How Much in Your Emergency Fund And Is It Used?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Bully3000
Posts: 56
Joined: Mon Jan 07, 2019 4:23 pm

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

Post by Bully3000 »

I have about 6 months sitting in an online savings account, this is purely for Job loss for me, income can cover other emergencies such as replacing broken/damaged items and i would prefer to finance something than remove cash from my EF.

If i had a large taxable account then i would reduce this to maybe a month or 2 but currently this is my only buffer without raiding retirement accounts.
carol-brennan
Posts: 277
Joined: Thu Dec 27, 2018 3:19 pm

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

Post by carol-brennan »

4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
User avatar
corn18
Posts: 1867
Joined: Fri May 22, 2015 6:24 am

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

Post by corn18 »

carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
An EF can be more than just CDs/cash. I have a large taxable account that could hold us over for many years even after a 50% market drop. So 8 months cash + many years in a fully invested taxable account is for superior to carrying 2 years of CDs/cash drag. That's my opinion, from experience.
Don't do something, just stand there!
User avatar
sunny_socal
Posts: 2297
Joined: Tue Mar 24, 2015 4:22 pm

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

Post by sunny_socal »

carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
Wow I can't imagine have that much cash. But then again if I had that much cash, it's likely I had 10x that amount stashed away elsewhere! :beer
bling
Posts: 761
Joined: Sat Jan 21, 2012 12:49 pm

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

Post by bling »

carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
the opportunity cost here is huge. can you imagine just sitting on the sidelines for any 5 year period in the past decade? if you go back 20 years, you would only be behind if you literally started at the top of the dot-com bubble, and just by a little.

what's your advice for the 22 year old that's graduating college? because if it's to fund that emergency fund to 5 years, this individual will not have a single dollar invested in stocks for probably 10-20 years. if you are this risk averse, do you also believe in reverse mortgages, and will continue to buy cash/bonds until your house is paid off? so now it's no stocks until you're over 50?
User avatar
Tamarind
Posts: 2357
Joined: Mon Nov 02, 2015 2:38 pm

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

Post by Tamarind »

$30k in Ally's no-penalty CD, configured to kick the interest into my savings account and roll over to a new CD every 11 months on autopilot.

That represents 1 year's worth of core expenses - no extras or savings included. We don't touch it.

We keep a separate savings account that collects the excess from checking and is used for large non-emergency expenses like replacement cars or home remodeling. This would go first in an emergency, but its not always very large.

We don't have a taxable investing account yet, so this is the extent of our liquid funds. For a larger emergency I'd have to tap the HELOC/credit cards/Roth contributions, any of which would require me to divert future income from retirement savings.
stoptothink
Posts: 8704
Joined: Fri Dec 31, 2010 9:53 am

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

Post by stoptothink »

carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
And you have had an emergency that requires 4-5yrs of expenses in cash? Nothing wrong with it, but EFs are for people that live paycheck to paycheck; we have ~$10k sitting in Ally at all times (enough to pay for wife's next semester of tuition and a few months of expenses) but it's not necessarily an emergency fund. Furthermore, with ~$50k in an HSA, 6-figures in Roths, and being a dual-income household which could very easily live off one income, I can't even think of an "emergency" that would necessitate us keeping a dedicated emergency fund
bawr
Posts: 80
Joined: Thu May 19, 2011 9:10 pm

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

Post by bawr »

I don't have anything I think of as an "emergency fund", but I do have well over five years' worth of living expenses in T-Bills, money market funds, and ultra-short term bond funds.
HEDGEFUNDIE
Posts: 4801
Joined: Sun Oct 22, 2017 2:06 pm

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

Post by HEDGEFUNDIE »

carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
Folks, meet our new KlangFool!
DesertDiva
Posts: 1004
Joined: Thu Mar 01, 2018 12:49 pm
Location: In the desert

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

Post by DesertDiva »

Questions everyone must answer: what constitutes an emergency? What is the likelihood of that emergency? What is the probable duration of the emergency? When does the emergency end? What costs would we incur? What monetary and non-monetary resources would we use to address the emergency? Does insurance come into play? Would the emergency require us to travel away from home for any period of time? Answering these questions helped us set a target of cash-on-hand and funds in a money market. It wouldn’t cover 100% of our highest possible emergency, but would help us stay afloat while dealing with finite nature of the situation while working to return to (or close to) our original state. Each household’s situation is different so to offer an actual number doesn’t make much sense.
KlangFool
Posts: 19067
Joined: Sat Oct 11, 2008 12:35 pm

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

Post by KlangFool »

carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
carol-brennan,

In order to provide a proper context to your answer, would you mind answering the following 2 questions?

A) Are you retired?

B) What is your total portfolio in term of years of expense excluding that 4 to 5 years of CD/Cash?

Thanks.

KlangFool
KlangFool
Posts: 19067
Joined: Sat Oct 11, 2008 12:35 pm

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

Post by KlangFool »

sunny_socal wrote: Sat Mar 02, 2019 8:23 am
carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
Wow I can't imagine have that much cash. But then again if I had that much cash, it's likely I had 10x that amount stashed away elsewhere! :beer
+1. My portfolio excluding the 1-year emergency fund is at 20 times of my annual expense.

KlangFool
KlangFool
Posts: 19067
Joined: Sat Oct 11, 2008 12:35 pm

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

Post by KlangFool »

stoptothink wrote: Sat Mar 02, 2019 8:49 am
carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
And you have had an emergency that requires 4-5yrs of expenses in cash? Nothing wrong with it, but EFs are for people that live paycheck to paycheck; we have ~$10k sitting in Ally at all times (enough to pay for wife's next semester of tuition and a few months of expenses) but it's not necessarily an emergency fund. Furthermore, with ~$50k in an HSA, 6-figures in Roths, and being a dual-income household which could very easily live off one income, I can't even think of an "emergency" that would necessitate us keeping a dedicated emergency fund
stoptothink,

Family.

If you have extended family members that you take care off in case of the emergency, your emergency fund may be used to take care of their emergencies. For example, we, uncles and aunties, sent 50K to our niece to fix her house when her house was flooded.

KlangFool
FIBoston
Posts: 107
Joined: Fri Feb 10, 2017 11:41 am

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

Post by FIBoston »

12k or 3 months of spending. Used it for the first time ever after a surprisingly high tax bill (5k) after unkowningly under-witholding this year.

I'm glad I had it in this instance not because I wouldn't have been able to make the payment without it, but because it would have been a lot harder mentally to spend the next few months turning off savings and paying down the next few months, instead of spending the next few months saving back the funds back up. Basically, it was the difference between making a one time payment to someone else and then continuing to only pay myself vs. making a credit card payment to someone else and then paying that credit card company a couple more times.
User avatar
TheTimeLord
Posts: 8748
Joined: Fri Jul 26, 2013 2:05 pm

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

Post by TheTimeLord »

stoptothink wrote: Sat Mar 02, 2019 8:49 am
carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
And you have had an emergency that requires 4-5yrs of expenses in cash? Nothing wrong with it, but EFs are for people that live paycheck to paycheck; we have ~$10k sitting in Ally at all times (enough to pay for wife's next semester of tuition and a few months of expenses) but it's not necessarily an emergency fund. Furthermore, with ~$50k in an HSA, 6-figures in Roths, and being a dual-income household which could very easily live off one income, I can't even think of an "emergency" that would necessitate us keeping a dedicated emergency fund
Can someone explain the difference in Emergency Fund and your Fixed Income allocation? If I am 60/40 with 25x expenses then to me it seems you more or less have a 10 year Emergency fund, 12.5 years if you are 50/50. So I don't get why 4-5 years causes anyone pause. The only possible difference I see is the possible need for it to be maintained in the after tax space. Personally, I have been using CDs instead of bonds for a few years because of rising interest rates and periodic good opportunities.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
stoptothink
Posts: 8704
Joined: Fri Dec 31, 2010 9:53 am

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

Post by stoptothink »

KlangFool wrote: Mon Mar 04, 2019 9:16 am
stoptothink wrote: Sat Mar 02, 2019 8:49 am
carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
And you have had an emergency that requires 4-5yrs of expenses in cash? Nothing wrong with it, but EFs are for people that live paycheck to paycheck; we have ~$10k sitting in Ally at all times (enough to pay for wife's next semester of tuition and a few months of expenses) but it's not necessarily an emergency fund. Furthermore, with ~$50k in an HSA, 6-figures in Roths, and being a dual-income household which could very easily live off one income, I can't even think of an "emergency" that would necessitate us keeping a dedicated emergency fund
stoptothink,

Family.

If you have extended family members that you take care off in case of the emergency, your emergency fund may be used to take care of their emergencies. For example, we, uncles and aunties, sent 50K to our niece to fix her house when her house was flooded.

KlangFool
Sounds like that "emergency" didn't require anywhere close to 4-5yrs of expenses as Carol-Brennan suggests and isn't that what home insurance is for? Furthermore, although I'd likely help in that specific situation because it is family and I can, I don't feel some inherent guilt to pay for someone else's "emergency"...isn't that why they should have an emergency fund?
Thegame14
Posts: 1808
Joined: Mon May 07, 2018 11:53 am

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

Post by Thegame14 »

about 55K, 20K in each of mine and DW personal savings, and about $15K in joint checking.
KlangFool
Posts: 19067
Joined: Sat Oct 11, 2008 12:35 pm

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

Post by KlangFool »

stoptothink wrote: Mon Mar 04, 2019 10:31 am
Sounds like that "emergency" didn't require anywhere close to 4-5yrs of expenses as Carol-Brennan suggests and isn't that what home insurance is for? Furthermore, although I'd likely help in that specific situation because it is family and I can, I don't feel some inherent guilt to pay for someone else's "emergency"...isn't that why they should have an emergency fund?
stoptothink,

<< isn't that what home insurance is for? >>

This was Houston. That part of the Houston is not supposed to be flooded. So, there was no flood insurance.

<<Furthermore, although I'd likely help in that specific situation because it is family and I can, I don't feel some inherent guilt to pay for someone else's "emergency">>

In my culture, this is a family obligation. The family takes care of each other.

<<isn't that why they should have an emergency fund?>>

This emergency far exceeds her emergency fund's capability to deal with it. And, it was a gift. She does not have to pay back the 50K. If it was a loan, it will take her quite a while to rebuild herself financially.

<< Sounds like that "emergency" didn't require anywhere close to 4-5yrs of expenses as Carol-Brennan suggests>>

Many of my family members have one year worth of emergency fund. So, we have a bigger pool of emergency fund to draw from each other on a real emergency.

To each its own. I am just providing a different point of view and perspective.

KlangFool
RollTide31457
Posts: 259
Joined: Tue Nov 28, 2017 8:06 pm

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

Post by RollTide31457 »

carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
Agree. Working toward having 10 years of living expenses in cash.
User avatar
corn18
Posts: 1867
Joined: Fri May 22, 2015 6:24 am

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

Post by corn18 »

TheTimeLord wrote: Mon Mar 04, 2019 9:58 am
stoptothink wrote: Sat Mar 02, 2019 8:49 am
carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
And you have had an emergency that requires 4-5yrs of expenses in cash? Nothing wrong with it, but EFs are for people that live paycheck to paycheck; we have ~$10k sitting in Ally at all times (enough to pay for wife's next semester of tuition and a few months of expenses) but it's not necessarily an emergency fund. Furthermore, with ~$50k in an HSA, 6-figures in Roths, and being a dual-income household which could very easily live off one income, I can't even think of an "emergency" that would necessitate us keeping a dedicated emergency fund
Can someone explain the difference in Emergency Fund and your Fixed Income allocation? If I am 60/40 with 25x expenses then to me it seems you more or less have a 10 year Emergency fund, 12.5 years if you are 50/50. So I don't get why 4-5 years causes anyone pause. The only possible difference I see is the possible need for it to be maintained in the after tax space. Personally, I have been using CDs instead of bonds for a few years because of rising interest rates and periodic good opportunities.
I don't think there is much of a difference. The only issue is the location, as you mentioned. We are 60/40 and most of our bonds are in my 401k and I can't get to them right now (age 53), so I keep some bonds in my taxable account, but not much. Between our taxable and Roth accounts, we could survive 7 years even after a 50% market drop. That gets us to 60 and access to the 401k.
Don't do something, just stand there!
KlangFool
Posts: 19067
Joined: Sat Oct 11, 2008 12:35 pm

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

Post by KlangFool »

corn18 wrote: Mon Mar 04, 2019 11:38 am
TheTimeLord wrote: Mon Mar 04, 2019 9:58 am
stoptothink wrote: Sat Mar 02, 2019 8:49 am
carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
And you have had an emergency that requires 4-5yrs of expenses in cash? Nothing wrong with it, but EFs are for people that live paycheck to paycheck; we have ~$10k sitting in Ally at all times (enough to pay for wife's next semester of tuition and a few months of expenses) but it's not necessarily an emergency fund. Furthermore, with ~$50k in an HSA, 6-figures in Roths, and being a dual-income household which could very easily live off one income, I can't even think of an "emergency" that would necessitate us keeping a dedicated emergency fund
Can someone explain the difference in Emergency Fund and your Fixed Income allocation? If I am 60/40 with 25x expenses then to me it seems you more or less have a 10 year Emergency fund, 12.5 years if you are 50/50. So I don't get why 4-5 years causes anyone pause. The only possible difference I see is the possible need for it to be maintained in the after tax space. Personally, I have been using CDs instead of bonds for a few years because of rising interest rates and periodic good opportunities.
I don't think there is much of a difference. The only issue is the location, as you mentioned. We are 60/40 and most of our bonds are in my 401k and I can't get to them right now (age 53), so I keep some bonds in my taxable account, but not much. Between our taxable and Roth accounts, we could survive 7 years even after a 50% market drop. That gets us to 60 and access to the 401k.
corn18,

It depends. There is a difference for some people. For some people, something can only be considered as an emergency fund if and only if it cannot lose its value when you access that money. In this case, since the bond can lose its value. It cannot be considered as an emergency fund. Only cash and cash equivalent qualify. Some other folks do not have the same consideration.

KlangFool
User avatar
willthrill81
Posts: 22609
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

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

Post by willthrill81 »

I very recently invested 2/3 of the funds in our emergency fund according to our total portfolio strategy. There is now no realistic scenario where we would need more than the few thousand we have in cash.

If our house burned down, we'd be out $1k.

If we totaled our car, we'd be out $500.

If any of us encountered a huge medical expense, our stop loss is ~$7-8k (stop loss for one person is slightly lower than the whole family), and we have more than that in our HSA.

Job loss isn't on the table in the near future as my current employment contract is good through June, 2020, and as a professor, I should be tenured in about two months. That's not quite as 'guaranteed' as many believe it is, but it's still very secure.

We save every month for auto maintenance, home maintenance, etc. and have adequate funds to cover just about anything that would come up at this point. Our car is still under bumper-to-bumper warranty, and our home is only four years old.

Once we become completely debt free in about a year, our need for liquidity will drop even further.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
dcabler
Posts: 1707
Joined: Wed Feb 19, 2014 11:30 am

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

Post by dcabler »

willthrill81 wrote: Mon Mar 04, 2019 1:06 pm I very recently invested 2/3 of the funds in our emergency fund according to our total portfolio strategy. There is now no realistic scenario where we would need more than the few thousand we have in cash.

If our house burned down, we'd be out $1k.

If we totaled our car, we'd be out $500.

If any of us encountered a huge medical expense, our stop loss is ~$7-8k (stop loss for one person is slightly lower than the whole family), and we have more than that in our HSA.

Job loss isn't on the table in the near future as my current employment contract is good through June, 2020, and as a professor, I should be tenured in about two months. That's not quite as 'guaranteed' as many believe it is, but it's still very secure.

We save every month for auto maintenance, home maintenance, etc. and have adequate funds to cover just about anything that would come up at this point. Our car is still under bumper-to-bumper warranty, and our home is only four years old.

Once we become completely debt free in about a year, our need for liquidity will drop even further.
Been my thinking for a while now. I can't envision a scenario where the usual amount in our checking account and/or our credit cards couldn't hold us over for the couple of days it would take to sell some mutual fund or ETF shares in the type of emergency not covered by the sorts of scenarios you're describing above. But that's just our situation - for others who are earlier in their career who haven't yet built up their savings to the point we have, having a well funded emergency fund probably makes a lot of sense.
Dottie57
Posts: 9544
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

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

Post by Dottie57 »

carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
I keep same. I am retired and spending my portfolio. Depending on returns, I will spend from cash or portfolio. The emergency is a bear market.
Last edited by Dottie57 on Mon Mar 04, 2019 3:47 pm, edited 1 time in total.
KlangFool
Posts: 19067
Joined: Sat Oct 11, 2008 12:35 pm

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

Post by KlangFool »

willthrill81 wrote: Mon Mar 04, 2019 1:06 pm I very recently invested 2/3 of the funds in our emergency fund according to our total portfolio strategy. There is now no realistic scenario where we would need more than the few thousand we have in cash.

We save every month for auto maintenance, home maintenance, etc. and have adequate funds to cover just about anything that would come up at this point. Our car is still under bumper-to-bumper warranty, and our home is only four years old.

Once we become completely debt free in about a year, our need for liquidity will drop even further.
willthrill81,

<<We save every month for auto maintenance, home maintenance, etc. >>

To each its own.

A) I keep 1 year of the emergency fund. I use my emergency fund for any one time expense too. For example, buying a new car.

B) In your case, you have a smaller emergency fund. But, you save money in separate buckets for those expenses.

KlangFool
azianbob
Posts: 388
Joined: Tue Jan 15, 2019 6:53 pm

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

Post by azianbob »

50k. Never been used. Getting 2.45% at CIT.
Miguelito
Posts: 301
Joined: Thu Feb 27, 2014 1:21 pm

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

Post by Miguelito »

My wife and I both have very stable jobs and are in a market and professions where it would not be too hard to get new jobs that pay 80%+ of what we make today. If both our jobs took a 20% pay cut we would be fine. The odds that one of us unexpectedly loses our job is pretty low. Both losing our jobs at the same time is almost incomprehensible. We work in entirely different and very healthy industries.

All that said, we have enough to cover all our expenses for 3 months in cash. We have an additional 5 months worth of easily accessible treasury funds if it came to that. That assumes we both lose our jobs. If only one of us loses our job, we could go on pretty much indefinitely by scaling back.

I don't really consider the EF as emergency money, more of a repository of liquid funds for large expenditures that can't be covered with monthly cash flow, but of course it would cover emergency situations and job loss as well.
fwellimort
Posts: 467
Joined: Tue Feb 12, 2019 9:41 am

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

Post by fwellimort »

Correct me if I was wrong but in the financial crisis of 2008, wasn't credit limit in credit card severely lowered cause no one could trust each other?

I thought conventional wisdom was insurance != investment.
I have 6 months of emergency fund. I doubt 6 months worth in the stock market would change my retirement plans anyway and having seen one of my relative lose his job suddenly for ~14 months, I sure don't want to experience that (and hopefully not during a recession).

Seeing people throwing all their money at the stock market including their emergency fund I guess means it's a good time to just leave emergency funds alone in HYSA.
Plus, this bull market has been raging for quite a while. Maybe I might consider investing a portion of my emergency fund after a notable bear market (say 28+% you can say I'm "timing" the market but this isn't investment money to start with), but until then, I'm fine with leaving insurances as insurances. :sharebeer
User avatar
BrandonBogle
Posts: 3605
Joined: Mon Jan 28, 2013 11:19 pm

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

Post by BrandonBogle »

corn18 wrote: Mon Mar 04, 2019 11:38 am I don't think there is much of a difference. The only issue is the location, as you mentioned. We are 60/40 and most of our bonds are in my 401k and I can't get to them right now (age 53), so I keep some bonds in my taxable account, but not much. Between our taxable and Roth accounts, we could survive 7 years even after a 50% market drop. That gets us to 60 and access to the 401k.
Corn, I would hope those are tax-exempt bonds you are holding, b/c why would you not just hold all the bonds in your 401k and hold some of your stock allocation in taxable. Then, when you need to tap your "emergency funds", you sell $x of stock in taxable and transfer $x from bonds to stocks in your 401k. You've then accomplished the same emergency fund, just more tax efficiently. Again, this is assuming these aren't tax-exempt bonds.
yummeemunnkee
Posts: 23
Joined: Fri Feb 16, 2018 10:19 am

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

Post by yummeemunnkee »

$150k in a savings acct earning 2.25% which I realize now, after reading this thread, may be overkill. :shock: But, we sleep well at night. When our water heater went a few months ago, no worries. When one of our decade-old cars dies, no worries. Only debt is a $235k mortgage at 3.25% which, thanks to this thread, I’m now thinking of taking $50k from that savings and putting it towards the mortgage to get it paid down sooner than later. LBYM. :moneybag
stoptothink
Posts: 8704
Joined: Fri Dec 31, 2010 9:53 am

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

Post by stoptothink »

dcabler wrote: Mon Mar 04, 2019 3:16 pm
willthrill81 wrote: Mon Mar 04, 2019 1:06 pm I very recently invested 2/3 of the funds in our emergency fund according to our total portfolio strategy. There is now no realistic scenario where we would need more than the few thousand we have in cash.

If our house burned down, we'd be out $1k.

If we totaled our car, we'd be out $500.

If any of us encountered a huge medical expense, our stop loss is ~$7-8k (stop loss for one person is slightly lower than the whole family), and we have more than that in our HSA.

Job loss isn't on the table in the near future as my current employment contract is good through June, 2020, and as a professor, I should be tenured in about two months. That's not quite as 'guaranteed' as many believe it is, but it's still very secure.

We save every month for auto maintenance, home maintenance, etc. and have adequate funds to cover just about anything that would come up at this point. Our car is still under bumper-to-bumper warranty, and our home is only four years old.

Once we become completely debt free in about a year, our need for liquidity will drop even further.
Been my thinking for a while now. I can't envision a scenario where the usual amount in our checking account and/or our credit cards couldn't hold us over for the couple of days it would take to sell some mutual fund or ETF shares in the type of emergency not covered by the sorts of scenarios you're describing above. But that's just our situation - for others who are earlier in their career who haven't yet built up their savings to the point we have, having a well funded emergency fund probably makes a lot of sense.
+2. I honestly can't think of any remotely possible scenario where what we always have sitting in our Ally account wouldn't be enough. Two income household, our current household expenses are less than half of one of our incomes, and the chances of one of us losing our job anytime in the near future is slim. Both of us? If that happens, we have more to worry about than money. Plus we're insured up the wazoo.

All depends on your level of comfort, but IMO, for a significant percentage of people on this board, an EF is superfluous.
User avatar
willthrill81
Posts: 22609
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

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

Post by willthrill81 »

stoptothink wrote: Mon Mar 04, 2019 7:12 pmAll depends on your level of comfort, but IMO, for a significant percentage of people on this board, an EF is superfluous.
I'm afraid that in at least some cases, it's worse than superfluous: it's a persistent drag on their portfolio.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
User avatar
Fieldsy1024
Posts: 710
Joined: Sun Feb 24, 2013 8:23 am

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

Post by Fieldsy1024 »

Low, 10k, plus hers 20k. If I NEED money I'll take the money that has been compounding faster than an emergency fund. Roth or 401k.
User avatar
corn18
Posts: 1867
Joined: Fri May 22, 2015 6:24 am

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

Post by corn18 »

BrandonBogle wrote: Mon Mar 04, 2019 6:26 pm
corn18 wrote: Mon Mar 04, 2019 11:38 am I don't think there is much of a difference. The only issue is the location, as you mentioned. We are 60/40 and most of our bonds are in my 401k and I can't get to them right now (age 53), so I keep some bonds in my taxable account, but not much. Between our taxable and Roth accounts, we could survive 7 years even after a 50% market drop. That gets us to 60 and access to the 401k.
Corn, I would hope those are tax-exempt bonds you are holding, b/c why would you not just hold all the bonds in your 401k and hold some of your stock allocation in taxable. Then, when you need to tap your "emergency funds", you sell $x of stock in taxable and transfer $x from bonds to stocks in your 401k. You've then accomplished the same emergency fund, just more tax efficiently. Again, this is assuming these aren't tax-exempt bonds.
Affirmative, tax free bonds (FTABX). It's 2% of my total portfolio, so not a lot, but could be handy in an emergency.
Don't do something, just stand there!
cresive
Posts: 462
Joined: Sat Nov 26, 2016 12:12 pm
Location: Virginia, USA
Contact:

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

Post by cresive »

Calygos wrote: 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.
Caveat: In a 2008-like crisis, the first thing banks tend to close are HELOC's. Even if you have one sitting and ready to use, it may not be there in a real emergency.
scrabbler1
Posts: 2531
Joined: Fri Nov 20, 2009 2:39 pm

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

Post by scrabbler1 »

I have a two-tiered emergency fund. The first is ~$700 buffer or cushion in my local bank's checking account I use to cover small, unforeseen expenses while continuing to meet minimum account balances to avoid monthly account fees. I tap into this fairly often and replenish any funds used within a month or two.

The second tier is a $40k holding in an intermediate-term muni bond fund. The fund has checkwriting privileges so it is more easily accessible in a pinch. I have had this account for 25 years and have written 17 checks, averaging $4,000. This fund is used to cover larger, unforeseen expenses which the local bank's checking account can't handle. While the fund used to pay a greater rate of return than it does now, it still pays in the 2%-2.5% range, earning me nearly $100 per month, mostly tax-free. I hate the thought of tying up a lot of money in an account which pays nearly nothing, and I am willing to risk a small cap loss on a redemption.

Before I retired 10 years ago, I had a larger amount in this fund because I was in a higher tax bracket. But I did some minor rebalancing out of the fund after I retired and my tax bracket dropped, making a muni bond fund somewhat less attractive versus taxable bond funds. This is my only fund which has checkwriting, so I plan to keep it at this level.
MnD
Posts: 4617
Joined: Mon Jan 14, 2008 12:41 pm

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

Post by MnD »

Our whole portfolio (8 accounts of various types and levels of liquidity) along with credit and insurance constitutes our emergency plan/fund.
Nothing specific labeled "emergency fund" and never have, although we do have a nice chunk in t-bills at ~2.5% TEY right now pending delivery of a teardrop camper soon and home remodel work in May.

We don't suffer from pessimism bias or a scarcity mindset but if one does, it doesn't matter how well off or how far ahead you are in the game - you'll emotionally need some big number walled off in some special bucket. As long as people include that as fixed income in their portfolio AA, and with various cash and cash-like things earning ~2.5% if you are at least semi-awake, there's no huge harm in that. It just decreases the duration of your overall fixed income somewhat, with (currently) little or no yield penalty. One could increase the duration somewhat in other fixed income and end up "even" ignoring some tax inefficiencies.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
bck63
Posts: 1438
Joined: Fri Sep 28, 2018 4:59 pm

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

Post by bck63 »

I consider the fixed income portion of my portfolio to be my emergency fund. About half of it is in a federal money market fund, with the other half in a intermediate bonds fund. I can easily tap into the MMF if an emergency arises.

I know this might not be considered ideal, but I've calculated that I can reach my savings goals with zero percent interest. If I put it all under the mattress, it would last more than 30 years after I retire in 12 years, factoring in inflation. So it's easier to think of my fixed income portfolio as an "emergency fund." I actually do spend from it from time to time.
Broken Man 1999
Posts: 5611
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, inland on high ground!

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

Post by Broken Man 1999 »

Broken Man 1999 wrote: Tue Mar 07, 2017 10:27 am We have never maintained an emergency fund. We had stable jobs and good credit. Plus we could have borrowed from my father in a real true emergency.

Now, we are FI. All throughout our work careers, and even now, we have enjoyed outstanding medical insurance from MegaCorp, something I am seriously grateful for receiving. My family has been shielded from the medical costs that sometimes impoverish others having no or less generous insurance.

We do have retirement assets that could be cashed in with same day receipt of funds (Series I Savings Bonds). Though, it would take one heck of an emergency for me to cash in I-Bonds that are paying 3%-3.6% plus the inflation amount.

Several of our credit cards are always trying to entice us into transferring credit card balances (we carry no balances). The credit card companies thoughtfully even supply checks for us to deposit to use any way we might choose. Such thoughtful folks!

Still, a credit card cash advance could provide a bridge for some folks to perhaps sell assets, especially those whose receipt of funds take a few days. Or simply using a high $$$ limit credit card buys time to collect the funds to pay it off prior to interest being charged, depending on the particular emergency.

Broken Man 1999
A year later, still have no emergency fund. If ever I would have needed an emergency fund, it would have been in 1999 when I spent from March to May in a regional trauma center, and June to October in a regular hospital. Didn't need it then, don't need it now.

A 50% equity and 50% bond (mostly treasuries) AA gives us the ability to cover anything that comes our way. Yet, in near 48 years of marriage we haven't ever been stressed by an emergency.

People with low earnings and assets need an emergency fund. Retirees with a solid portfolio do not, IMHO. Those who feel the need to have an emergency fund, just do what it takes to SWAN (sleep well at night). I SWAN without an emergency fund. This subject has no right or wrong answers, the decision is highly personal.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
User avatar
bengal22
Posts: 1919
Joined: Sat Dec 03, 2011 6:20 pm
Location: Ohio

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

Post by bengal22 »

I have an emergency fund or as I like to call it - my portfolio. The part that I access now is my taxable portion, which consists of Wellesley, Windsor 2, Wellington, S&P 500. When I need cash I sell and put in Prime. I don't care if I sell it an up year or a down year because in the long run it beats keeping a constant level of cash. It works for me.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley
remomnyc
Posts: 855
Joined: Mon Jan 04, 2016 4:27 pm

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

Post by remomnyc »

When I was working, I kept one year of expenses in savings to cover job loss. When I retired last year, I started using the savings to fund my monthly expenses. I haven't decided yet if I will replenish it when it goes below six months or down to zero.
michoco911
Posts: 136
Joined: Sun Jul 14, 2019 4:13 am

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

Post by michoco911 »

np81 wrote: Tue Mar 07, 2017 9:45 am
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.
Apparently, we have very different opinions on the term 'emergency'. ;)
+1

Wife insists on a lot of stuff.
A 1M$ house is not one of that is considered as emergency
30% VWRD 30% VUSD 40% AGGG until further notice
User avatar
Harry Livermore
Posts: 614
Joined: Thu Apr 04, 2019 5:32 am

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

Post by Harry Livermore »

Not sure how I missed this thread, since I've been posting about my EF on other threads.
I think the amount/ # of months/ savings vehicle is a highly personal mix (hence "personal finance") It's probably also radically dependent on your stage in life. If you have an emergency when you are in "the thick of it", maybe with one or more kids in college, high and varied domestic overhead, looming retirement, AND you are still paying a mortgage, you will need and appreciate a much larger fund than, say, someone who is 22, in a studio apartment, who may not have someone else dependent on them although that 22 year old may have substantial student loans, or is enterprising enough to have bought that apartment at 21) And a retiree might have a year or two of spending teed up in a savings account or CD anyway. So you never know, maybe everyone needs an EF!
In my case, I am self-employed. Always have been. 32 years of ups and downs. I never ever want to miss a mortgage payment, or have credit card debt pile up to allow me to pay for insurance, groceries, or gas. I don't want to have to choose between $500 worth of home heating oil and my kid's college payment.
So I have layers and layers and layers of planning, with various funds stashed away. I have about 11 months between our regular savings account and some online HY savings accounts. As discussed in other threads, I have another 1-2 months in a MM at Etrade that I have really been saving to invest in the downturn, but may end up using. We also have another 12 months or so in VTSAX (taxable) with a very low cost basis, so while it would hurt, we could use it even if the market was down (although then it might only be 6 months!) After that, I could sell my individual stock holdings at Etrade, all with low basis, so same deal. After that it's HELOC time, there's about 3 years' worth of untapped credit there. I might actually tend to go HELOC first, but as discussed in other threads, during the GFC, some folks discovered that the banks pulled the rug out from under them, closing the HELOCs to reduce risk, just when people needed them most.
And in terms of opportunity cost, yes, it's an issue. But I have 30x the EF in the market, in a 40/60-ish mix. What does that 11 months represent to the future me at 70 years old? Would it have grown to 22 months? Or does it mean that short-term financial calamity did not harm my family when I was 53?
I think the reason I would like to have more months in the bank, and why I'm kind of on the same team as Klangfool and carol-brennan, is if there is a black swan event that prohibits me from working (COVID) AND the market is down (making the funds in VTSAX and Etrade worth less) AND suddenly on top of that we need a new car, a new boiler, or a new roof, it's no problem.
I had assumed 11-12 months was reasonable in my case. This recent event has made me rethink that. I also think, as we approach retirement, having the next 3 years' worth of spending gives you options; so if your sequence of returns is bad, you don't have to draw from your retirement accounts right away.
TL/DR: CASH IS KING. Sorry Ray Dalio.
Cheers
User avatar
jh
Posts: 1830
Joined: Mon May 14, 2007 11:36 am
Location: USA

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

Post by jh »

.....
Last edited by jh on Thu Aug 06, 2020 12:40 am, edited 1 time in total.
Retirement = 401k/Roth IRA (global balanced fund 75/25 AA using indexes) | Taxable (financial independence?) = Vanguard High Div Yield ETF (VYM)
novemberrain
Posts: 619
Joined: Wed May 09, 2018 12:26 pm

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

Post by novemberrain »

About 100k cash in trivial interest savings account, which is 5 months of expenses at current spending rate (when both me and spouse have jobs). Although if both me and spouse lose job (which is a possibility now with Covid), I will likely more than halve my spending and make the 100k last a year. After which point I might have to sell some stocks if we both are still without a job.
Last edited by novemberrain on Thu Apr 02, 2020 1:49 am, edited 1 time in total.
User avatar
TierArtz
Posts: 438
Joined: Wed Jan 04, 2017 10:33 pm

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

Post by TierArtz »

I don't have a designated emergency fund. I have about $25K in cash (checking/savings/MM) and a dependable pension. Beyond that, I have about 20 years of expenses covered in my taxable brokerage. SS and the ability to tap retirement accounts will kick in before taxable runs out. I'm blessed; In my four decades of adult life, I've not experienced an expensive emergency.
APX32
Posts: 141
Joined: Sat May 27, 2017 1:22 pm

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

Post by APX32 »

Approximately $150k (2.5 years expenses) spread across 3 different accounts, including I-bonds.

Next up would be Roth, I have about a years worth of contributions I can withdraw after exhausting the above.

If the emergency is to last more than 3-4 years, there are bigger problems to worry about.

Also, as Klangfool indicates, I’ve used my funds to help family members for various expenses over the years.
42% SPY | 7% GLD | 8% BTC | 43% Cash (I-bonds, LTTs, MMs)
BrownEyedGirl_27
Posts: 231
Joined: Tue Dec 17, 2019 6:37 pm

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

Post by BrownEyedGirl_27 »

Loandapper wrote: Mon Mar 06, 2017 8:40 pm
AlohaJoe wrote:Two years ago I had an emergency and needed $160,000 so keeping a few months living expenses in a savings account wouldn't have helped anyway.
Not to hijack the thread, but how much have people actually needed in an emergency? And what was the general story behind needing it?

I'd say there are VERY few people in the country who could come up with $160k in a matter of days or weeks...or even decades.
Worst emergency? Paying taxes this year to the tune of $3000. We already paid fed, now for state...second worst emergency was paying for a new clutch, about $1000. With this recession we can afford the usual monthly expenses and then some, but I wouldn’t mind having 6 months to a year saved up in rough expenses. Right now we’re sitting at roughly 4 months.

I wouldn’t pay for an emergency on a credit card in all seriousness unless I knew I could pay off the loan when the bill came.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig
bgf
Posts: 1534
Joined: Fri Nov 10, 2017 9:35 am

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

Post by bgf »

carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
theres also many many people with a net worth far below 5 years of expenses. you can only do what you can do.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
stoptothink
Posts: 8704
Joined: Fri Dec 31, 2010 9:53 am

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

Post by stoptothink »

bgf wrote: Mon Apr 06, 2020 5:58 am
carol-brennan wrote: Sat Mar 02, 2019 5:12 am 4-5 years of funds in CDs/cash.

You folks who, by choice, have no emergency fund or one that will keep you going for only 8 months or so have never actually experienced an emergency. That's my opinion, from experience.
theres also many many people with a net worth far below 5 years of expenses. you can only do what you can do.
What would be such an emergency? I've been through 2 major market declines in my adult life (in '08 I lost most of my life savings and my job, but I found random jobs to make do), two hurricanes, I've been laid off two other times, quite a few medical "emergencies", etc. If you set up your financial life, there isn't necessarily something that can be considered an "emergency" that would require quick access to cash. Wife and I have stable (even now) professional jobs in two very different industries, either income could easily support us, our home will be paid off in a few months (and no other debt), $40k+ in HSA in case of a medical emergency, 6-figures in Roth IRAs we could tap, etc. With our limited expenses and no debt, we could live off unemployment from one of us if necessary. We've never had even 6 months in cash (and generally much less) in a dedicated "emergency fund", and I can't even think of a situation where we might need more.
Post Reply