Where To Put My Emergency Fund?
Where To Put My Emergency Fund?
I currently keep my emergency fund 6 months/$10k in the Vangaurd Federal Money Market Fund (VMFXX) via a taxable account. I am thinking of moving to another Vanguard fund in my taxable account, but am not sure. Any suggestions or should I just keep it there?
Re: Where To Put My Emergency Fund?
That is perfectly reasonable. The wiki says you could keep the first 3 mos in mm, the next 3 mos in cds and if you desire more than six mos, the next 3 mos in a short term treasury bond fund.
https://www.bogleheads.org/wiki/Emergency_fund
https://www.bogleheads.org/wiki/Emergency_fund
-
- Posts: 237
- Joined: Sun Jun 07, 2015 12:50 pm
Re: Where To Put My Emergency Fund?
Not for everyone but I try to run a lean EF.
3 months cash
3 months rolling short term CD ladder
Excess goes into a tax free muni
3 months cash
3 months rolling short term CD ladder
Excess goes into a tax free muni
-
- Posts: 12277
- Joined: Wed Jan 11, 2017 7:05 pm
Re: Where To Put My Emergency Fund?
+1, except I substitute I-Bonds for CD's.DoctorPhysics wrote:Not for everyone but I try to run a lean EF.
3 months cash
3 months rolling short term CD ladder
Excess goes into a tax free muni
Re: Where To Put My Emergency Fund?
3 months cash, rest VTINX
Re: Where To Put My Emergency Fund?
Rarely does one need emergency 10k right away.
I have 2 months of expenses in my checking and
6 months expenses (10k) in Betterment (60/40)
Depends on your personal life situation
I have 2 months of expenses in my checking and
6 months expenses (10k) in Betterment (60/40)
Depends on your personal life situation
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: Where To Put My Emergency Fund?
Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
The Sensible Steward
Re: Where To Put My Emergency Fund?
I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
- flamesabers
- Posts: 1848
- Joined: Fri Mar 03, 2017 11:05 am
- Location: Rochester, MN
Re: Where To Put My Emergency Fund?
OP,
I think it's fine to keep your emergency fund in one of Vanguard's money market funds.
I think it's fine to keep your emergency fund in one of Vanguard's money market funds.
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: Where To Put My Emergency Fund?
In the event of a significant power outage, retailers can't verify your checks and may not take them (do you carry checks around with you?), ATMs don't work, and credit cards don't work either. It's happened several times in the U.S. And yes, fire resistant boxes are cheap and easily available. And if you're using an ATM, I'm guessing that at least part of your EF is in a savings account earning next to nothing anyway, but perhaps you have a high yield savings account tied to a debit card.Nicolas wrote:I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
Your concern for earnings is noted, and I share it. That's why most of my EF is invested in Wellesley Income, which generates enough earnings to keep my entire EF well ahead of inflation.
The Sensible Steward
Re: Where To Put My Emergency Fund?
Hmm, you have a point about extended power outages. The longest power outage of my life was only four hours. We have no exposure to hurricanes. If I was ever to face one of long duration I'd probably just hunker down and eat what's in our pantry. Since I no longer work, no need to drive anywhere. I'll take that risk over keeping a lot of cash around. My EF is mostly in high yield online savings, so in the event of a long-duration power or internet outage I'd be out of luck. So far, hasn't happened. But it could I suppose.willthrill81 wrote:In the event of a significant power outage, retailers can't verify your checks and may not take them (do you carry checks around with you?), ATMs don't work, and credit cards don't work either. It's happened several times in the U.S. And yes, fire resistant boxes are cheap and easily available. And if you're using an ATM, I'm guessing that at least part of your EF is in a savings account earning next to nothing anyway, but perhaps you have a high yield savings account tied to a debit card.Nicolas wrote:I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
Your concern for earnings is noted, and I share it. That's why most of my EF is invested in Wellesley Income, which generates enough earnings to keep my entire EF well ahead of inflation.
Re: Where To Put My Emergency Fund?
You could go with Vanguard Short-Term Bond Index fund.
Stocks-80% || Bonds-20% || Taxable-VTI/VXUS || IRA-VT/BNDW
Re: Where To Put My Emergency Fund?
Maybe I'm naive, but in a scenario like the one you're describing, it's pretty much a state of emergency (i.e. post-hurricane or tornado or earthquake), and I'm not sure even hard cash would be of much use then. In that scenario, you're better off having bottled water/canned goods/first aid supplies/necessary medications stored in a disaster survival kit, which is it's own type of "emergency fund," but not the one we typically talk about around here.willthrill81 wrote:
In the event of a significant power outage, retailers can't verify your checks and may not take them (do you carry checks around with you?), ATMs don't work, and credit cards don't work either. It's happened several times in the U.S. And yes, fire resistant boxes are cheap and easily available. And if you're using an ATM, I'm guessing that at least part of your EF is in a savings account earning next to nothing anyway, but perhaps you have a high yield savings account tied to a debit card.
Your concern for earnings is noted, and I share it. That's why most of my EF is invested in Wellesley Income, which generates enough earnings to keep my entire EF well ahead of inflation.
I don't think there is much need to have hard cash around, given the potential for theft/loss of the money through some type of disaster. Better off in an FDIC/NCUA insured institution, IMHO.
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: Where To Put My Emergency Fund?
State of emergency or no, it's happened several times in recent U.S. history. Most of Michigan and some areas in nearby states and Canada lost power for over 24 hours due to a power grid issue. Many retailers stayed open, but the only way people could buy anything was with hard cash. The utility companies say the grid is more secure now, but cyber attacks on power stations are a real possibility these days, and many experts don't believe that utilities are adequately defended against this.Chadnudj wrote:Maybe I'm naive, but in a scenario like the one you're describing, it's pretty much a state of emergency (i.e. post-hurricane or tornado or earthquake), and I'm not sure even hard cash would be of much use then. In that scenario, you're better off having bottled water/canned goods/first aid supplies/necessary medications stored in a disaster survival kit, which is it's own type of "emergency fund," but not the one we typically talk about around here.willthrill81 wrote:
In the event of a significant power outage, retailers can't verify your checks and may not take them (do you carry checks around with you?), ATMs don't work, and credit cards don't work either. It's happened several times in the U.S. And yes, fire resistant boxes are cheap and easily available. And if you're using an ATM, I'm guessing that at least part of your EF is in a savings account earning next to nothing anyway, but perhaps you have a high yield savings account tied to a debit card.
Your concern for earnings is noted, and I share it. That's why most of my EF is invested in Wellesley Income, which generates enough earnings to keep my entire EF well ahead of inflation.
I do agree that having the resources you need to get through such a period like water and food are important too, but I don't think they are complete substitutes either.
If the cash is well hidden in a fire resistant box, the likelihood of it being stolen is remote. And just for that possibility, we have a small decoy firebox filled with rocks in our bedroom that would make a thief think he'd hit the jackpot and hit the road. Our 'real' firebox is very well hidden.Chadnudj wrote:I don't think there is much need to have hard cash around, given the potential for theft/loss of the money through some type of disaster. Better off in an FDIC/NCUA insured institution, IMHO.
The Sensible Steward
Re: Where To Put My Emergency Fund?
Part of our "emergency fund" are food stuffs, water, first aid, batteries, etc. It's not sizable, and we don't consider ourselves paranoid, but it gives us added piece of mind. We hope to never use any of it.Chadnudj wrote:Maybe I'm naive, but in a scenario like the one you're describing, it's pretty much a state of emergency (i.e. post-hurricane or tornado or earthquake), and I'm not sure even hard cash would be of much use then. In that scenario, you're better off having bottled water/canned goods/first aid supplies/necessary medications stored in a disaster survival kit, which is it's own type of "emergency fund," but not the one we typically talk about around here.willthrill81 wrote:
In the event of a significant power outage, retailers can't verify your checks and may not take them (do you carry checks around with you?), ATMs don't work, and credit cards don't work either. It's happened several times in the U.S. And yes, fire resistant boxes are cheap and easily available. And if you're using an ATM, I'm guessing that at least part of your EF is in a savings account earning next to nothing anyway, but perhaps you have a high yield savings account tied to a debit card.
Your concern for earnings is noted, and I share it. That's why most of my EF is invested in Wellesley Income, which generates enough earnings to keep my entire EF well ahead of inflation.
I don't think there is much need to have hard cash around, given the potential for theft/loss of the money through some type of disaster. Better off in an FDIC/NCUA insured institution, IMHO.
Re: Where To Put My Emergency Fund?
I guess I just don't see losing power for 24 hours (or even 48 or 72) as an "emergency" where I'd need access to hard cash, so long as my home is outfitted with sufficient non-perishable food/potable water/batteries, etc. YMMV.willthrill81 wrote: State of emergency or no, it's happened several times in recent U.S. history. Most of Michigan and some areas in nearby states and Canada lost power for over 24 hours due to a power grid issue. Many retailers stayed open, but the only way people could buy anything was with hard cash. The utility companies say the grid is more secure now, but cyber attacks on power stations are a real possibility these days, and many experts don't believe that utilities are adequately defended against this.
I do agree that having the resources you need to get through such a period like water and food are important too, but I don't think they are complete substitutes either.
Re: Where To Put My Emergency Fund?
Does that mean Wellesley is sitting in a taxable account?willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: Where To Put My Emergency Fund?
No, it's in a Roth IRA that I had enough free space in for it a while back.bob_m10 wrote:Does that mean Wellesley is sitting in a taxable account?willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
The Sensible Steward
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: Where To Put My Emergency Fund?
It probably wouldn't be, but it might be as well. The problem with the future is that we don't know much about it.Chadnudj wrote:I guess I just don't see losing power for 24 hours (or even 48 or 72) as an "emergency" where I'd need access to hard cash, so long as my home is outfitted with sufficient non-perishable food/potable water/batteries, etc. YMMV.willthrill81 wrote: State of emergency or no, it's happened several times in recent U.S. history. Most of Michigan and some areas in nearby states and Canada lost power for over 24 hours due to a power grid issue. Many retailers stayed open, but the only way people could buy anything was with hard cash. The utility companies say the grid is more secure now, but cyber attacks on power stations are a real possibility these days, and many experts don't believe that utilities are adequately defended against this.
I do agree that having the resources you need to get through such a period like water and food are important too, but I don't think they are complete substitutes either.
The Sensible Steward
- welderwannabe
- Posts: 1634
- Joined: Fri Jun 16, 2017 8:32 am
Re: Where To Put My Emergency Fund?
You would do better in a Ally savings account and it is insured. Even better is to start to move it to iBonds. They are earning 1.96% right now. You can move it a bit per year so you don't have your entire EF locked up. You can't cash out an iBond for 1 year.rattlenap wrote:I currently keep my emergency fund 6 months/$10k in the Vangaurd Federal Money Market Fund (VMFXX) via a taxable account. I am thinking of moving to another Vanguard fund in my taxable account, but am not sure. Any suggestions or should I just keep it there?
I am not an investment professional, but I did stay at a Holiday Inn Express last night.
Re: Where To Put My Emergency Fund?
Yeah, that's a little to risky for my taste.lostdog wrote:You could go with Vanguard Short-Term Bond Index fund.
- SmileyFace
- Posts: 9184
- Joined: Wed Feb 19, 2014 9:11 am
Re: Where To Put My Emergency Fund?
Tier 1: gsbank (earning 1.2%)
Tier 2: ibonds (earning varies with inflation)
Tier 2: ibonds (earning varies with inflation)
Re: Where To Put My Emergency Fund?
How many months do you keep in each Tier?DaftInvestor wrote:Tier 1: gsbank (earning 1.2%)
Tier 2: ibonds (earning varies with inflation)
- SmileyFace
- Posts: 9184
- Joined: Wed Feb 19, 2014 9:11 am
Re: Where To Put My Emergency Fund?
I keep about 6 months in tier 1 and now have about that in tier 2 (but I also count the ibonds as a portion of my bond retirement allocation).rattlenap wrote:How many months do you keep in each Tier?DaftInvestor wrote:Tier 1: gsbank (earning 1.2%)
Tier 2: ibonds (earning varies with inflation)
How many months you want to hold really depends upon how secure you feel in your job and what your obligations are. As I've gotten older - it could take me quite a while to find another job at my income level.
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: Where To Put My Emergency Fund?
A short-term bond index fund is risky?rattlenap wrote:Yeah, that's a little to risky for my taste.lostdog wrote:You could go with Vanguard Short-Term Bond Index fund.
The worst year in the history of this fund, it returned .07%, so it's never lost money over a year. There was one brief period inside a year where it lost 1.85%.
The Sensible Steward
Re: Where To Put My Emergency Fund?
This really limits the possibilities. How about Vanguard ultra-short bond fund? SEC yield 1.5% so might as well go with CDs. Otherwise VMMXX, high-yield savings, I bonds. That's it.rattlenap wrote:Yeah, that's a little to risky for my taste.lostdog wrote:You could go with Vanguard Short-Term Bond Index fund.
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: Where To Put My Emergency Fund?
Precisely. It sounds like anything less than an FDIC insured account is too risky for him. In that case, an online savings account with someone like Ally is probably about the best he can do as far as interest rates go since six month CD rates are below 1%.mega317 wrote:This really limits the possibilities. How about Vanguard ultra-short bond fund? SEC yield 1.5% so might as well go with CDs. Otherwise VMMXX, high-yield savings, I bonds. That's it.rattlenap wrote:Yeah, that's a little to risky for my taste.lostdog wrote:You could go with Vanguard Short-Term Bond Index fund.
The Sensible Steward
- flamesabers
- Posts: 1848
- Joined: Fri Mar 03, 2017 11:05 am
- Location: Rochester, MN
Re: Where To Put My Emergency Fund?
The Navy Federal Credit Union has a CD offering a rate above 1%. They have a special of 3% for 5 months for a maximum amount of $10k:willthrill81 wrote:Precisely. It sounds like anything less than an FDIC insured account is too risky for him. In that case, an online savings account with someone like Ally is probably about the best he can do as far as interest rates go since six month CD rates are below 1%.
viewtopic.php?t=225391
Re: Where To Put My Emergency Fund?
Sorry for the run around here. But I just found out today that my company offers a Credit Union with a 2% interest payment on deposits up to $25k. So I am now taking a look at this. Though I am not that familiar with Credit Unions. Are they FDIC insured, what should I look out for before putting money into one? Any advice will be great.
- welderwannabe
- Posts: 1634
- Joined: Fri Jun 16, 2017 8:32 am
Re: Where To Put My Emergency Fund?
Credit unions don't use FDIC. They use NCUA which is very similar.
The banks have been trying to keep NCUA limits below FDIC limits for years because they don't like the competition, but NCUA was successfully increased to $250K as well.
The banks have been trying to keep NCUA limits below FDIC limits for years because they don't like the competition, but NCUA was successfully increased to $250K as well.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.
- flamesabers
- Posts: 1848
- Joined: Fri Mar 03, 2017 11:05 am
- Location: Rochester, MN
Re: Where To Put My Emergency Fund?
Credit Unions are backed by the National Credit Union Administration. The Administration functions much like the FDIC, including offering insurance coverage on deposits up to $250k.rattlenap wrote:Sorry for the run around here. But I just found out today that my company offers a Credit Union with a 2% interest payment on deposits up to $25k. So I am now taking a look at this. Though I am not that familiar with Credit Unions. Are they FDIC insured, what should I look out for before putting money into one? Any advice will be great.
Re: Where To Put My Emergency Fund?
So all Credits Unions are NCUA no matter what, correct? Are there also any pitfalls with using a Credit Union? It's not something I'd use a regular basis, but is only for my EF.welderwannabe wrote:Credit unions don't use FDIC. They use NCUA which is very similar.
The banks have been trying to keep NCUA limits below FDIC limits for years because they don't like the competition, but NCUA was successfully increased to $250K as well.
- flamesabers
- Posts: 1848
- Joined: Fri Mar 03, 2017 11:05 am
- Location: Rochester, MN
Re: Where To Put My Emergency Fund?
The credit union must be insured by the NCUA. There will be signs inside their buildings and on their website to indicate they are insured by the NCUA. You can look up on NCUA's website to verify if a particular credit union is insured.rattlenap wrote:So all Credits Unions are NCUA no matter what, correct? Are there also any pitfalls with using a Credit Union? It's not something I'd use a regular basis, but is only for my EF.welderwannabe wrote:Credit unions don't use FDIC. They use NCUA which is very similar.
The banks have been trying to keep NCUA limits below FDIC limits for years because they don't like the competition, but NCUA was successfully increased to $250K as well.
https://www.ncua.gov/Pages/default.aspx
One potential pitfall with credit unions is the requirements to join one. Since you're already eligible to join the credit union in question, this shouldn't be a problem for you. You might want to check to see if you can continue to have an account with this credit union even when you're no longer employed by your company.
Re: Where To Put My Emergency Fund?
I've been making adjustment, but settled on similar with simplifications.DoctorPhysics wrote:Not for everyone but I try to run a lean EF.
3 1-2 months cash
3 months rolling short term CD ladder
Excess goes into a tax free muni
Last edited by inbox788 on Fri Aug 11, 2017 3:28 pm, edited 1 time in total.
-
- Posts: 1571
- Joined: Thu Apr 30, 2015 12:30 pm
- Location: Florida
Re: Where To Put My Emergency Fund?
What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.Nicolas wrote:I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
-
- Posts: 1571
- Joined: Thu Apr 30, 2015 12:30 pm
- Location: Florida
Re: Where To Put My Emergency Fund?
What is the hard cash % of 6 months of expenses??willthrill81 wrote:In the event of a significant power outage, retailers can't verify your checks and may not take them (do you carry checks around with you?), ATMs don't work, and credit cards don't work either. It's happened several times in the U.S. And yes, fire resistant boxes are cheap and easily available. And if you're using an ATM, I'm guessing that at least part of your EF is in a savings account earning next to nothing anyway, but perhaps you have a high yield savings account tied to a debit card.Nicolas wrote:I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
Your concern for earnings is noted, and I share it. That's why most of my EF is invested in Wellesley Income, which generates enough earnings to keep my entire EF well ahead of inflation.
-
- Posts: 1571
- Joined: Thu Apr 30, 2015 12:30 pm
- Location: Florida
Re: Where To Put My Emergency Fund?
Would it not be better to max out that Roth with stock funds.willthrill81 wrote:No, it's in a Roth IRA that I had enough free space in for it a while back.bob_m10 wrote:Does that mean Wellesley is sitting in a taxable account?willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
-
- Posts: 1571
- Joined: Thu Apr 30, 2015 12:30 pm
- Location: Florida
Re: Where To Put My Emergency Fund?
This make really good sense. My question is the risk of the Short term treasury vs the returns. Someone like me in the 25% tax bracket would there been and yield left after paying taxes? Would it be better just putting 1 year cd paying 1.3%??mhalley wrote:That is perfectly reasonable. The wiki says you could keep the first 3 mos in mm, the next 3 mos in cds and if you desire more than six mos, the next 3 mos in a short term treasury bond fund.
https://www.bogleheads.org/wiki/Emergency_fund
I am not sure.
-
- Posts: 5586
- Joined: Thu Aug 09, 2012 10:54 am
Re: Where To Put My Emergency Fund?
Then you sell some taxable investments to cover the credit card. Having a really bad month expense wise, during a really bad stock market year is fairly unlikely and even so, being forced to sell a few grand worth of taxable investments at a low point in crash isn't a huge deal.indexonlyplease wrote: What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.
Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
I keep 10k in my money market account at the credit union which is the $ amount where I get a small bump in interest rate. I then keep an appropriate extra amount in intermediate tax exempt bonds relative to what my ideal asset allocation would be. The excess in the bonds is effectively my emergency and expected future large expense fund.
Once your taxable investments are large enough you really don't need a segregated emergency fund. Its really a concept for people with low savings amounts or that are just starting out as a buffer to keep them from carrying a balance on a credit card.
Re: Where To Put My Emergency Fund?
If I needed a new AC and a new transmission at the same time, as per your hypothetical example, yes I could easily pay that whole credit card balance of $8k on my next statement. My credit card accounts are autopaid in full from my high yield online savings account every month which is currently earning 1.25%, and I have many multiples of $8k in there. I never carry a balance.indexonlyplease wrote:What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.Nicolas wrote:I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
-
- Posts: 1571
- Joined: Thu Apr 30, 2015 12:30 pm
- Location: Florida
Re: Where To Put My Emergency Fund?
Thanks for clearing up. You have the cash in high yield savings. Same here. At 6 months expenses for emergencies. I want to see what willthrill81 says. I like his 2 account idea.Nicolas wrote:If I needed a new AC and a new transmission at the same time, as per your hypothetical example, yes I could easily pay that whole credit card balance of $8k on my next statement. My credit card accounts are autopaid in full from my high yield online savings account every month which is currently earning 1.25%, and I have many multiples of $8k in there. I never carry a balance.indexonlyplease wrote:What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.Nicolas wrote:I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
Re: Where To Put My Emergency Fund?
I get confused about this "emergency" fund business. Why is it separated from other investment funds? I can see for someone just starting out that there may be some utility to putting some money away in a separate account for an "emergency." But it seems to me that the req't for such an account disappears quickly as the investor (hopefully) amasses assets. We have Vanguard accounts worth >> $1kk that are pretty much available to us by the next day. I don't thin I need an "emergency" account, but maybe we're missing something.
Re: Where To Put My Emergency Fund?
The problem in that case would come if having to sell in a down market. That's why it's nice to have a few bucks around so you can ride out bear markets without having to touch it.c078342 wrote:I get confused about this "emergency" fund business. Why is it separated from other investment funds? I can see for someone just starting out that there may be some utility to putting some money away in a separate account for an "emergency." But it seems to me that the req't for such an account disappears quickly as the investor (hopefully) amasses assets. We have Vanguard accounts worth >> $1kk that are pretty much available to us by the next day. I don't thin I need an "emergency" account, but maybe we're missing something.
Re: Where To Put My Emergency Fund?
I don't see that as much of a problem at all for millionaires (">> $1kk")Nicolas wrote:The problem in that case would come if having to sell in a down market. That's why it's nice to have a few bucks around so you can ride out bear markets without having to touch it.
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: Where To Put My Emergency Fund?
We have about three months of expenses in our EF, and one month of that is in hard currency I can lay my hands on 24/7. The rest is in Vanguard's Wellesley Income fund in my Roth IRA. I had some free space in my Roth (I'm not currently maxing it out for several reasons) a while back, and it made sense to put the funds there rather than a taxable account. Obviously, I can withdraw my contributions with no penalty at any time. There is a little volatility with Wellesley, but not much; it's a very steady fund.indexonlyplease wrote:Thanks for clearing up. You have the cash in high yield savings. Same here. At 6 months expenses for emergencies. I want to see what willthrill81 says. I like his 2 account idea.Nicolas wrote:If I needed a new AC and a new transmission at the same time, as per your hypothetical example, yes I could easily pay that whole credit card balance of $8k on my next statement. My credit card accounts are autopaid in full from my high yield online savings account every month which is currently earning 1.25%, and I have many multiples of $8k in there. I never carry a balance.indexonlyplease wrote:What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.Nicolas wrote:I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.willthrill81 wrote:Here's what I do:
1/3 in hard cash (i.e. literal bills that are safe but easily accessible 24/7; can't understand why more Bogleheads don't seem to do this at all)
2/3 in Wellesley Income (this exposes me to a little volatility [historical max has been just under 10% loss in a year] but also helps me to keep my overall EF ahead of inflation and with some upward growth)
Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
In a few years when my mortgage is paid off, I'll probably extend the EF to six months or perhaps even a year, and if so, I'll probably maintain this same ratio of one-third in cash and the rest in Wellesley. Beyond that, my Roth will be 100% stocks, probably until I'm dead and likely beyond that as well.
The Sensible Steward
Re: Where To Put My Emergency Fund?
Interesting browsing...
Looking at my Quicken charts.... I have about 6% of my entire portfolio in some form of cash -
Now some of that is part of stocks, bonds, funds, etc -
but most of it is held in.... Chase & Schwab Checking, Ally Bank ladder CD & MM, Vanguard Prime MM.
It is spread around for ease in allocation to other accounts, ATM access, or more Vanguard fund purchases.
And, as far as hard cash - I have about 4 months expenses of real dollars in a drawer...
Looking at my Quicken charts.... I have about 6% of my entire portfolio in some form of cash -
Now some of that is part of stocks, bonds, funds, etc -
but most of it is held in.... Chase & Schwab Checking, Ally Bank ladder CD & MM, Vanguard Prime MM.
It is spread around for ease in allocation to other accounts, ATM access, or more Vanguard fund purchases.
And, as far as hard cash - I have about 4 months expenses of real dollars in a drawer...
Re: Where To Put My Emergency Fund?
c078342 wrote:I get confused about this "emergency" fund business. Why is it separated from other investment funds? I can see for someone just starting out that there may be some utility to putting some money away in a separate account for an "emergency." But it seems to me that the req't for such an account disappears quickly as the investor (hopefully) amasses assets. We have Vanguard accounts worth >> $1kk that are pretty much available to us by the next day. I don't thin I need an "emergency" account, but maybe we're missing something.
If your risk tolerance is fine with "emergency" money being at the mercy of the market,then that's fine. I'm not okay with it. I work in a volatile industry so I'm pretty conservative with my emergency money. I have 6 months of income saved so far which is about 8 months of expenses spread between a few accounts.
1 month as a checking buffer. 2 months in my savings account tied with checking. 2 months (will be 3) in a HYSA where my CC cash back goes, 1 month (eventually 6) in I bonds, and then all excess in a Vanguard LifeStrategy 60/40 fund. It gives me piece of mind, and it helps me keep that money separate. I have other accounts that are just retirement savings (401k, Roth, and taxable) that are a different AA than what I was comfortable with for non retirement monies. Also have accounts for irregular spending and vacations and the like. Just whatever works for the individual.
-
- Posts: 1571
- Joined: Thu Apr 30, 2015 12:30 pm
- Location: Florida
Re: Where To Put My Emergency Fund?
willthrill81 wrote:We have about three months of expenses in our EF, and one month of that is in hard currency I can lay my hands on 24/7. The rest is in Vanguard's Wellesley Income fund in my Roth IRA. I had some free space in my Roth (I'm not currently maxing it out for several reasons) a while back, and it made sense to put the funds there rather than a taxable account. Obviously, I can withdraw my contributions with no penalty at any time. There is a little volatility with Wellesley, but not much; it's a very steady fund.indexonlyplease wrote:Thanks for clearing up. You have the cash in high yield savings. Same here. At 6 months expenses for emergencies. I want to see what willthrill81 says. I like his 2 account idea.Nicolas wrote:If I needed a new AC and a new transmission at the same time, as per your hypothetical example, yes I could easily pay that whole credit card balance of $8k on my next statement. My credit card accounts are autopaid in full from my high yield online savings account every month which is currently earning 1.25%, and I have many multiples of $8k in there. I never carry a balance.indexonlyplease wrote:What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.Nicolas wrote:
I don't keep any hard cash except for pocket money. I don't need immediate access to hard cash. I can't think of a reason I would need it. I can write a check, make a cash withdrawal, or use my credit cards anytime. (I never carry a balance and pay in full monthly). If I had that much hard cash I would always be worried where it was, if it had been stolen or lost. In the event of a fire, it goes up with the house, unless kept in a fireproof box. Also I prefer my emergency fund at least earns something, hard cash earns nothing.
Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
In a few years when my mortgage is paid off, I'll probably extend the EF to six months or perhaps even a year, and if so, I'll probably maintain this same ratio of one-third in cash and the rest in Wellesley. Beyond that, my Roth will be 100% stocks, probably until I'm dead and likely beyond that as well.
Makes good sense. Do you think this would work in a taxed account? I know the income from the Wellesley fund you pay dividends and taxed at your rate. But is this the same as interest from savings and cd's.
In another repley I posted the Paul Merriman's
Vanguard Prime Money Market VMMXX First three to six months worth of living expenses
Vanguard Short-Term Corp Bond Index Admiral VSCSX Funds in excess of three to six months of living expenses
This would also pay dividends but less. I think a least. All questions??
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: Where To Put My Emergency Fund?
I like having some hard cash on hand, but I think that Paul's EF recommendation is fine as well.indexonlyplease wrote:willthrill81 wrote:We have about three months of expenses in our EF, and one month of that is in hard currency I can lay my hands on 24/7. The rest is in Vanguard's Wellesley Income fund in my Roth IRA. I had some free space in my Roth (I'm not currently maxing it out for several reasons) a while back, and it made sense to put the funds there rather than a taxable account. Obviously, I can withdraw my contributions with no penalty at any time. There is a little volatility with Wellesley, but not much; it's a very steady fund.indexonlyplease wrote:Thanks for clearing up. You have the cash in high yield savings. Same here. At 6 months expenses for emergencies. I want to see what willthrill81 says. I like his 2 account idea.Nicolas wrote:If I needed a new AC and a new transmission at the same time, as per your hypothetical example, yes I could easily pay that whole credit card balance of $8k on my next statement. My credit card accounts are autopaid in full from my high yield online savings account every month which is currently earning 1.25%, and I have many multiples of $8k in there. I never carry a balance.indexonlyplease wrote:
What if the AC man came to your house in the summer and told you a new ac is needed. $5000 installed. If you put this on the credit card could you cover it next month. What if the same month you car transmission went out. Another $3000 yes bad month.
Is hard cash considered sittting in bank account making nothing?? Better than the 18% credit card someone could not pay off.
In a few years when my mortgage is paid off, I'll probably extend the EF to six months or perhaps even a year, and if so, I'll probably maintain this same ratio of one-third in cash and the rest in Wellesley. Beyond that, my Roth will be 100% stocks, probably until I'm dead and likely beyond that as well.
Makes good sense. Do you think this would work in a taxed account? I know the income from the Wellesley fund you pay dividends and taxed at your rate. But is this the same as interest from savings and cd's.
In another repley I posted the Paul Merriman's
Vanguard Prime Money Market VMMXX First three to six months worth of living expenses
Vanguard Short-Term Corp Bond Index Admiral VSCSX Funds in excess of three to six months of living expenses
This would also pay dividends but less. I think a least. All questions??
I don't think I would change this strategy if I had to hold Wellesley in taxable. The after tax return is still likely to be significantly higher than a muni bond fund; anything else will also require taxes to be paid.
I'm personally fine with Wellesley's far higher returns than money markets or ST bonds. I think it's preferable to overfund your EF by 10-20% in order to avoid insufficient capital when you need it in return for much higher returns. But I'm very much in the minority with this viewpoint. I'm okay with that though.
The Sensible Steward
- Taylor Larimore
- Posts: 32842
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Re: Where To Put My Emergency Fund?
rattlenap:rattlenap wrote:I currently keep my emergency fund 6 months/$10k in the Vangaurd Federal Money Market Fund (VMFXX) via a taxable account. I am thinking of moving to another Vanguard fund in my taxable account, but am not sure. Any suggestions or should I just keep it there?
I do not have a separate, low-yielding, "emergency fund" that may never be used.
In the event I should need cash in hurry, I know I can get it from my bank account, credit card, portfolio, bank loan, family, etc..
It is a myth that everyone needs an "emergency fund."
Best wishes."Our life is frittered away by detail. Simplify. Simplify." -- Henry David Thoreau
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle