How Much in Your Emergency Fund And Is It Used?

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Jcraz13
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How Much in Your Emergency Fund And Is It Used?

Post by Jcraz13 » Mon Mar 06, 2017 7:51 pm

http://www.bankrate.com/finance/consume ... -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 ?

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

Post by livesoft » Mon Mar 06, 2017 8:00 pm

I don't have an emergency fund, but I have credit cards. If I needed to pay someone cash right now, I could not do it.

I have never used my non-existent emergency fund.
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corysold
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Re: How Much in Your Emergency Fund And Is It Used?

Post by corysold » Mon Mar 06, 2017 8:08 pm

I don't follow the X months expenses per se. But I do try to keep some extra lying around. We try to add $500/month to it. Not so much so that it builds in value, but that we are used to that expense in the budget. Then if we have an expense larger than we can cover, we don't have to take anything out of the budget to pay it off in a few months.

I've used the entire thing once for unexpected funeral expenses for a child and parts of it a few times for household expenses, though those aren't really unexpected, just untimely.

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

Post by mortfree » Mon Mar 06, 2017 8:10 pm

30k. It is a feel good number for me and isn't just for emergencies: car down payment, house upgrades, appliances, etc.

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

Post by Silverado » Mon Mar 06, 2017 8:19 pm

Way too much for sure. Sitting at a way too low interest rate. Never used it. Seriously, over 18 months of expected expenses. I like to think that is offset a bit by being 80% equities in our retirement accounts, but I know I am simply wasting purchasing power to inflation. But it is sometimes nice to know it is there.

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

Post by AlohaJoe » Mon Mar 06, 2017 8:22 pm

$0

I have credit cards, CDs, bonds, and equities I can all use in the case of an emergency.

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.

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

Post by blueblock » Mon Mar 06, 2017 8:25 pm

Before I retired, I had a year's "replacement salary" in my emergency fund. Never had to touch it.

Now that I don't have to be concerned about possible job loss, I let my cash holdings stand in for an EF (2-3 years' living expenses), with taxable and Roth as back up, in case the emergency is something catastrophic.

eman13
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Re: How Much in Your Emergency Fund And Is It Used?

Post by eman13 » Mon Mar 06, 2017 8:30 pm

I Keep 12 months.... I have never used it... I hope I never have too. But its nice knowing its there.

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

Post by kolea » Mon Mar 06, 2017 8:38 pm

Our finances are not that organized to identify something as a dedicated EF. I got severance when I retired and I stashed that to pay for any cost over-runs when we moved. It never got spent so is some sort of slush fund at this point. We used it to pay for travel one year and then I have bought a bunch of retirement recreational toys the last couple of years. Is it an EF? I have never used it as such but I guess it could be. Really the key with an EF is to have liquidity which does not have to be cash.
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Loandapper
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Loandapper » 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.

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

Post by cfs » Mon Mar 06, 2017 8:40 pm

The Lowest Rated Fund [my portfolio] is currently holding 23 cents in cash. In a real emergency I can use my credit card. tfr/cfs
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pennstater2005
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Re: How Much in Your Emergency Fund And Is It Used?

Post by pennstater2005 » Mon Mar 06, 2017 8:45 pm

No dedicated EF. Just money in my savings account that I add to or spend from occasionally. I also would use a credit card.
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Daryl
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Daryl » Mon Mar 06, 2017 8:58 pm

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.

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

Post by midagelawyer » Mon Mar 06, 2017 9:10 pm

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.

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

Post by farnsy » Mon Mar 06, 2017 9:15 pm

We have $20K that's really for "emergencies" that we have not yet touched (though we would probably use it on a new car if we got one) and then we have a variable amount on top of that in the same account (typically around $10K) that we use for unexpected things like new water heaters or last minute 401(k) contributions. That gets dipped into once or twice a year.

We keep this in a money market account currently earning 1%. I sometimes consider putting it in a brokerage account and buying higher earning assets, at least the $20k we don't regularly use.

Most of my emergency liquidity is in the form of lots of credit card capacity, a paid-off home, and no debt. Also two jobs...not likely to lose both at the same time.
Last edited by farnsy on Mon Mar 06, 2017 10:08 pm, edited 1 time in total.

corn18
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Re: How Much in Your Emergency Fund And Is It Used?

Post by corn18 » Mon Mar 06, 2017 9:30 pm

$50k. Never used it. Makes me happy to have it. Although now that I have a large amount in taxable and Roth IRA's, I may just invest it.

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

Post by AlohaJoe » Mon Mar 06, 2017 9:33 pm

Loandapper wrote: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.


I'd wager every single person in this thread could come up with $160,000. Sure, it might involve having to take a 401(k) loan or a home equity loan or a personal loan (or all three) but after all, we're talking about an emergency aren't we?

AlohaJoe wrote:Not to hijack the thread, but how much have people actually needed in an emergency? And what was the general story behind needing it?


A business partner lied to me and suddenly we were unable to pay salaries and a number of other large expenses; I had about 5 days advance warning. Very few "emergencies" require money the same day. Those that do can almost always be put on a credit card -- even if it means I need to call my credit card company for a temporary increase in credit limit (which is already at something like $20,000, since they seem to had out credit line increases like free candy).

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

Post by HIinvestor » Mon Mar 06, 2017 9:35 pm

We have two 5-figure CDs that we could cash if needed with very little (if any) penalty. Additionally, we have a few 5 figure accounts at local banks and a few at other institutions that are all earning very little interest. We also have some US Savings Bonds that could be quickly liquidated, as well as an untapped LOC for 1/2 to 1/4 of the FMV of our house (6 figures). We have never had to tap any of our savings nor emergency fund.

We could easily lay hands on an extra $500, as could each of our kids. Both "kids" have significant emergency reserve funds. I'm quite sure that all my sibs and my parents and other relatives could very easily come up with an extra $500 if needed, including putting it on their charge card and paying it off before the balance was due.

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

Post by BrandonBogle » Mon Mar 06, 2017 9:36 pm

This is an interesting thread. I have to say I was not expecting that from my fellow Bogleheads. I was just thinking about how I don't actually have a decent emergency funds, and then come across this thread.

Am I missing the backstory in these responses? For instance, in my case, I have a taxable investment account and a Roth IRA. Is that my "emergency fund" b/c if I every really had a true emergency, I could just liquidate some holdings (and potentially pay capital gains taxes on it)?

As for the Bankrate.com article, it sounds more like a cash-flow issue. My credit cards can provide that an as a fallback and if I needed the money in hours, my taxable account has margin privileges.

Am I totally off base here?

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

Post by fortfun » Mon Mar 06, 2017 9:40 pm

I've wondered about this too. I keep 30k but have never used it and could just use the 25k limit on my credit card. I am getting 1% with Ally savings--which I guess is better than nothing but I do wish I would have had it in a Vanguard TMI for the past 10 years--it would be worth alot more now...

When you have kids, I think you feel more obligated to keep an emergency fund....

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

Post by dreamrrr » Mon Mar 06, 2017 10:14 pm

fortfun wrote:When you have kids, I think you feel more obligated to keep an emergency fund....


I keep $100K in my emergency fund. I've had several emergencies that required immediate access to cash. Some have been related to helping my kids. I don't do credit.

examples > tooth implants for one son; son's car caught on fire and needed an replacement so I help finance a replacement car; son was in a high speed head on collision (not his fault), was in a coma for 2 months and spent 10 months in the hospital; he has two kids and a wife and required my financial support for 18 months till he recovered and could support his family again. had my heater go out and needed immediate replacement. anticipate getting a new roof this spring. Seems like there is always some planned for or unplanned for event that requires a large sum of money to deal with. I could tap my investments but I never have. I tap the emergency fund and then bring the balance back to $100K over time.
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Re: How Much in Your Emergency Fund And Is It Used?

Post by emoore » Mon Mar 06, 2017 10:48 pm

dreamrrr wrote:
fortfun wrote:When you have kids, I think you feel more obligated to keep an emergency fund....


I keep $100K in my emergency fund. I've had several emergencies that required immediate access to cash. Some have been related to helping my kids. I don't do credit.

examples > tooth implants for one son; son's car caught on fire and needed an replacement so I help finance a replacement car; son was in a high speed head on collision (not his fault), was in a coma for 2 months and spent 10 months in the hospital; he has two kids and a wife and required my financial support for 18 months till he recovered and could support his family again. had my heater go out and needed immediate replacement. anticipate getting a new roof this spring. Seems like there is always some planned for or unplanned for event that requires a large sum of money to deal with. I could tap my investments but I never have. I tap the emergency fund and then bring the balance back to $100K over time.


That's great that you have $100k in an EF but do you really need all that cash immediately? Couldn't you have some in ibonds or other bond funds that you could sell over the course of months? Just an observation.

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

Post by HIinvestor » Mon Mar 06, 2017 11:00 pm

Personally, I wouldn't consider stocks or similar good investments for an emergency fund because I would be unwilling to liquidate during a bear market, which could last for a considerable time period. I also only put things on our charge card that we will pay off in full before the balance is due because interest charges on credit cards are WAY higher than interest on my HELOC and any other loans I could easily obtain, or even any penalty on my CDs.
There are a LOT of people in the US living from one paycheck to the next. I have met quite a few of them and they would indeed have a tough time if there is a delay in payroll being paid for any reason, like during the federal shutdown because the federal budget was not approved before the deadline. Supervisors had to go and talk with the employees to be sure they would be OK waiting for their paychecks and talking about how they could get loans as needed to tide them over.
Bogleheads who live below their means are less likely to be living from one paycheck to the next, but they can have unexpected things occur that are costly, just like anyone else. If they have a bigger financial cushion, they are better able to handle financial setbacks.

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

Post by iamlucky13 » Mon Mar 06, 2017 11:17 pm

My emergency fund is a part of my investing policy statement, and actually was before I started visiting this site and had heard of an investing policy statement. Others convinced me right out of college that I should have an emergency fund, and I concluded I should have an idea when it could actually be spent before any major decisions came up. When I read the Bogleheads Wiki, I realized I already had most of an IPS drafted in the form of various notes I had written down to remind myself how I wanted to manage my finances.

My IPS tells me to keep my emergency fund above 6 months living expenses except for extraordinary circumstances, such as job loss, medical emergency, or buying a home. I don't want to have to touch my retirement savings except for truly dire circumstances.

We got down to a little over 3 months expenses left when we bought our home, but we kept our payments low and were able to bounce back fairly quickly. I had previously lost my job during the recession. I had been able to keep my savings roughly flat during that time due to unemployment insurance and careful spending, but I had almost exhausted unemployment insurance by the time I found another job, so I was well-aware of the risks.

My less strict goal is to keep non-retirement accounts above 12 months. That can either serve as an extended emergency fund, or a buffer so big expenses like a new car keep us well above 6 months savings.

The first 6 months worth stay in FDIC-insured accounts or i-bonds. Months 6-12 can go into bond funds. 12+ months worth can be bonds and equity.

Obviously it took a fair amount of discipline and time to get to this point, plus a little luck (like having a home buying opportunity at the bottom of the market), and the plan evolved along the way. 3 months was a priority from the moment I got my first real job, but knowing that I'd want to eventually get to 6 months. 12 months didn't become a goal until we had a home and had my wife's student loans paid off.

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

Post by pokebowl » Tue Mar 07, 2017 1:17 am

Reading these responses, I guess I am more paranoid than most. I keep roughly ~1 years worth of salary or living expenses (whichever comes first) in a high yield savings account, 5% of which is sitting in cash in my home safe. Sure I can throw this all at the stock market and if lucky can knock a year or two off my working years toward retirement. However with a family to support. I'd rather have this cushion to weather most common storms.

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

Post by AlohaJoe » Tue Mar 07, 2017 1:30 am

pokebowl wrote:Sure I can throw this all at the stock market and if lucky can knock a year or two off my working years toward retirement. However with a family to support.


It isn't "a year or two". On average it would shave 5 years off. And if you were lucky (like someone who threw it into the stock market right after the crash in 1930) it would shave 14 years off.

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

Post by randomizer » Tue Mar 07, 2017 2:35 am

I tend to sail pretty close to who wind. I aim to have at least three months of expenses (in my case, many thousands per month) but often end up cutting it very fine because I invest/save aggressively. I have run it down to zero or close to zero many times, and building it back up is slow. Soon to get a mortgage so planning on playing it much safer in the future.

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

Post by iamlucky13 » Tue Mar 07, 2017 3:47 am

AlohaJoe wrote:
pokebowl wrote:Sure I can throw this all at the stock market and if lucky can knock a year or two off my working years toward retirement. However with a family to support.


It isn't "a year or two". On average it would shave 5 years off. And if you were lucky (like someone who threw it into the stock market right after the crash in 1930) it would shave 14 years off.


It looks like your claim is closer than I was inclined to think when I first read your post. For 5% real returns (eg - 8% total minus 3% inflation), the value after 30 years is 4.3x the principal, which means 3.3 years gained versus an alternative that can keep up with inflation. For 6% returns, you gain 4.7 years. And currently, options that keep up with inflation are very limited.

But my emergency fund is effectively a short duration investment because I could hypothetically need it in the near term. If my mix of stocks, bonds, and cash manages 3% real returns, I gain 1.4 years.

I've got other reasons (medium-term spending plans that don't disrupt my retirement plan) that lead me to keep my emergency fund in taxable accounts, at the moment, but I also have trouble coming to grips with paying a 10% penalty on a 401k hardship withdrawal, and I don't want to count on being able to repay a 401k loan following an emergency. Practically speaking, the 10% penalty is just another cost to compare against reduced tax-adjusted returns. This is something for me to spend more time with Excel on and give more thought to...

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

Post by climber2020 » Tue Mar 07, 2017 7:13 am

I used to keep 50k around as an emergency fund, which at the time could last me about 2 years in the event of a job loss. The only time I ever used it was several years ago when my car unexpectedly died on the highway and I had to buy a new car on short notice.

About 3 years ago, I gradually began investing more of my emergency fund as my taxable account grew sufficiently large enough and my job became more secure. In hindsight, that was a good decision (so far). Only keep about 10k or so in cash now.

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

Post by Toons » Tue Mar 07, 2017 7:35 am

I have an emergency fund.
five figures.
I don't use it. :happy
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arsenalfan
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Re: How Much in Your Emergency Fund And Is It Used?

Post by arsenalfan » Tue Mar 07, 2017 7:59 am

Evolved such that the more liquid components of my AA are my Emergency Fund:

$50k cash
$100k iBonds
$100k state municipal bonds

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

Post by brusan » Tue Mar 07, 2017 8:08 am

My wife and I keep 9 months of our combined take home pay in Ally Bank and iBonds.
Likelihood of both of us losing our jobs at the same time is low but having this safety net just in case, helps us sleep at night knowing we probably won't have to dip into retirement accounts to pay bills. Still have 15 years to retirement. As our taxable Vanguard account and retirement accounts grow, we may gradually slowly lower the EF to 6 months net pay or expenses.
Last edited by brusan on Tue Mar 07, 2017 9:32 am, edited 1 time in total.

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

Post by artthomp » Tue Mar 07, 2017 8:16 am

I leave 2% of my portfolio in cash when I re-balance once a year when I have to take my IRS Required Distribution.
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CyclingDuo
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Re: How Much in Your Emergency Fund And Is It Used?

Post by CyclingDuo » Tue Mar 07, 2017 8:17 am

Jcraz13 wrote: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?


We live in a tornado zone area. On average, there are about 35 - 65 of them each season in our state. Last night was our first grim reminder that tornado season 2017 is underway as there were 4 that touched down within 20-30 minutes of where we live.

Why mention that? Back up just 7 years and we can tell you what happens when an emergency hits, your emergency fund is not built up enough, and you end up having to sell some equities not long after the bottom of the bear market low cycle. A twister came through our neighborhood one evening - and yes, our house/yard/shed/fences/trees were victims of the wind, hail, 9 inches of rain that fell in 60 minutes, and tornado backdraft. Roof, shingles, siding, windows, siding, gutters, shed, fences, trees, basement flooding, AC (blown away), etc.

The normal course of action is to call your insurance company, who then initiates a claim and an agent or two comes out to survey the damage, appraises the damage and estimates the repair costs, and begins the paperwork to get things started. That's the normal course of action - and most in our neighborhood took that approach. Not knowing any better, and with forecasts of more heavy rain coming the next day and beyond - I was on the phone with 15 minutes of surveying the damage myself. With the roof damage, more rain would have destroyed the interior of our house. I had a roofing crew of 12 guys on my roof the next morning rebuilding the entire thing, a basement/carpet flood crew of 6 in the basement by 8 am, a heating/cooling company delivering a new AC unit by 9 am. The insurance agent arrived about the same time and asked me what I was doing. I said I was trying to save my house from the upcoming storms that were forecast. That's when I found out I had not followed standard protocol for this emergency. :oops:

Long story short, I'm glad I did. :beer

We saved our house with the quick action as more bad weather and heavy storms hit the next few days. Those with roof damage continued to have water pour into their homes and several were total losses by the time any crews were authorized to show up and begin work once the insurance companies had moved to that stage of the process. The difficulty came in paying all of the contractors that I had rounded up so quickly. They will only wait so long for their payment before the daily phone calls and emails start piling in - especially the cost of a new roof and that contractor who had salaries to pay for his crew. In the end, I had to front all of the costs while waiting on the insurance payments. We did not have enough of an emergency fund built up at the time that was large enough to cover all the total bills of $90K+.

We had to sell stocks/mutual funds - not too far off of market cycle lows - to finance it all as it took months to get all of the insurance payments for the work that was done. Had we not done it the way we did (immediate phone calls to get the roof/windows/AC/basement flooding addressed ASAP), and with the roof damage from the tornado making our home suspect to any more rain, we would have lost the entire home with the subsequent 4" and 5" rains that hit the next few days. I thought our mortgage company would have been an option for a line of credit, however they wouldn't loan anything until all the work on the damage was completed and approved. So a catch 22 there as well.

Needless to say, that has colored our idea of what an emergency fund needs to be in terms of having enough money that is accessible. Emergencies do happen - big and small.

Be prepared.

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

Post by radagast » Tue Mar 07, 2017 8:24 am

I am generally aggressive about not leaving cash in bank accounts and have liquid of cash of 1K to 3K in my checking and savings accounts.

OTOH, I have about 50K on tap from my blended whole life policy (to be used for market volatility) and a substantial amount of liquidity available from my margin account (when the markets look safer).
Last edited by radagast on Tue Mar 07, 2017 8:31 am, edited 1 time in total.

mw1739
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Re: How Much in Your Emergency Fund And Is It Used?

Post by mw1739 » Tue Mar 07, 2017 8:27 am

We don't have a designated emergency fund. My wife used to insist on keeping $75k in the bank at all times, but that has slowly gone away. We probably have $20-25k in the bank that isn't designated for anything, but used to cover large expenses or irregularities in cash flow. We have taxable investments of roughly 2-2.5x annual expenses. Lastly, we could draw on our unused HELOC or use credit cards to cover any imaginable expense.

In this day and age of easy access to credit, I don't see the need for more than a few months expenses sitting in cash. Almost every home repair (furnace, roof etc.) and medical provider usually has an option to finance the payment. Cars can be bought with 0% down. Granted, these may not be the most wise options, but they are available to most Americans.

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

Post by Lindrobe » Tue Mar 07, 2017 8:27 am

My emergency fund is $40k. I think it would get me by for about 2 years in the event that husband and I both lost job (probably unlikely). It has always just seemed like a good number. We don't touch it EVER.

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

Post by B. Wellington » Tue Mar 07, 2017 8:28 am

Over the years I have questioned this. How much is "enough" and how much is too much?

I have run it to almost zero when aggressively investing and as high as 25-30K. Now holding at 25K. I view this as a "spending"/EF fund. For example, to payoff the CC card after buying plane tickets etc., we also had to replace a vehicle 2 years ago and were able to write a check for a used car and drive it off the lot paid for while still having some left over if needed.

Everyone's needs are different, YMMV.

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

Post by Jack FFR1846 » Tue Mar 07, 2017 8:41 am

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

Post by Rainmaker41 » Tue Mar 07, 2017 9:10 am

I have a minimum target of 6 months' expenses in liquid stable nominal-value savings, used to date only for times of insufficient income relative to expenses. I view the sacrificed ROI that I could have from investing the sum as the 'insurance premium' I pay for being able to cover big problems with cash rather than interest-charging credit card debt, raiding retirement accounts with penalties, etc.
My username is not about money, but is my old online gaming username. I can't say that I make a great deal of money; I just hate spending it. Married the most loving woman in the world October 2017.

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

Post by Texanbybirth » Tue Mar 07, 2017 9:32 am

$20k, and it never gets touched. Thank God (literally) we haven't had an emergency, yet. I'm thinking: severe injury to one of us or the kids, extended job loss (though I just read that the unemployment rate among CPAs is only 2.5% so I'm not overly concerned about that), or a catastrophic event to our house.

We have separate buckets for: car replacement (pay ourselves a payment each month), car & home repairs (we add $xxx per month and deduct if major repairs are necessary), non-monthly bills (accrued monthly), and one year of out-of-pocket family max for our health insurance.

One of the great things I read on Bogleheads a year ago is about really figuring out what an "emergency" is for you. Thankfully, we have the means to set aside money now for a lot of what others might consider an "emergency", so I try to be prepared ahead of time.

However, just the other day I was thinking about my kids (2 and 5 mos.) and wondering, "Oh my goodness, due to their genes they're going to need braces and glasses. I should start saving now!" I think that's a little extreme on my part... :shock:

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

Post by np81 » Tue Mar 07, 2017 9:36 am

Our EF is roughly $100k, which is considerably more than what I'd prefer, but at the very least I have convinced my wife to put most of it into 2.5-3% CDs so they generate better earnings than our GS Bank savings accounts.

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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 9:41 am

AlohaJoe wrote:
Loandapper wrote: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.


I'd wager every single person in this thread could come up with $160,000. Sure, it might involve having to take a 401(k) loan or a home equity loan or a personal loan (or all three) but after all, we're talking about an emergency aren't we?

AlohaJoe wrote:Not to hijack the thread, but how much have people actually needed in an emergency? And what was the general story behind needing it?


A business partner lied to me and suddenly we were unable to pay salaries and a number of other large expenses; I had about 5 days advance warning. Very few "emergencies" require money the same day. Those that do can almost always be put on a credit card -- even if it means I need to call my credit card company for a temporary increase in credit limit (which is already at something like $20,000, since they seem to had out credit line increases like free candy).


May be some truth to this.

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. I needed a private loan because our DTI ratios wouldn't support conventional financing.

Other emergencies have included sending $7,500 to property manager while on vacation in Thailand to repair roof damage caused by a falling tree.

The last real emergency was unexpected job loss back in 2000. I was barely out of school and hadn't worked enough to build up adequate savings. Back then my monthly burn rate was only around $1250, but it was super scary. Subsequent job losses have been anticipated or welcomed, and didn't constitute emergencies.

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

Post by np81 » 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'. ;)

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

Post by jnet2000 » Tue Mar 07, 2017 9:52 am

We have $120 grand in cash in boring old savings account earning around 1 percent. We are loosing to inflation but we view it as an insurance policy for life's happenings. Last year, we did not have any emergency needs that we needed to tap into it. However, we have had to use it in the past, plumbing issues, funerals, car repairs, etc. While we cashflow most small emergencies it allows my wife and I to sleep well at night. It is actually her favorite part of finances. Happy wife, happy life.
"You really don't need leverage in this world much. If you're smart, you're going to make a lot of money without borrowing" Warren Buffet

Broken Man 1999
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Re: How Much in Your Emergency Fund And Is It Used?

Post by Broken Man 1999 » 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
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

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

Post by ved » Tue Mar 07, 2017 11:40 am

Interesting thread.

A few comments:
Some folks include buying their next car, house, etc. as one of the reasons for holding emergency funds. For me, an emergency is an unexpected (low probability) event that could be mitigated by having almost instantaneous access o cash. Without that access, it could either cost more, or worsen the event.

I have seen umpteen threads advising on the folk's portfolios, where almost the first recommendation is to have a decent EF. But, sever people here say that they don't keep an EF themselves. Not practicing what we preach?

As for me, I do keep a significant amount (several months of expenses) in an EF. That decreased considerably over the last few months, after I paid off our mortgage - in fact, I used part of the EF to pay off the mortgage.

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

Post by fantasytensai » Tue Mar 07, 2017 11:47 am

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.

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

Post by bligh » Tue Mar 07, 2017 11:48 am

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.
Last edited by bligh on Tue Mar 07, 2017 11:57 am, edited 1 time in total.

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

Post by goingup » Tue Mar 07, 2017 11:51 am

ved wrote:I have seen umpteen threads advising on the folk's portfolios, where almost the first recommendation is to have a decent EF. But, sever people here say that they don't keep an EF themselves. Not practicing what we preach?

Our entire taxable portfolio could be used in an emergency so there is no designated emergency fund. We have a 60/40 portfolio with bonds, cash and CDs that are accessible. I'm in my 50's. Younger investors may need an EF for security so they don't have to tap a 401K during a job loss, etc.

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