Author Topic: Replenishing an emergency or house fund  (Read 1257 times)

FuzzyRunner

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Replenishing an emergency or house fund
« on: April 12, 2018, 12:28:44 PM »
Hello Everyone,

Currently figuring out a housing budget and was wondering how you all plan to replenish an emergency or housing fund after you've needed to use it?  I assume you are allocating every dollar your earn to some part of your budget whether its to expenses or savings.  So if you were to ever need to use money for a big ticket item (house repair, new car, etc.) how would you go on to replace that money?  Do you cut your savings back until its filled up or do you cut expenses?  Thanks!

PoutineLover

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Re: Replenishing an emergency or house fund
« Reply #1 on: April 12, 2018, 01:24:31 PM »
Whenever I need to dip into my savings I try to cut back on other optional things until I can fill it back up to a comfortable level. My budget consists of automatic long term savings, fixed costs, variable spending and savings for shorter term needs (infrequent large expenses, travel, unexpected expenses). The first two don't change, so if my savings fund is depleted, I cut back on the variable spending until I can get it back up to a comfortable level.

Dragonswan

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Re: Replenishing an emergency or house fund
« Reply #2 on: April 12, 2018, 01:51:03 PM »
I make monthly contributions to my emergency fund.  So if I use up the fund I hope I don't have another emergency until the balance goes back up.  If I do have another emergency I do like PoutineLover and borrow from one of the discretionary funds like travel.  I have a separate fund for buying and maintaining a car so car repairs come out of that if necessary. I have a lot of discretionary funds each month that I put in a non retirement savings account so I would not contribute to that the month of the emergency.  If all else fails then I'll take a loan out from my TSP (401K equivalent) and divert discretionary funds to it until it's paid off.

FuzzyRunner

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Re: Replenishing an emergency or house fund
« Reply #3 on: April 12, 2018, 02:26:51 PM »
How quickly would you both want to recover your emergency fund?  I would think pulling money from another fund wouldn't really replenish the fund very quickly (a year or more for a small emergency fund) unless you spend a lot of $ on travel, or whatever the discretionary fund may be.  Since I try to keep my expenses down (and I don't make a ton of money) I don't see me being able to replenish my emergency fund from borrowing from other budget items in a timely matter.

Do you plan to stop making contributions to your emergency fund or is that part of your budget so you'll always be trickling money in?

I should add my emergency fund would be for pretty much anything that is an unexpected issue.  i.e. new roof, house appliance dieing, medical issue, job loss, etc.  I think some might split some of these things up into different savings categories

PoutineLover

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Re: Replenishing an emergency or house fund
« Reply #4 on: April 12, 2018, 02:51:58 PM »
I'm always building up my fund, some from my paychecks and if I get extra money like side jobs, gifts or tax refunds I'll move that over too. Most months I can put a couple hundred in, and a couple times a year I use some of it for something expensive that comes up. It hovers around a few thousand dollars usually, and my bare bones monthly expenditures are $1,200 so I'd be covered for 2-3 months.
The only real emergency I'm anticipating is a job loss, since I rent, I don't have a car or any dependents, and I have insurance (health, disability and rental). I also have a line of credit and I could withdraw from my TFSA if I really needed to. Your circumstances will dictate the type of emergency you need to be planning for and how much it might cost to deal with it.

Raenia

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Re: Replenishing an emergency or house fund
« Reply #5 on: April 14, 2018, 06:36:46 AM »
In my mind, things like a new roof or replacing a broken appliance aren't really emergencies, they're expected expenses that arrive at unpredictable times.  If you own a house, you know you're going to need to replace your dishwasher or your roof eventually.  I'd recommend a sinking fund for house expenses as a line item in your monthly budget.  I forget what the exact recommendation is for how much to put aside, as I'm still a renter.  However, I do the same thing for my car - I can't predict what will break when, but I do know that something will break eventually, so I put a little away every month toward expected repairs/replacement.  I keep this separate from my emergency fund, which is intended only for healthcare costs or job loss.

Carrie

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Re: Replenishing an emergency or house fund
« Reply #6 on: April 14, 2018, 07:22:45 AM »
I have a 6 month emergency fund in a money market, and then a separate home and auto maintenance account. Antpything emergency for house or car comes out of that, but it's also for future car purchase. Right now that account is filled & capped but if we have a known expense coming up or need to replenish, that's where we aim our money. I also keep a small savings account for annual property tax, throw $200/mo there.

Cranky

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Re: Replenishing an emergency or house fund
« Reply #7 on: April 14, 2018, 10:49:37 AM »
I have a 3 tiered system.

I have a Little Emergency fund ($1k) in my regular checking account.

I have a Big Emergency Fund (6-12 months expenses, depending on how careful we are) in the credit union.

I have a House Fund in the same bank that our regular checking is in, so I can move money online easily.

And then we have retirement/investments. So if something is coming up with the house, I fatten that up a little. If there's an actual emergency, I replenish from the checking account. But all incoming money comes into the basic account, and then goes where it's needed, so I guess that the bottom line is that long term investments are cut back until the other accounts are refilled, but in practice, it's all pretty steady.

Telecaster

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Re: Replenishing an emergency or house fund
« Reply #8 on: April 14, 2018, 12:04:21 PM »
Hello Everyone,

Currently figuring out a housing budget and was wondering how you all plan to replenish an emergency or housing fund after you've needed to use it?  I assume you are allocating every dollar your earn to some part of your budget whether its to expenses or savings.  So if you were to ever need to use money for a big ticket item (house repair, new car, etc.) how would you go on to replace that money?  Do you cut your savings back until its filled up or do you cut expenses?  Thanks!

That's the paradox of an emergency fund.  If you believe an emergency fund is a necessary thing, and you actually use it in an emergency, then the emergency fund must be re-filled out of your investments.  Otherwise you have no emergency fund.   Which means you are actually using your investments, not cash, for your emergency fund.   Or you could refill it over time, but if you have an emergency before it is re-filled, then that again means you are relying on your investments, not cash, for your emergency fund. 

Which means you don't really need a cash emergency fund.  What you do need are liquid assets that are sufficient to get you through some future emergency.   Those assets can be stocks, and in order to make sure they are sufficient figure in a potential drop of 20-50% in case a market crash coincides with an emergency.   Not having a cash emergency fund solves the paradox. 

Some people say that cash emergency fund prevents having to sell stocks in an downturn.   Two problems with that.  1) How do you fill up the fund again? and 2)  it is an extremely expensive form of insurance.  Emergencies are rare (which is why they are called emergencies).  Stock market crashes are also rare.   But if those events do coincide, you probably won't sell off the whole fund in one day.  You'll most likely sell stocks over a period of months.    And most stock market corrections are measured in months.    Remember, the stock market ends on a down year only 5% of the  time (1 out of 20 years), on average.  So you might have to sell some at the bottom, but probably not all.    And, FWIW, the stock market doubles about every ten years.    So if you have an emergency ten years from now, right as there is 50% market correction, AND you have to sell the whole thing at the bottom, you'd likely in the same financial position as if your emergency fund had been in cash the whole time.  So the cash emergency fund didn't improve your financial position. 

But if you don't have an emergency for 20 years, then you (most likely) will bet in far, far better financial position, and therefore safer financially, than if you kept your e-fund in cash that whole time.   So a cash e-fund increases your financial risk over time compared to not having an e-fund.  So the cash e-fund will provide very little downside protection unless the stars align perfectly, and very likely will provide no downside protection at all.   That's exactly the opposite of how insurance should work.   And course, you give up all of the upside gains.   

Re: House fund.  That's a little different.  When you save up enough to buy the house, then just buy the house and you are done.   No need to refill the fund unless you decide to buy another house. 


justchristine

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Re: Replenishing an emergency or house fund
« Reply #9 on: April 14, 2018, 12:21:21 PM »
I have simplified things as my stash has grown. I used to keep track of sinking funds in a spreadsheet but it got too tedious.   I can cash flow small irregular expenses or emergencies by not  adding to investments for  the month..  I have a savings account that I keep 10k or so in and a brokerage account for my after tax investing. If I can't cash flow an expense I use the savings and brokerage accounts as backup(in that order)  if the savings gets low, I just redirect the money I would have otherwise sent to the brokerage until the savings is back to my comfort zone. 

Cranky

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Re: Replenishing an emergency or house fund
« Reply #10 on: April 14, 2018, 12:36:19 PM »
To clarify - my House Fund is not for buying a house, but for house related expenses. Itís where I stash money for insurance and taxes, and accumulate money for major projects.

Carrie

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Re: Replenishing an emergency or house fund
« Reply #11 on: April 14, 2018, 01:17:39 PM »
For those of you who invest emergency funds, do you use after tax investment and throw money monthly there?
I've been conditioned to have an emergency fund, then an emergency fund for that emergency fund, and now we may be cash heavy.  Would you use a conservative fund or go straight up index?

Telecaster

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Re: Replenishing an emergency or house fund
« Reply #12 on: April 14, 2018, 01:53:31 PM »
Index fund in a taxable account.  Roth contributions can play a role too.   

justchristine

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Re: Replenishing an emergency or house fund
« Reply #13 on: April 14, 2018, 04:45:58 PM »
For those of you who invest emergency funds, do you use after tax investment and throw money monthly there?
I've been conditioned to have an emergency fund, then an emergency fund for that emergency fund, and now we may be cash heavy.  Would you use a conservative fund or go straight up index?

I look at all my assets in every account (savings,401k,it's) and balance my assets allocation across the entire amount.  So my savings is my cash allocation while my after tax brokerage account has vtsax and the bond fund that I can never remember the ticket for. So, yes...part of my 'emergency' fund is in vanguard index funds.

Mezzie

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Re: Replenishing an emergency or house fund
« Reply #14 on: April 14, 2018, 06:33:22 PM »
I pay monthly into my emergency fund. When the balance passes a certain threshhold, we invest half of it and keep building. If we have to spend some, we don't increase the rate at which we save unless the balance gets so low I feel uncomfortable, which may be happening soon due to some extended family emergencies. I've already started some extra penny pinching in anticipation of that.

Lmoot

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Re: Replenishing an emergency or house fund
« Reply #15 on: April 15, 2018, 03:22:59 AM »
What did you with the extra cash you were previously allocating to saving up the efund? I personally am constantly saving for future expenses (emergency or otherwise). Being that having a healthy efund is high priority to me, I would likely move cash from a non-emergency bucket, to the efund, then focus on replenishing that bucket instead; that way there are minimal consequences to not having the cash available when I need/want it. I shouldn't be spending money on a vacay I've been saving up for anyway, if I don't have a healthy efund.

ElleFiji

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Re: Replenishing an emergency or house fund
« Reply #16 on: April 15, 2018, 03:52:48 PM »
I have a chequing account, a short-term and emergencies savings account and then my paltry investments.

I have a range that I like to keep the savings account at - if it is low because of planned spending or an emergency, I treat it like a hair on fire debt and throw everything at it - sometimes even my investing dollars. If I know I have a big expense coming up near future, I plan to get the account to be above it's normal range.

One of my tactics is to log in to pay my bills and throw extra money at it

Dragonswan

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Re: Replenishing an emergency or house fund
« Reply #17 on: April 16, 2018, 07:29:09 AM »
How quickly would you both want to recover your emergency fund?  I would think pulling money from another fund wouldn't really replenish the fund very quickly (a year or more for a small emergency fund) unless you spend a lot of $ on travel, or whatever the discretionary fund may be.  Since I try to keep my expenses down (and I don't make a ton of money) I don't see me being able to replenish my emergency fund from borrowing from other budget items in a timely matter.

Do you plan to stop making contributions to your emergency fund or is that part of your budget so you'll always be trickling money in?

I should add my emergency fund would be for pretty much anything that is an unexpected issue.  i.e. new roof, house appliance dieing, medical issue, job loss, etc.  I think some might split some of these things up into different savings categories
Yes refilling the fund takes over a year.  But hopefully the efund isn't completely depleted with a single emergency.  I have 1K a month in discretionary funds before I even have to think about backing off the retirement investing or dipping into investments.  Now, I sort of earmark this fund as the down payment for the future retirement house.  So if I have an emergency that depletes the efund/house maintenance fund then I don't contribute to the down payment fund or use part of that fund for the next emergency if the efund isn't sufficiently replenished. 

As one commenter alluded to, money is fungible so if you want to put everything into one big emergency/maintenance pot (car fund + house maintenance + job loss + etc) and use as necessary, that works too.  But you have to contribute to it at least monthly (some years I've had a set amount automatically taken out of each paycheck and put into the account).  You can risk investing your efund, but psychologically it helps to separate an emergency fund from an investment fund.  You don't want to start making it mentally easy to tap your investments.  You want to have a pot of money you can use when you're stressed which is not the best time to make decisions about selling investments.

diapasoun

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Re: Replenishing an emergency or house fund
« Reply #18 on: April 16, 2018, 03:46:51 PM »
PTF. I'm almost done building up a six months' cash emergency fund and have been thinking about where I want to keep that money -- just reading this thread so far has given me some good food for thought.