency.

alfaspider
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Re: How Much in Your Emergency Fund And Is It Used?

Post by alfaspider » Tue Mar 07, 2017 3:17 pm

My "emergency fund" consists of both checking account balances and an online savings account paying a bit over 1%. Currently, it's around 1 year of living expenses.

Since the checking account is an operating account, that money is used. I do also sometimes transfer from savings to fund purchases. For example, I purchased a car for cash last year and drew the accounts to around 8-months living expenses. But overall, I try to keep the 1-year target. Probably more conservative than I need- I could open another investment account instead- but it gives me a sense of security, which is worth the opportunity cost to me. Part of my rationale is that a true financial emergency may very likely be coupled with another global financial crisis. I don't want to find out I lost my job right when I find my investments are down 40% and be forced to sell at the bottom to fund my living expenses.

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flamesabers
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Re: How Much in Your Emergency Fund And Is It Used?

Post by flamesabers » Tue Mar 07, 2017 3:30 pm

Dirghatamas wrote:I don't have an emergency fund. This to me sounds just like mental accounting. Money is money. It doesn't know where it came from and doesn't care how it will get used. So, I treat my entire assets holistically.

The only practical issue is time/liquidity. If I need money at time 0, I have credit cards and very small checking account (less than 0.1% of assets). All my taxable investments are available in time 0+ 2 days using ACH of mutual funds. Obviously tax deferred investments are not available/liquid. I keep all my assets (except tiny checking account) always in 100% global stocks. Yes, their value moves a lot day to day. I don't worry about it.

I don't want a significant amount (say 20% of my assets) in cash earning nothing while waiting for an emergency.


I agree. I used to keep about $25k in a rewards checking account (at one time it was earning around 4.0% interest), but once the interest rate plummeted I saw no reason to tie up so much money in a checking account. I do keep between $5k-$10k in Vanguard's Municipal Money Market Fund, however I used that account more as temporary storage for next year's IRA contribution then anything else. I always like to make my IRA contribution at the start of the new year.

Mr.BB
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Mr.BB » Tue Mar 07, 2017 3:31 pm

BrandonBogle wrote:
Mr.BB wrote:Right now we have $52,000 in our emergency fund. Eventually I would like to get it to at least $75,000. We have only used it twice about $2,000 each time for ct scans for our dogs. We have insurance on our second dog so I was able to replenish it about $1500 of it.
By the time we get to start collecting Social Security I will re-evaluate our holdings, but until then it really is a nice safety net.
A few years ago I even started a separate long term no-debt fund. I figure in about 15 years we will need a new furnace, central air, roof. $1,200 a year in that fund should help cover those expenses and not touch our retirement accounts when it is time to replace those items.


So maybe this is just my ignorance here, but I am seriously curious. What would be the problem with paying for the ct scans, the furnace, central air, roof (if they would accept payment this way), etc. with a credit card and pay it off within 30 days? If you have bond fund holdings, CDs, individual bonds/treasuries, a taxable investment account, or a Roth IRA, why would one need to have $52k-$75k in cash?

For me, I have a similar "large expense - expected, date - unexpected" fund for a new roof, new water heater, new washer/dryer, new car, etc. That sits in Vanguard's Intermediate or Long-Term Tax Exempt bond fund in my taxable. For any of those, I could pay it on my credit card and have plenty of time to liquidate to cash to pay off the card. I have not considered this part of my "emergency fund". Am I doing the mental accounting wrong? I have $10k sitting in a 1.5% savings account that is for cash-flow handling, but the rest are sitting in less liquid holdings.


To me, the whole point of having an emergency fund is
1) I have the money to pay for the emergencies. Putting it on a credit card doesn't mean you can pay for it. I would put the charge on the credit card, (I like getting our hotel points!). But I can simply turn around and pay the bill with the checking acct cash.
2) I like keeping our retirement accounts as is, they are for retiring not paying bills. It's how I like to organize our finances. It's simple, but it works very well for us.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

windrider
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Re: How Much in Your Emergency Fund And Is It Used?

Post by windrider » Tue Mar 07, 2017 3:49 pm

I keep more of a tiered emergency/slush fund. Most bills are paid by credit card, and credit cards are paid off every month with a checking account that has enough slush that I can cover a month or two of unexpected expenses without needing to dip into the emergency.

After that, more of an "emergency fund" is a series of savings accounts -- a money market that is slightly less accessible but slightly more interest, and a savings account that takes a little less time to get money from. From these, money is occasionally withdrawn, but there are also automatic contributions which usually keep it at a stable level of a 3-4 months of expenses. It's basically an attempt to earn a little interest on money set aside that gets paid in periodic big chunks -- e.g. property taxes.

After that, there are bonds in a taxable account, and then if worst comes to worst, stock based assets in a taxable account, though it would have to be a pretty big justification to take the capital gains hit. I would avoid tapping retirement in all but the most dire of emergencies.
Last edited by windrider on Tue Mar 07, 2017 3:59 pm, edited 1 time in total.

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FelixTheCat
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Re: How Much in Your Emergency Fund And Is It Used?

Post by FelixTheCat » Tue Mar 07, 2017 3:54 pm

Daryl wrote:In a real emergency, I'd call Mom and Dad. They won't tell me how much they have, but assure me that it is sufficient.

+1 In a real emergency, I'd call Daryl's Mom and Dad. :D

I have an EF. I've used it for repairing my 10 year old car from time-to-time.
Felix is a wonderful, wonderful cat.

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Doc
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Doc » Tue Mar 07, 2017 3:59 pm

In figuring the size of your "emergency" fund think outside the box.

First, people should make a distinction between "contingency" and "emergency". A contingency fund is money that will be spent on something, sometime in the near future but the what on and the how much is unknown. It is almost always a relatively small amount like a new roof on your house. An emergency fund is money that may never be spent and it is usually a large amount. We usually try to insure ourselves against emergencies like our house burning down. Whether a certain event is a contingency or an emergency depends on what one's own particular situation is. To a college professor being laid off is an emergency because he is tenured but to a construction worker it is a contingency because he often gets laid off in bad weather.

That being said we have about $1500 in my wife's "mad money" checking account as a contingency and a mid six figure amount in a fully invested emergency fund (aka a margin account) at one of our brokers.

We did have one emergency once when my daughter came over for dinner and happened to mention that the deal for her new condo fell through because the loan company doubled the required down payment five day before closing. Since I was leaving town for a two week backcountry trip in a few days it was an emergency. She was able to close on time and it cost less than a hundred in margin interest.
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Artisan » Tue Mar 07, 2017 4:06 pm

I am also surprised by what I consider the low amounts or no EF from some of the posters. I'd like to see responses from more of the frequent posters here to see if that offsets the responses so far.

We currently have 18 months of current expenses increasing to 24 months making 1% in online savings accounts.
Biggest use of EF was for a major surgery for one of our children which our insurance refused to cover. Cost was roughly 4 months of expenses at the time.

Our current EF helps me sleep very well at night :)
Last edited by Artisan on Tue Mar 07, 2017 4:10 pm, edited 1 time in total.

corysold
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Re: How Much in Your Emergency Fund And Is It Used?

Post by corysold » Tue Mar 07, 2017 4:09 pm

It seems to me this is a nomenclature issue.

Some posters don't have an "emergency fund", but they have $1,000,000 in stock they'd sell if they needed it. Put the emergency on a credit card, sell the stock, pay off the card, problem solved. More or less the same thing with a different name.

The article suggests many Americans don't have the $500 to pay off the credit card when they charge the emergency to it. That is a bigger issue than what posters call their cash they'd use in an emergency.

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BrandonBogle
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Re: How Much in Your Emergency Fund And Is It Used?

Post by BrandonBogle » Tue Mar 07, 2017 4:11 pm

Doc wrote:First, people should make a distinction between "contingency" and "emergency". A contingency fund is money that will be spent on something, sometime in the near future but the what on and the how much is unknown. It is almost always a relatively small amount like a new roof on your house. An emergency fund is money that may never be spent and it is usually a large amount. We usually try to insure ourselves against emergencies like our house burning down. Whether a certain event is a contingency or an emergency depends on what one's own particular situation is. To a college professor being laid off is an emergency because he is tenured but to a construction worker it is a contingency because he often gets laid off in bad weather.


Thank you. While I've mentioned "contingency" funds upthread, I guess I harped too much on "emergency" funds being cash, ready to be in hand today. Without paying interest or penalties or any fees, I can have four figured by end of day today and five figures by tomorrow morning. Six figures can be the day after that (+2 days from today), but that involves paying something (interest on margin, advance from credit card, capital gains on tax-exempt bonds, capital gains on stocks, Roth IRA contribution withdrawal). The first two (today + tomorrow) will cover months of all expenses (without impacting my ability to retire early) and the third (+2 days) would cover years, perhaps delaying early retirement.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by Daryl » Tue Mar 07, 2017 6:32 pm

FelixTheCat wrote:
Daryl wrote:In a real emergency, I'd call Mom and Dad. They won't tell me how much they have, but assure me that it is sufficient.

+1 In a real emergency, I'd call Daryl's Mom and Dad. :D

@FelixTheCat - If you had a real emergency, and they were able to help, they would. That is just the type of people they are!

flippinterp
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Re: How Much in Your Emergency Fund And Is It Used?

Post by flippinterp » Tue Mar 07, 2017 6:51 pm

I've got a couple thousand in a designated emergency fund, enough for 2-3 months of expenses. However, I have other cash reserves that could be used in a true emergency if needed. The last time I used my emergency fund was to purchase my car- the old car's engine kept overheating and it lead to damages that didn't make sense to fix. The good thing about saving (whether it's for retirement, house downpayment, or emergency money) is that a lot of smaller unexpected expenses can be absorbed into my family's regular cash flow. We typically just put it on our credit card and pay it off, and just contribute less into savings that month. Would I like a bigger emergency fund? Absolutely. But not if it means sacrificing retirement savings.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by Jimmie » Tue Mar 07, 2017 7:11 pm

HIinvestor wrote:There are a LOT of people in the US living from one paycheck to the next.

It is worse than that. All the payday loan places prove to me that there are a lot of people living one paycheck BEHIND "paycheck to paycheck".

bogglizer
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Re: How Much in Your Emergency Fund And Is It Used?

Post by bogglizer » Tue Mar 07, 2017 7:55 pm

I keep $5K in the bank and a $100K home equity line of credit (HELOC). I never use use credit cards as a debt management tool.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by LadyGeek » Tue Mar 07, 2017 8:02 pm

This thread is now in the Personal Finance (Not Investing) forum (Emergency fund).

To keep this actionable, please limit your comments to your own situation.
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Sandtrap » Tue Mar 07, 2017 8:08 pm

2 commas. Untouched. :wink:

cresive
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Re: How Much in Your Emergency Fund And Is It Used?

Post by cresive » Tue Mar 07, 2017 10:46 pm

Jcraz13 wrote:http://www.bankrate.com/finance/consumer-index/money-pulse-0117.aspx


This in all practicality means less than half of Americans don't have money to cover $500.00 in expenses that might arise unexpectedly.

And yet it seems the restaurants and coffee shops are full. Assuming most on this forum are frugal and have an EF, what does it consist of dollar wise ?

How much do you have in your emergency fund , and how often did you use it in the last year ?


I have a three tiered emergency fund. The first tier I have used almost every other month for some expense. The second I have used a couple times in the last few years. Fortunately, I haven't had to tap my real "it hit the fan" emergency fund which is fine with me, as I am using my Roth IRA for that. I am in the process of building a buffer fund to hit before I have to hit my Roth--thus building a 4-tiered approach.

My funds look like this:

1. I keep a savings account at my primary bank which is my overdraft protection. I try to keep a few thousand in this and I use my checking account as a transfer station--i.e. paycheck comes in, bills get paid. If there is a cash flow issue, my savings will cover it. I don't have any overdraft protection via a credit card anymore. Both of these accounts are in a credit union which won't allow that.

2. Online bank account where I try to keep about $3200 in case of an "unexpected" charge such as a care repair, new tires, or some other "major" issue. Unfortunately, I have had to tap and rebuild this account several times a year. Thank heavens for tax returns so I can refund the account.

3. NEW. I am building an I bond fund to be my real major fund for items like a new HVAC or other like issue. Such an issue would overwhelm the above accounts but having some cash in bonds would act as a nice buffer. Right now I am using zero interest cards to fill this gap. I am hoping to build this fund within the next couple years.

4. ROTH. This was my original major emergency fund. My earlier reasoning was that I could put a heavy charge onto a credit card and in the mean time transfer money from my ROTH to cover the payment. I had a hard time justifying keeping a lot of money in cash, so I put it into my retirement fund but in an account that I could access should the need arise. With my new system, this will be a catastrophic account--i.e loss of job and needing 6 months to find a new one. As I write this, my ROTH is still my Armageddon account, but I am hoping to build my I bond fund enough to make this account moot.

On the bright side, if I never need either the ROTH or even the I bond account, I will have some nice tax-advantaged money in retirement to take some nice vacations!!!

I have struggled to fund these accounts. I suspect that I don't make the money that many of the posters here earn. However, I have had several occurrences where I was really glad to have the savings. With my personality, it is helpful to have the separate funds, as if I had some extra cash in my checking account, I wouldn't have any extra cash in my checking account!
Last edited by cresive on Wed Mar 08, 2017 7:31 am, edited 2 times in total.

Blender
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Blender » Tue Mar 07, 2017 11:29 pm

$30K earning 1% in a saving account plus some cash at home.

I guess I think about an emergency fund different than a lot on here. For me it's not about some single event that costs $xxx amount of dollars, for those types of events we have number of ways to cash flow and pay for things. For us it's about another '08 type situation where the market loses 50% and you lose your job. If so we have enough to get by for a while without having to liquidate investments at a large lost. Each time we consider reducing the EF amount to put more towards investments we think about that pain of selling at market lows if it was needed. That and for some reason it helps me sleep better at night.

invst65
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Re: How Much in Your Emergency Fund And Is It Used?

Post by invst65 » Tue Mar 07, 2017 11:44 pm

I follow a modified version of the Permanent Portfolio strategy called the Golden Butterfly and it calls for 20% cash at all times (the Permanent Portfolio is 25%). So there is no need for an emergency fund. An adequate supply of cash is always there. Hopefully at re-balancing time you will add to it but if you have to convert cash into other investments things will probably be pretty bad and you'll be glad you had the cash on hand.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by Alchemist » Wed Mar 08, 2017 1:10 am

I keep $20k in a separate savings account at my main bank and represents about 10 months of expenses. It is kept separate from other cash (checking account, savings for car/wedding/ect). I have had to tap it a couple times, but for no more than $2k at a time due to car repairs, broken iPhone, funeral travel expenses, ect. So far no 'major' financial emergencies thankfully.

However, last February when the market dipped 10%; I took half of it and put it in VTSAX in my taxable account since I thought it was a good bet the market would spring back. While that was a very good investment and a made a few grand from it since then, having only $10k of cash on hand for a few months while I rebuilt my EF was very uncomfortable for me. I don't think I will be doing that again.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by Longtermgrowth » Wed Mar 08, 2017 2:32 am

invst65 wrote:I follow a modified version of the Permanent Portfolio strategy called the Golden Butterfly and it calls for 20% cash at all times (the Permanent Portfolio is 25%). So there is no need for an emergency fund. An adequate supply of cash is always there. Hopefully at re-balancing time you will add to it but if you have to convert cash into other investments things will probably be pretty bad and you'll be glad you had the cash on hand.


I'm curious, how do you invest the 20% cash to keep it available for re-balancing? Short-Term Treasury Fund?

VAslim16
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Re: How Much in Your Emergency Fund And Is It Used?

Post by VAslim16 » Wed Mar 08, 2017 5:22 am

Mine is about 15k. I would like to get it up to 36k eventually which should be enough for a year of expenses saved. I don't use it very often but like having the security for sure...

Pill
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Pill » Wed Mar 08, 2017 7:14 am

I dumped 10k of my 11k in the marker today... Feel just fine buying on a down day. But honestly the reason I dumped it into the market is the earnings that are coming out look great. Only up from here. Will return to savings after making a k or two. Its like free money. But I am also willing to lose a k or two.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by JimmyD » Wed Mar 08, 2017 9:25 am

Currently, ours is a little south of $15K, but we generally try to keep it at $25K. We'll have it back at the target balance by the end of the year. Would be sooner, but we still need to fund two backdoor Roths.

I'd like to think we only use it for emergencies, but in reality, we've cash flowed all "emergencies" thus far as they haven't required a ton of cash. And as stated, I'll hit it up to fund our Roths.

I'm also guilty of raiding it from time to time for debt payoff. We're paying off my wife's Jeep at the end of the month and then we're done with car payments for likely the next decade. Once the emergency fund is topped off, it's time to look into taxable investing and extra mortgage payments.

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Conch55
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Conch55 » Wed Mar 08, 2017 9:36 am

I currently have low 6 figures in what I call bridge money, with FDIC protection, to provide peace of mind when the stock markets behave badly. It's to cover a real emergency.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by KSOC » Wed Mar 08, 2017 10:10 am

My wife and I received an inheritance of $45K from her Father. We decided to use it as our emergency fund. At the time we just had checking & savings getting by with two teens. It was a comforting feeling knowing I had back up. Kept it at Ally Bank at 1%. Every month the interest goes to my Vanguard Taxable (Total Stock Market). My wife would not approve of putting the balance in anything riskier. In time it will be a nice chunk of change to buy some bonds or other safe securities, if not needed for a real emergency.
Too soon old, too late smart.

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F150HD
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Re: How Much in Your Emergency Fund And Is It Used?

Post by F150HD » Wed Mar 08, 2017 10:33 am

midagelawyer wrote:About $50K and I'm constantly debating whether I should invest it and in what. I keep thinking it's a waste having it earn so little.


+1 earning 1% at ALLY I've often wondered about putting it into something else as its losing value at such a low rate compared to inflation.

np81
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Re: How Much in Your Emergency Fund And Is It Used?

Post by np81 » Wed Mar 08, 2017 10:58 am

There's no way I'd keep a significant amount of money in an account only earning 1% interest, as there are plenty of good CD options available that'll do much better and are nearly as accessible as a savings account.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by williebow » Wed Mar 08, 2017 11:35 am

6 months of expenses. Peace of mind..

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bardenay
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Re: How Much in Your Emergency Fund And Is It Used?

Post by bardenay » Wed Mar 08, 2017 11:41 am

Somewhere I read that an emergency fund exists to help prevent a personal tragedy from becoming a financial tragedy.

The wording of that may be a bit strong, but I think the idea is on track. Especially for those starting out. When you don't have much in savings or reserves it is easy to get into a bad debt cycle.

My emergency fund has about $15k in it. If my "emergency" went beyond that amount there are other places to access funds such as mid-range savings, next car fund, etc.

Bardenay

Flashes1
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Flashes1 » Wed Mar 08, 2017 12:36 pm

I don't have an emergency fund, but I do have a large enough HELOC from a very strong bank on a house with 60% loan/value.

I never understand why I would keep funds yielding 1% for something that I'll unlikely ever need, and if I did, I could use my HELOC.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by Calygos » Wed Mar 08, 2017 1:46 pm

Flashes1 wrote:I don't have an emergency fund, but I do have a large enough HELOC from a very strong bank on a house with 60% loan/value.

I never understand why I would keep funds yielding 1% for something that I'll unlikely ever need, and if I did, I could use my HELOC.


Sincere question: What about people who rent (can't find/afford a house) so can't get a HELOC? I also keep my ~$21k (aiming for $30k) at Ally, as anything that would earn enough to counter inflation and be worth moving to would also entail higher risk/volatility and less liquidity.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by CantPassAgain » Wed Mar 08, 2017 1:59 pm

Flashes1 wrote:I don't have an emergency fund, but I do have a large enough HELOC from a very strong bank on a house with 60% loan/value.

I never understand why I would keep funds yielding 1% for something that I'll unlikely ever need, and if I did, I could use my HELOC.



You gonna draw from a HELOC if you lost your job? Pretty brave.

We have two accounts at GSBank earning 1.05%.

One has just under $26K. This is our "live for 6 months without changing lifestyle if we both lost our jobs and the market tanks at the same time" account. Unlikely, and if it did happen we would definitely tighten our belts, but it feels good to have.

The other account is money that is intended to actually be spent when bad things inevitably happen like car/home repairs or health issues. We save a small fixed amount to this account each paycheck. It's currently around $5K.

I like accounts for "buckets" of expenses. Keeps my mental accounting to a minimum :)

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Re: How Much in Your Emergency Fund And Is It Used?

Post by sawhorse » Wed Mar 08, 2017 3:02 pm

bligh wrote:I dont keep an emergency fund. Instead I have "cash reserves".
...
Our cash reserves smooth out big purchases, unexpected expenses and also act as my emergency fund.


Same here.

I've actually been on the brink of a financial disaster situation for the last two years as I've been unemployed with enormous medical expenses. If my husband were to lose his job, the situation would be devastating.

The last two years, our monthly cash flow was only negative by a few hundred dollars due to the medical expenses, and our cash reserves have covered that stop my husband has still be able to contribute to a 401k.

This year we expect the medical expenses to double to over $45k because of experimental treatments I hope to try. That money is coming out of the cash reserves and another source to be determined.

If my husband were to lose his job, we would use my 457 from a former government job as it can be withdrawn without penalty. It's sitting in TIAA Traditional earning 3.5% guaranteed.

In that way we have layers of cash reserves.
Last edited by sawhorse on Wed Mar 08, 2017 3:07 pm, edited 1 time in total.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by sawhorse » Wed Mar 08, 2017 3:04 pm

F150HD wrote:
midagelawyer wrote:About $50K and I'm constantly debating whether I should invest it and in what. I keep thinking it's a waste having it earn so little.


+1 earning 1% at ALLY I've often wondered about putting it into something else as its losing value at such a low rate compared to inflation.


I bonds for money you wouldn't need within a year.

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BrandonBogle
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Re: How Much in Your Emergency Fund And Is It Used?

Post by BrandonBogle » Wed Mar 08, 2017 3:16 pm

sawhorse wrote:This year we expect the medical expenses to double to over $45k because of experimental treatments I hope to try.


I'll be hoping for the best possible results from this!

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Re: How Much in Your Emergency Fund And Is It Used?

Post by Calygos » Wed Mar 08, 2017 3:45 pm

sawhorse wrote:
F150HD wrote:
midagelawyer wrote:About $50K and I'm constantly debating whether I should invest it and in what. I keep thinking it's a waste having it earn so little.


+1 earning 1% at ALLY I've often wondered about putting it into something else as its losing value at such a low rate compared to inflation.


I bonds for money you wouldn't need within a year.


I think the issue is knowing whether or not you'd need the money within a year. If you have money you feel comfortable locking away like that, then you likely have liquidity elsewhere and the question of safety and returns is then just shifted to the other funds.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by invst65 » Wed Mar 08, 2017 3:48 pm

Longtermgrowth wrote:
invst65 wrote:I follow a modified version of the Permanent Portfolio strategy called the Golden Butterfly and it calls for 20% cash at all times (the Permanent Portfolio is 25%). So there is no need for an emergency fund. An adequate supply of cash is always there. Hopefully at re-balancing time you will add to it but if you have to convert cash into other investments things will probably be pretty bad and you'll be glad you had the cash on hand.


I'm curious, how do you invest the 20% cash to keep it available for re-balancing? Short-Term Treasury Fund?


Yes, I have it in FSBAX at Fidelity.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by rattlenap » Wed Mar 08, 2017 3:54 pm

I have $10k (6 months expenses) that I keep in a taxable account in the Vanguard Federal Money Market settlement fund.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by NoVa Lurker » Wed Mar 08, 2017 3:59 pm

bligh wrote:I dont keep an emergency fund. Instead I have "cash reserves". I keep it in a band of $15K and $60K with the target being $40-50K. If the balance drops below $40K I prioritize rebuilding the cash reserves. If it goes over $50K I tend to invest it unless I know I have a big expense coming like an estimated tax payment or a car purchase or vacation.

Our cash reserves smooth out big purchases, unexpected expenses and also act as my emergency fund.


This is almost exactly what we do, except our target is $20k plus whatever large expenses might be within the next year (new car, home improvements). If we had a true emergency, we'd presumably put off the large expenses for a bit.

I think of this as our liquidity account.

Then I try to have no more than a $1k buffer in checking.

We also have $39k in credit card availability, but I'd be hesitant to rely on that, because (1) the banks could reduce that availability in a credit crunch, and (2) the interest rates would be high if we ever had to carry a balance, which we've never done. You could imagine some possible "emergencies" where paying by credit card would be useful, and others where it wouldn't.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by Independent George » Wed Mar 08, 2017 4:17 pm

I think a better question is what exactly constitutes an 'emergency'; I draw a distinction between an ordinary big ticket expense and an 'emergency'. To use the example from the link, I don't think of the tile repair as an emergency the way a broken down car or a leaky roof would be. A broken car means you can't get to work; a leaky roof is an outright danger, and repairing it heads off far greater expenses from water damage, mildew, rot, etc. The flooring situatin is important, but I'd cover it with duct tape/epoxy and save until I could cover it in cash withut dipping into savings.

I have about $20k in my emergency fund (1% Ally Savings + 5% Netspend), about 25k in my intermediate fund (Vanguard Wellesley in a taxable account), plus a 'buffer' in my checking account (monthly expenses of around $3.5k, and checking balance is typically between $8k-10k depending on where I am in my pay cycle). I know I'd be better off shifting my buffer into savings/investments (where it could actuallly earn something), but I just find it too comforting to pay my monthly expenses out of checking twice.

Has it really been 10 years since we were getting 5.50% from savings and 1% from checking? I hate losing money to inflation every month.

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Re: How Much in Your Emergency Fund And Is It Used?

Post by sawhorse » Wed Mar 08, 2017 4:26 pm

Calygos wrote:
sawhorse wrote:
F150HD wrote:
midagelawyer wrote:About $50K and I'm constantly debating whether I should invest it and in what. I keep thinking it's a waste having it earn so little.


+1 earning 1% at ALLY I've often wondered about putting it into something else as its losing value at such a low rate compared to inflation.


I bonds for money you wouldn't need within a year.


I think the issue is knowing whether or not you'd need the money within a year. If you have money you feel comfortable locking away like that, then you likely have liquidity elsewhere and the question of safety and returns is then just shifted to the other funds.


That's a good point. If you could get a 12 month no interest promotional period for a credit card or loan, that might work.

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