Author Topic: In Praise of Big, Fat Emergency Funds  (Read 7677 times)

elaine amj

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Re: In Praise of Big, Fat Emergency Funds
« Reply #50 on: March 22, 2020, 08:12:16 PM »
I thought this was a brilliant solution to the question of whether to pay off the mortgage early. And wish we had thought of it when we decided to attack our mortgage.

Anyway, now we have a paid off house and enough cash to last a good while I am thankful DH is much more conservative than I. Having the cash really does help me sleep better.
Last August I made a decision to save cash instead of allocating money each month to the mortgage company. I planned to save enough until I could make one large payment to payoff the house.  Feels pretty good to have this cash right now. Hopefully, I keep my job and can continue to save for paying off the house.

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deborah

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Re: In Praise of Big, Fat Emergency Funds
« Reply #51 on: March 22, 2020, 11:40:40 PM »
As someone who has gone through more than her share of emergencies (lost everything I possessed in a fire, three years of whiplash after being run into by a bus, car conked out in the middle of nowhere, fire burnt my city infrastructure...), I've always been on the "no emeergency fund is really necessary" side. The initial expenses of every real emergency has been able to be dealt with immediately with a credit card, and the longer term expenses have been able to be funded from money that could be obtained from normal investments.

However, I've always had quite a bit of cash around when an emergency has occurred. We currently have more than 15 years of cash but we are unlikely to need any of it due to the way our assets are structured. My car accident cost me more than $70,000 and I had that in cash at the time, but I would have been better off if the money had been invested and I had gradually withdrawn it. Having cash means that you don't have to rely upon your investments being available - I knew a lot of people in 2008 who had investments that were frozen for several years afterwards.

Certainly, I expect that the current emergency is one where some investments will be frozen, so a big fat emergency fund will be useful to a lot of people.

KathrinS

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Re: In Praise of Big, Fat Emergency Funds
« Reply #52 on: March 23, 2020, 01:12:17 AM »
I'm self employed and always had a 3 month emergency fund. I thought that my job was more secure than a salaried one, as it's very, very unlikely that all clients leave at once. Of course, now my workplaces have closed down and I can no longer visit my in-home clients. I now have 1-2 online lessons a day, which might be enough to cover a half to two thirds of my expenses.

Luckily, I saw this coming when it happened in Italy, so I was able to double my emergency fund to 6 months. A crisis like this is a great way to test our strategy and I have realised that a 6 month buffer is prudent for my situation.

lexde

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Re: In Praise of Big, Fat Emergency Funds
« Reply #53 on: March 23, 2020, 06:36:51 AM »
I have about 3 months right now, but honestly I would feel much more comfortable having 9-12 months in an emergency fund.

Yes, the ROI is minimal in a HYSA, but the psychological benefit far outweighs those gains.

Iím saving at about a 1:1 rate (1 extra month in eFund each month of w2 work) while still investing aggressively so I am going to continue to do that. My job isnít safe right now but it will be hard to tell for a little while if there will be layoffs.

redhead84

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Re: In Praise of Big, Fat Emergency Funds
« Reply #54 on: March 23, 2020, 07:48:41 AM »
We are in a good position. We have no debt (including house) and somewhere between one and two years of living expenses in cash (depending on how low we take the spending down). Fortunately, I don't think we'll need to use the EF.

My husband and I both work in finance for "essential" businesses. He is in the transportation industry and I'm in essential manufacturing.
I work for a financially conservative company. My company is not leveraged at all and has significant cash reserves. If I lose my job, the wheels are fully off.

DH's company is less secure and already discussing workforce reductions. I don't think he'll lose his job, but a pay cut is possible.


PoutineLover

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Re: In Praise of Big, Fat Emergency Funds
« Reply #55 on: March 23, 2020, 08:16:10 AM »
I wish my emergency fund was a bit bigger, I usually save up cash in a high interest savings fund and periodically transfer to retirement funds. I just recently did a transfer, so now my availabile funds are low. For now my job is safe, but unfortunately instead of investing the dip I think it'll be safer to save up, given all the uncertainty. I should know more in a few weeks, and then I'll be able to reevaluate.

mm1970

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Re: In Praise of Big, Fat Emergency Funds
« Reply #56 on: March 23, 2020, 10:37:42 AM »
Because we have good incomes and are a bit lazy, we've accumulated probably a bit more than my annual salary in our savings account. (a bit over six fig)

JSMustachian

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Re: In Praise of Big, Fat Emergency Funds
« Reply #57 on: March 24, 2020, 01:15:51 PM »
We have access to $20,000 in cash and bonds. Our jobs in healthcare IT and public teaching are very stable in a down economy. We feel very fortunate to be in the position we are in and sleeping very well at night.

Dicey

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Re: In Praise of Big, Fat Emergency Funds
« Reply #58 on: March 24, 2020, 02:37:16 PM »
Good thread, @Dicey. Like many, Iíve always gone my own way w.r.t having an emergency fund. Very happy with my choice right now.

I do wonder, in the sprit of just fun, if youíll be softening your stance on mortgages... ;)
Hell no, but I've never been against paying them off, IF it's done optimally. It's not a secret that my primary home never had a mortgage, but we were FI when we bought it. We have not borrowed against it to invest, but the combination of low rates and bonfire sales prices on stocks are somewhat compelling. Probably a good thing I'm sick and have no fucking energy to pursue anything...

My platform over on the DPOYM Clubhouse, and anywhere, really, is: Do The Math First. Understand your choices. Be smart about how you deploy your green soldiers. If you've done All The Things and still want to pay off your mortgage in one lump sum once you hit FI? Sure, go for it!*

And now, back to our regularly scheduled Big, Fat EF programming... Feel free to join us over at the DPOYM Clubhouse any time if you have questions.

*That was a trick. Many people, once they reach FI and know first hand how this stuff works, like having a big-ass ball o' money and don't mind their low-interest, fixed rate mortgage any more.

Serendip

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Re: In Praise of Big, Fat Emergency Funds
« Reply #59 on: March 24, 2020, 04:15:23 PM »
I've got about six-seven months worth. I wish I had more now as I've lost my job and don't want to totally deplete this, but am very happy that at least I have this.

Dicey

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Re: In Praise of Big, Fat Emergency Funds
« Reply #60 on: March 24, 2020, 04:19:47 PM »
I've got about six-seven months worth. I wish I had more now as I've lost my job and don't want to totally deplete this, but am very happy that at least I have this.
Costco is hiring on the spot and so are most grocery stores. If it won't jeopardize your unemployment benefits, it might help stretch your EF dollars until you get settled into something new.

Fomerly known as something

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Re: In Praise of Big, Fat Emergency Funds
« Reply #61 on: March 25, 2020, 05:39:56 AM »
I had this revelation last year during the government shit down, that spending ones emergency fund not to fix the furnace but to pay for food because there was no paycheck is well no fun at all.  I doubled my emergency fund last July from 6 months of basic expenses to 1 year.  Iím 5.5 years away from FIRE, I have plans in place to up my Efund even more over these next Zeffirelliís years.

Malkynn

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Re: In Praise of Big, Fat Emergency Funds
« Reply #62 on: March 25, 2020, 06:14:10 AM »
Minimal cash here and still very comfortable with that. Also very comfortable having a mortgage.

My entire life has been a series of serious emergencies, I've built very robust systems to manage them.

Dicey

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Re: In Praise of Big, Fat Emergency Funds
« Reply #63 on: March 25, 2020, 06:54:08 AM »
Minimal cash here and still very comfortable with that. Also very comfortable having a mortgage.

My entire life has been a series of serious emergencies, I've built very robust systems to manage them.
I suspect those "very robust systems" would count as an EF. I totally count my well-stocked pantries as part of my emergency preparedness. If I have a lot of staples on hand, when the SHTF, I won't have to spend actual cash to keep my family fed.

And, in a very good way, it doesn't surprise me a bit that your emergency management system is both robust and somewhat unconventional. We have all learned a lot from your wise ways, malkynn.

You've brought up a very good point. There are more components to a solid EF than just cash.

OtherJen

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Re: In Praise of Big, Fat Emergency Funds
« Reply #64 on: March 25, 2020, 07:09:28 AM »
Minimal cash here and still very comfortable with that. Also very comfortable having a mortgage.

My entire life has been a series of serious emergencies, I've built very robust systems to manage them.
I suspect those "very robust systems" would count as an EF. I totally count my well-stocked pantries as part of my emergency preparedness. If I have a lot of staples on hand, when the SHTF, I won't have to spend actual cash to keep my family fed.

And, in a very good way, it doesn't surprise me a bit that your emergency management system is both robust and somewhat unconventional. We have all learned a lot from your wise ways, malkynn.

You've brought up a very good point. There are more components to a solid EF than just cash.

Mind sharing them for the more ignorant among us (including me)?

DadJokes

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Re: In Praise of Big, Fat Emergency Funds
« Reply #65 on: March 25, 2020, 07:29:50 AM »
Ditto on robust systems in place

We only have ~4 months' essential expenses in bank accounts (not to mention unreimbursed HSA funds & credit card rewards points), and that assumes cutting out a lot of things.

However, we also have:

1. Stable government jobs with great healthcare
2. The ability to get by on the lowest-paid spouse's income
3. Good relationships with nearby family
4. Remaining GI Bill benefits for me

The most dangerous contingency that we currently don't have a plan for is healthcare if I get laid off. Our son is currently on my healthcare plan, because it only cost ~$10/month to add him. However, my wife's healthcare plan, while free for her, has a significant cost to add family. We can cover current expenses on her income, but we can't cover current expenses + what healthcare would cost.
« Last Edit: March 25, 2020, 07:54:20 AM by DadJokes »

Malkynn

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Re: In Praise of Big, Fat Emergency Funds
« Reply #66 on: March 25, 2020, 08:15:28 AM »
Minimal cash here and still very comfortable with that. Also very comfortable having a mortgage.

My entire life has been a series of serious emergencies, I've built very robust systems to manage them.
I suspect those "very robust systems" would count as an EF. I totally count my well-stocked pantries as part of my emergency preparedness. If I have a lot of staples on hand, when the SHTF, I won't have to spend actual cash to keep my family fed.

And, in a very good way, it doesn't surprise me a bit that your emergency management system is both robust and somewhat unconventional. We have all learned a lot from your wise ways, malkynn.

You've brought up a very good point. There are more components to a solid EF than just cash.

Mind sharing them for the more ignorant among us (including me)?

In our case, it's a combo of keeping fixed costs low and having multiple professional streams available to us, so if one area of expertise takes a hit, we can always pivot to another. We also diversify our work across government, private sector, non profit, and academia.

Also, we don't have cash, but we do have multiple lines of credit between us at mortgage-level low rates, not HELOCs. The chances of all of these being shut down at the same time are extremely slim.

For that to happen at the same time as losing all of our possible streams of income...well, the level of upheaval would have to be so devastating that I would be far more concerned about civil violence than about paying my mortgage.

I just saw my therapist yesterday and she laughed and said "of all of my patients, you're the only one that I'm not at all worried about right now, you actually built your entire life for this kind of thing"

Honestly, for us, this current situation barely rises to the level of mild inconvenience.

ETA: to clarify and for full disclosure, this type of robustness comes at an enormous cost. If we were willing to be leveraged and double down on our highest income streams, we would be much, much wealthier people, but with much more risk.
« Last Edit: March 25, 2020, 09:05:04 AM by Malkynn »

UnleashHell

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Re: In Praise of Big, Fat Emergency Funds
« Reply #67 on: March 25, 2020, 12:37:35 PM »
plenty of lines of credit.
about 3 or 4 months of expenses sitting in checking/savings
and a few thousand in hard cash at hand.

its an emergency fund...

Serendip

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Re: In Praise of Big, Fat Emergency Funds
« Reply #68 on: March 26, 2020, 07:13:50 AM »
I've got about six-seven months worth. I wish I had more now as I've lost my job and don't want to totally deplete this, but am very happy that at least I have this.
Costco is hiring on the spot and so are most grocery stores. If it won't jeopardize your unemployment benefits, it might help stretch your EF dollars until you get settled into something new.

Thanks for the suggestions @Dicey!  I'll likely wait at least a month and then assess. I live in a more-remote place (so we don't have anything like a Costco or box store)-- it's a destination town but now it's ghost-quiet and there is a remaining small base of locals.

The grocery stores are perhaps hiring but my SO's anxiety level means that we aren't even going into grocery stores at this point. He would be over-the-top stressed about it, so I'll watch to see if other options show up. The Canadian gov't is setting up a program to help people in my situation (self-employed, not eligible for Employment Insurance) and it should roll out in the next two weeks.

SheWhoWalksAtLunch

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Re: In Praise of Big, Fat Emergency Funds
« Reply #69 on: March 26, 2020, 10:15:30 AM »
I've got about six-seven months worth. I wish I had more now as I've lost my job and don't want to totally deplete this, but am very happy that at least I have this.
Costco is hiring on the spot and so are most grocery stores. If it won't jeopardize your unemployment benefits, it might help stretch your EF dollars until you get settled into something new.

Thanks for the suggestions @Dicey!  I'll likely wait at least a month and then assess. I live in a more-remote place (so we don't have anything like a Costco or box store)-- it's a destination town but now it's ghost-quiet and there is a remaining small base of locals.


I also live in a destination town, unfortunately ours is filling up with entitled owners of vacation rentals fleeing the cities.  Walking the dog last night, I met a neighbor I'd never seen before who was gushing about how much safer it is here than back in her home city.  I kept having to physically back away from her and her spouse as the two of them stepped repeatedly inside my comfort zone.  They didn't like it when I pointed out we were actually more at risk now that we had visitors from around the country all piling into our little local supermarket and sharing their germs.  They pointed to our complete lack of reported cases of COVID-19, and I had to explain the only reason we don't have any cases listed for our county yet is because the county itself is one of the poorest in the state.  Anyone who can afford healthcare crosses the county line a few miles away to access doctors and services and gets counted there.

but back to the reason for the thread:

5-8 months in checking/savings depending on how willing we are to tighten our belts
paid off home & vehicles, no debts
2 months food on hand (though it might get a bit boring by week 5)
budding vegetable garden (not counted in food above) & a wealth of self sufficiency skills
The DH has sensibly stopped going to work simply because he can.
I am considered essential and am sitting at work (earning a paycheck) as I type this, but am prepared to quit if I start to feel unsafe.

My emergency fund isn't anywhere near as large as some of yours, but I've always been more comfortable keeping the emergency fund topped up first and investing second.
« Last Edit: March 26, 2020, 10:17:26 AM by SheWhoWalksAtLunch »

Serendip

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Re: In Praise of Big, Fat Emergency Funds
« Reply #70 on: March 26, 2020, 05:27:40 PM »

I also live in a destination town, unfortunately ours is filling up with entitled owners of vacation rentals fleeing the cities.  Walking the dog last night, I met a neighbor I'd never seen before who was gushing about how much safer it is here than back in her home city.  I kept having to physically back away from her and her spouse as the two of them stepped repeatedly inside my comfort zone.  They didn't like it when I pointed out we were actually more at risk now that we had visitors from around the country all piling into our little local supermarket and sharing their germs.  They pointed to our complete lack of reported cases of COVID-19, and I had to explain the only reason we don't have any cases listed for our county yet is because the county itself is one of the poorest in the state.  Anyone who can afford healthcare crosses the county line a few miles away to access doctors and services and gets counted there.


ahh yes, I hear you @SheWhoWalksAtLunch --our mayor (& others from a few surrounding places where people go for adventure-sports) publicly announced that coming here to vacation, mountain-bike, etc is NOT WELCOME right now and puts locals at risk... and that we don't have the resources for extra people to be here now (including the grocery stores). So 2nd home-owners were told to stay in their primary residence. We only have one neighbour who came from the city but for a pretty good reason-- they have teenagers who wouldn't abide by social-distancing rules so they drove them up here to get away from their friends.

Dicey

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Re: In Praise of Big, Fat Emergency Funds
« Reply #71 on: March 26, 2020, 11:00:35 PM »

I also live in a destination town, unfortunately ours is filling up with entitled owners of vacation rentals fleeing the cities.  Walking the dog last night, I met a neighbor I'd never seen before who was gushing about how much safer it is here than back in her home city.  I kept having to physically back away from her and her spouse as the two of them stepped repeatedly inside my comfort zone.  They didn't like it when I pointed out we were actually more at risk now that we had visitors from around the country all piling into our little local supermarket and sharing their germs.  They pointed to our complete lack of reported cases of COVID-19, and I had to explain the only reason we don't have any cases listed for our county yet is because the county itself is one of the poorest in the state.  Anyone who can afford healthcare crosses the county line a few miles away to access doctors and services and gets counted there.


ahh yes, I hear you @SheWhoWalksAtLunch --our mayor (& others from a few surrounding places where people go for adventure-sports) publicly announced that coming here to vacation, mountain-bike, etc is NOT WELCOME right now and puts locals at risk... and that we don't have the resources for extra people to be here now (including the grocery stores). So 2nd home-owners were told to stay in their primary residence. We only have one neighbour who came from the city but for a pretty good reason-- they have teenagers who wouldn't abide by social-distancing rules so they drove them up here to get away from their friends.
Wow, at least the parents took action. Let's pray they all stay healthy, for the sake of everyone else.

Bettersafe

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Re: In Praise of Big, Fat Emergency Funds
« Reply #72 on: March 27, 2020, 04:20:59 AM »

I also live in a destination town, unfortunately ours is filling up with entitled owners of vacation rentals fleeing the cities.  Walking the dog last night, I met a neighbor I'd never seen before who was gushing about how much safer it is here than back in her home city.  I kept having to physically back away from her and her spouse as the two of them stepped repeatedly inside my comfort zone. 


This really pisses me off!! They should self-quarantine for 14 days before even considering going out. Instead they're going outside AND don't follow social distancing rules..... bleh.

Prairie Gal

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Re: In Praise of Big, Fat Emergency Funds
« Reply #73 on: March 27, 2020, 08:33:31 PM »
My emergency fund isn't nearly as big as some of you either, but at least I do have one. My house is paid off, and I am still working (from home). I also get a small survivor's pension. I am not worried, and I won't have to touch my investments. But, this pandemic does make me feel like beefing up my cash accounts.

With all the thousands of people losing their jobs, I am guessing there are lots of them wishing they had an emergency fund.

LWYRUP

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Re: In Praise of Big, Fat Emergency Funds
« Reply #74 on: March 27, 2020, 08:51:09 PM »

I also live in a destination town, unfortunately ours is filling up with entitled owners of vacation rentals fleeing the cities.  Walking the dog last night, I met a neighbor I'd never seen before who was gushing about how much safer it is here than back in her home city.  I kept having to physically back away from her and her spouse as the two of them stepped repeatedly inside my comfort zone.  They didn't like it when I pointed out we were actually more at risk now that we had visitors from around the country all piling into our little local supermarket and sharing their germs.  They pointed to our complete lack of reported cases of COVID-19, and I had to explain the only reason we don't have any cases listed for our county yet is because the county itself is one of the poorest in the state.  Anyone who can afford healthcare crosses the county line a few miles away to access doctors and services and gets counted there.


ahh yes, I hear you @SheWhoWalksAtLunch --our mayor (& others from a few surrounding places where people go for adventure-sports) publicly announced that coming here to vacation, mountain-bike, etc is NOT WELCOME right now and puts locals at risk... and that we don't have the resources for extra people to be here now (including the grocery stores). So 2nd home-owners were told to stay in their primary residence. We only have one neighbour who came from the city but for a pretty good reason-- they have teenagers who wouldn't abide by social-distancing rules so they drove them up here to get away from their friends.

I am not a second home owner but this seems very unfair to me.  "Stay in Manhattan and die already!"

Second home owners should be asked to self-quarantine and bring their own supplies.  But to say someone is not welcome in their own home?  Not cool.

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Re: In Praise of Big, Fat Emergency Funds
« Reply #75 on: March 28, 2020, 03:30:58 AM »
My attitude to cash has changed hugely since FIRE.  In the accumulation phase I looked at it as a drag on returns so the question was always "what is the minimum amount of cash to give me a feeling of safety and happiness?" 

Since FIRE, and with the really high stock valuations we had before this crash, my thinking changed completely.  If those stock valuations were sustainable, then I already had enough stocks.  There was no point at all in buying more stocks to chase an upside I didn't need so I may as well keep loads of cash.

Because of this attitude, and through a combination of lower than expected spending and un-budgeted post-FIRE earnings, I'm currently sitting on about 3.5 years spending in cash.  I have to say that feels pretty damn good right now.

texxan1

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Re: In Praise of Big, Fat Emergency Funds
« Reply #76 on: March 28, 2020, 05:01:53 AM »
I was weeks away from FIRE, for which im gonna back out of unleast until my bride makes it to the states ( 6 months ish). In prepping for that, i managed to save since last summer, so im around 200k in my EF... but this is more titled a "slump in the economy" fund.. Now once i get confirmation from corporate megacorp that i will keep my job till january 1 2021, I will take half of it and put it in the market and then start saving more.

my bride to be is on lockdown in her country,, and she is diligently working from home and saving every penny for our future.

Once I FIRE, i want atleast 3 years worth of funding for another market hickup like this one.

Tex

OtherJen

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Re: In Praise of Big, Fat Emergency Funds
« Reply #77 on: March 28, 2020, 05:09:22 AM »

I also live in a destination town, unfortunately ours is filling up with entitled owners of vacation rentals fleeing the cities.  Walking the dog last night, I met a neighbor I'd never seen before who was gushing about how much safer it is here than back in her home city.  I kept having to physically back away from her and her spouse as the two of them stepped repeatedly inside my comfort zone.  They didn't like it when I pointed out we were actually more at risk now that we had visitors from around the country all piling into our little local supermarket and sharing their germs.  They pointed to our complete lack of reported cases of COVID-19, and I had to explain the only reason we don't have any cases listed for our county yet is because the county itself is one of the poorest in the state.  Anyone who can afford healthcare crosses the county line a few miles away to access doctors and services and gets counted there.


ahh yes, I hear you @SheWhoWalksAtLunch --our mayor (& others from a few surrounding places where people go for adventure-sports) publicly announced that coming here to vacation, mountain-bike, etc is NOT WELCOME right now and puts locals at risk... and that we don't have the resources for extra people to be here now (including the grocery stores). So 2nd home-owners were told to stay in their primary residence. We only have one neighbour who came from the city but for a pretty good reason-- they have teenagers who wouldn't abide by social-distancing rules so they drove them up here to get away from their friends.

I am not a second home owner but this seems very unfair to me.  "Stay in Manhattan and die already!"

Second home owners should be asked to self-quarantine and bring their own supplies.  But to say someone is not welcome in their own home?  Not cool.

Here in Michigan, the second homes are often in more rural tourist destinations that are not equipped to deal with a wave of non-residents who might become ill and overload the local medical facilities.

LWYRUP

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Re: In Praise of Big, Fat Emergency Funds
« Reply #78 on: March 28, 2020, 07:18:28 AM »
But medical facilities in the city are likely even more overloaded.  Some people are literally fleeing for their lives.

Again, they need to do it responsibly and should be fined / attested if they don't.  But if population diffusion is done responsibly with self quarantine and social distancing measures, it could save many lives.

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Re: In Praise of Big, Fat Emergency Funds
« Reply #79 on: March 28, 2020, 11:34:10 AM »
But medical facilities in the city are likely even more overloaded.  Some people are literally fleeing for their lives.

Again, they need to do it responsibly and should be fined / attested if they don't.  But if population diffusion is done responsibly with self quarantine and social distancing measures, it could save many lives.
I donít know about your country, but Iíd be very surprised if rural areas have anything like the medical facilities of the cities. We have less than half the GPs in rural areas per head of population compared to cities, and less than one fifth of specialists. In that case, people staying in cities would reduce the strain on medical facilities in rural areas.

OtherJen

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Re: In Praise of Big, Fat Emergency Funds
« Reply #80 on: March 28, 2020, 03:05:33 PM »
But medical facilities in the city are likely even more overloaded.  Some people are literally fleeing for their lives.

Again, they need to do it responsibly and should be fined / attested if they don't.  But if population diffusion is done responsibly with self quarantine and social distancing measures, it could save many lives.
I donít know about your country, but Iíd be very surprised if rural areas have anything like the medical facilities of the cities. We have less than half the GPs in rural areas per head of population compared to cities, and less than one fifth of specialists. In that case, people staying in cities would reduce the strain on medical facilities in rural areas.

Pretty much. I spent large portions of every summer in Gaylord, MI, the county seat of mostly rural Otsego County, because my grandparents owned a lakefront cottage (as do many down-staters). The local hospital, which serves the entire county, has 80 total beds, and were reporting 14 cases of COVID-19 as of this afternoon. An influx of second home-owners who may be carriers from the larger southern cities could potentially crush their medical system.
« Last Edit: March 28, 2020, 03:07:16 PM by OtherJen »

Serendip

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Re: In Praise of Big, Fat Emergency Funds
« Reply #81 on: March 28, 2020, 03:19:50 PM »


I am not a second home owner but this seems very unfair to me.  "Stay in Manhattan and die already!"

Second home owners should be asked to self-quarantine and bring their own supplies.  But to say someone is not welcome in their own home?  Not cool.

It's not dire in the city most are coming from...this isn't a heart-less request but an attempt to keep the community safe. People are not self-quaranting when they arrive--they are going grocery shopping.

The small local municipalities are requesting people to stay in their primary residences until it's safe.

We don't have medical resources here and going back & forth between places (coming from places with higher infection rates) only spreads the virus more. Of course people can use their 2nd homes, but locals are put at increased risk if people are moving around constantly.
It's a request from the community.

The problem is that most people aren't bringing supplies and they are not committing to staying here...they are driving between places.
« Last Edit: March 28, 2020, 03:22:00 PM by Serendip »

Trudie

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Re: In Praise of Big, Fat Emergency Funds
« Reply #82 on: March 28, 2020, 10:23:34 PM »
We also have an embarrassingly large cash buffer ó enough to take care of about five years of expenses before we have to start drawing down retirement investments ó in a CD ladder.   But, itís really helped us sleep better during the current crisis.  Living on cash has given us latitude to do Roth conversions (and pay taxes out of cash).  In anticipation of a chaotic Trump presidency (concerns about getting into world conflicts, mostly), we purposely kept a buffer.

I also am super relieved to not be carrying a mortgage and to have developed my frugal living skills.  I just really feel like we can meet the challengeó financially, at least.

Weíre already FIREd, so I think a lot about how we would have managed in our working years.  It would have been so very stressful.  I feel lucky that staying home is not a challenge.

LWYRUP

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Re: In Praise of Big, Fat Emergency Funds
« Reply #83 on: March 29, 2020, 10:52:36 AM »
The small local municipalities are requesting people to stay in their primary residences until it's safe.

We don't have medical resources here and going back & forth between places (coming from places with higher infection rates) only spreads the virus more. Of course people can use their 2nd homes, but locals are put at increased risk if people are moving around constantly.
It's a request from the community.

The problem is that most people aren't bringing supplies and they are not committing to staying here...they are driving between places.

What you are saying -- don't drive between multiple locations, bring your own supplies, self-quarantine, all seem reasonable to me.  That's different from "you are not welcome here."  Certainly these folks were welcome when they were stimulating the local economy and cutting fat checks for property taxes. 

I have no issues with local restrictions enforcing necessary safety measures.  I do have a problem with an elected official telling homeowners that are acting responsibly that they cannot use their lawful private property. 

RedwoodDreams

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Re: In Praise of Big, Fat Emergency Funds
« Reply #84 on: March 30, 2020, 04:27:42 PM »
I've had an embarrassingly big cash position. Over the holidays, my husband & I agreed to put some of it in the market, and the majority of it into our house. (Double face punches, but we are trying to reduce mortgage size, as we're in the bay area.) We still have a large cash position, but now of course I wish we'd kept the money that we put into the market & the house.

A colleague of mine has always cringed/joked about my cash hoarding strategy, and has recently reversed his position and mentioned repeatedly how he wished he'd adopted a similar approach.

Like you, I prioritize sleeping at night. Getting a mortgage under $1m helps me sleep at night, and having a huge cash flow to ride out challenges given the HCOL are both important to me.

@MaybeBabyMustache, one option to consider since you dumped a lot into your mortgage is asking for a recast. That can help free up the monthly cash flow, and if cash flow isn't a problem, you could always make the same payment that you made before.

jafr1284

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Re: In Praise of Big, Fat Emergency Funds
« Reply #85 on: March 30, 2020, 07:46:34 PM »
I am a freelance musician and have not really ever had a super stable job so i keep about a year in expenses (20k) in my vanguard money market sweep account. It was awesome living in mexico when my emergency fund was like 3 years of expenses, but now that I'm back in the states its back to a normal size. I always thought that investing everything like MMM does is a good idea, but that counts on not losing your job during a downturn which is what has happened to me. Interesting stuff!

MaybeBabyMustache

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Re: In Praise of Big, Fat Emergency Funds
« Reply #86 on: March 30, 2020, 08:42:21 PM »
Thanks @RedwoodDreams - we are in good shape & both have (reasonably) secure jobs. Anything is possible, but we'll likely keep the course for now. We have definitely tossed around a recast, and would try that if our situation changed at all.

oneday

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Re: In Praise of Big, Fat Emergency Funds
« Reply #87 on: March 31, 2020, 01:50:25 AM »
The Covid-19 situation has caused me to re-evaluate my position on cash emergency funds.

I had been following MMM's suggestion of ~$2000 cash in a checking account to handle monthly credit card payments/expenses and cash flow any large purchases, and keeping the rest of your money invested in taxable/retirement accounts. This position is contingent on maintaining cashflow. Now that my W2 job is at risk AND the market has simultaneously dropped, I don't want to pull from my accounts right now to cover living expenses if I lose my W2, so I'm saving additional cash for now. Going forward I'd like to maintain a 3-6 month cash balance as an emergency fund in a high-yield savings account to protect against this situation. My bare living expenses are low so this shouldn't be a huge amount of money to keep out of the market but will give peace of mind.

Exactly!  I've never wanted to take the risk that right at the time I *need* to pull from my investments, their value is down.  Therefore I maintain a year's salary in the bank.  Who's laughing now? j/k

Daisy

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Re: In Praise of Big, Fat Emergency Funds
« Reply #88 on: March 31, 2020, 01:15:27 PM »
After selling a condo last year and some other unexpected cash, I was sitting at about 30-40% of my net worth in cash for the past few years. I know we are not supposed to time the markets, but I just couldn't get over my fear factor and invest it all in VTI over the past few years. I did want to get to a full allocation to stocks. I've lived through the 2008 recession, the tech bubble bursting in the late 90s, and wasn't an investor then (too young!) but I remember the great crash of 1987.

So I was happy to put most of my cash into VTI earlier in March when the Dow went to 25,500 or so. I thought I was a genius. I did leave about two years worth of spending in cash since I am FIREd and need to live off of my savings and investments.

I also believe in having some "buffer" in my budget/expenses in order to handle emergency situations such as what we are in. For example, now that I have had to cancel all travel, I am living on much less. My two years of cash could probably stretch to 3 or 4 years if need be. I do sleep well at night...

If the world or markets haven't recovered by then, I will probably have bigger things to worry about than the value of VTI.

LWYRUP

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Re: In Praise of Big, Fat Emergency Funds
« Reply #89 on: March 31, 2020, 01:20:37 PM »
The Covid-19 situation has caused me to re-evaluate my position on cash emergency funds.

I had been following MMM's suggestion of ~$2000 cash in a checking account to handle monthly credit card payments/expenses and cash flow any large purchases, and keeping the rest of your money invested in taxable/retirement accounts. This position is contingent on maintaining cashflow. Now that my W2 job is at risk AND the market has simultaneously dropped, I don't want to pull from my accounts right now to cover living expenses if I lose my W2, so I'm saving additional cash for now. Going forward I'd like to maintain a 3-6 month cash balance as an emergency fund in a high-yield savings account to protect against this situation. My bare living expenses are low so this shouldn't be a huge amount of money to keep out of the market but will give peace of mind.

Exactly!  I've never wanted to take the risk that right at the time I *need* to pull from my investments, their value is down.  Therefore I maintain a year's salary in the bank.  Who's laughing now? j/k

Yep.  I do the same.  And one of the big reasons I hold bonds is that they are basically level 2 of the emergency fund.  In a pinch, I can sell bonds in retirement accounts and buy stocks, and then sell taxable stocks for cash.  That gives me two years of no income before I would need to think about selling stocks.  I can work remotely or freelance so the reality is no income is  very unlikely, so even if freelancing goes poorly we are probably out 3-4 years.  By that time I can sell my house and use the cash to buy somewhere cheaper in cash. 

MMM can be overly optimistic about things.  I am a planner.  It's just how I'm wired.  I have ran through best case scenarios (uber rich real estate investor) and worst case scenarios (depression level crash, disbarred and disgraced in my professional network (due to a hypothetical false allegation, etc.)) and have worked through in my head how I'd respond to various scenarios.  I've got various backup and contingency plans.  You never know. 
« Last Edit: March 31, 2020, 01:22:51 PM by LWYRUP »

former player

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Re: In Praise of Big, Fat Emergency Funds
« Reply #90 on: March 31, 2020, 01:39:11 PM »
The small local municipalities are requesting people to stay in their primary residences until it's safe.

We don't have medical resources here and going back & forth between places (coming from places with higher infection rates) only spreads the virus more. Of course people can use their 2nd homes, but locals are put at increased risk if people are moving around constantly.
It's a request from the community.

The problem is that most people aren't bringing supplies and they are not committing to staying here...they are driving between places.

What you are saying -- don't drive between multiple locations, bring your own supplies, self-quarantine, all seem reasonable to me.  That's different from "you are not welcome here."  Certainly these folks were welcome when they were stimulating the local economy and cutting fat checks for property taxes. 

I have no issues with local restrictions enforcing necessary safety measures.  I do have a problem with an elected official telling homeowners that are acting responsibly that they cannot use their lawful private property.
The problem I have is that calling these people "homeowners" isn't quite right, because these holiday places are not their "homes".  Call them "property owners" or "land owners" instead and the balance of interest changes.  What landowners can do with their property is limited in all sorts of entirely lawful ways.  A temporary limitation for the safety of the surrounding community could be entirely reasonable depending on the circumstances.  And absent large scale civil unrest I don't see how someone sheltering in place in a home in the city is at any more risk than someone doing the same in a rural area, provided they follow the necessary precautions in both places.

ETA:  I am probably biased.  19 out of 27 COVID-19 cases in my area last week were tourists and second home owners, imposed on a health care system that is already under resourced for an expanding population.
« Last Edit: March 31, 2020, 02:25:47 PM by former player »

Glenstache

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Re: In Praise of Big, Fat Emergency Funds
« Reply #91 on: March 31, 2020, 01:46:43 PM »
Good thread @Dicey .

I kept a larger EF than recommended by MMM as well. My strategy included maintaining a strict minimum amount in combined savings and checking, which also covered routine unexpected expenses (repairs, etc). I also had an amount that I felt I needed as a total sum as an emergency fund, which  included the cash position and a separate amount kept in a taxable account. For the taxable amount, I only considered 70% of it accessible to build in an assumption of a 30% market drop. This strategy has worked well and greatly reduced my financial stress levels with the current state of the world. I feel a lot of gratitude for being able to be in a comfortable position in the current crises. My position is in part due to good decisions over time, but also (largely) due to having been in fortunate circumstance over most of my life. Many are not so lucky and have not had the option to get into a position where they can make decisions about how to structure a sizable EF.

LiveLean

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Re: In Praise of Big, Fat Emergency Funds
« Reply #92 on: March 31, 2020, 03:41:18 PM »
Old Pete doesn't like EFs. He's going the self-insurance route for health insurance. And he's divorced. Which means he's lost half his stash to divorce and is risking the other half on a medical emergency. Not having health insurance with a kid is just...wow.

I don't spend much time on this site anymore, but whatever admiration I once had for the guy is gone.

Luz

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Re: In Praise of Big, Fat Emergency Funds
« Reply #93 on: March 31, 2020, 04:01:13 PM »
We had 3 months in our EF. Realized that we could really tighten our belts and stretched it to 6 months. I think I'll do 6 months full/12 months lean from now on. And try to keep my regular living expenses pretty flexible so I can slash them when needed.

ender

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Re: In Praise of Big, Fat Emergency Funds
« Reply #94 on: March 31, 2020, 05:57:14 PM »
Keep in mind if you have tons of money invested, it's easy to not have an emergency fund.

If you have a tight FIRE budget/net worth, that is less ideal.

Dicey

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Re: In Praise of Big, Fat Emergency Funds
« Reply #95 on: March 31, 2020, 07:31:26 PM »
Keep in mind if you have tons of money invested, it's easy to not have an emergency fund.

If you have a tight FIRE budget/net worth, that is less ideal.
@ender, you're one of the people I respect, but I can't make out what you're saying here. Care to elaborate a bit more?

OtherJen

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Re: In Praise of Big, Fat Emergency Funds
« Reply #96 on: March 31, 2020, 07:54:13 PM »
I would love to see Pete's numbers through the Great Recession. Apparently, he and his ex-wife retired in 2005 with a stash of less than $1 million. He didn't start his blog until April 2011.  Not keeping a cash emergency fund larger than $2000 must have worked just fine for him, with no worries (I am skeptical and we have 6x that much in cash). I'd like to hear about those missing years during the Great Recession. I remember them as being scary, as my husband lost his job in 2010 and our house's value dropped by 80% of the purchase price.
« Last Edit: April 01, 2020, 06:49:26 PM by OtherJen »

APowers

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Re: In Praise of Big, Fat Emergency Funds
« Reply #97 on: March 31, 2020, 08:44:48 PM »
Minimal cash here and still very comfortable with that. Also very comfortable having a mortgage.

My entire life has been a series of serious emergencies, I've built very robust systems to manage them.
I suspect those "very robust systems" would count as an EF. I totally count my well-stocked pantries as part of my emergency preparedness. If I have a lot of staples on hand, when the SHTF, I won't have to spend actual cash to keep my family fed.

And, in a very good way, it doesn't surprise me a bit that your emergency management system is both robust and somewhat unconventional. We have all learned a lot from your wise ways, malkynn.

You've brought up a very good point. There are more components to a solid EF than just cash.

Mind sharing them for the more ignorant among us (including me)?

In our case, it's a combo of keeping fixed costs low and having multiple professional streams available to us, so if one area of expertise takes a hit, we can always pivot to another. We also diversify our work across government, private sector, non profit, and academia.

Also, we don't have cash, but we do have multiple lines of credit between us at mortgage-level low rates, not HELOCs. The chances of all of these being shut down at the same time are extremely slim.

For that to happen at the same time as losing all of our possible streams of income...well, the level of upheaval would have to be so devastating that I would be far more concerned about civil violence than about paying my mortgage.

I just saw my therapist yesterday and she laughed and said "of all of my patients, you're the only one that I'm not at all worried about right now, you actually built your entire life for this kind of thing"

Honestly, for us, this current situation barely rises to the level of mild inconvenience.

ETA: to clarify and for full disclosure, this type of robustness comes at an enormous cost. If we were willing to be leveraged and double down on our highest income streams, we would be much, much wealthier people, but with much more risk.

Low fixed costs? Check.
Ability to cut back even further? Check.
Multiple income streams? Check.
Diversified skillsets? Check.
Pantry full of food? Check.
Multiple lines of credit available? Check.
PLUS cash in the bank. Check, check, and check.


But this line: Honestly, for us, this current situation barely rises to the level of mild inconvenience. *That* is the truth. To someone who may look at me from an outside perspective, I look pretty close to the poverty line. But in reality, even being locked in my house for 3 months with only being allowed to grocery shop won't be anything worse than a "fun experience". I will have work waiting for me (desperate for me, even) when this blows over, I will STILL have money in the bank, and I will have spent a ton of quality time with my family.

DadJokes

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Re: In Praise of Big, Fat Emergency Funds
« Reply #98 on: April 01, 2020, 01:02:31 PM »
I would love to see Pete's numbers through the Great Recession. Apparently, he and his ex-wife retired in 2005 with a stash of less than $1 million. He didn't start his blog until April 2011.  Not keeping a cash emergency fund of $2000 must have worked just fine for him, with no worries (I am skeptical and we have 6x that much in cash). I'd like to hear about those missing years during the Great Recession. I remember them as being scary, as my husband lost his job in 2010 and our house's value dropped by 80% of the purchase price.

He has said that he isn't much for keeping records.

Pete definitely isn't the best example to follow for anyone pursuing FIRE. He was just one of the best communicators.

use2betrix

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Re: In Praise of Big, Fat Emergency Funds
« Reply #99 on: April 01, 2020, 06:58:09 PM »
I work as a contractor in energy/oil & gas, so my employment is always volatile. Because of that, since finding MMM and being able to save more, Iíve been fortunate to keep a good sized emergency fund. Weíve taken two, 4 month sabbaticals in the last 4 years, thanks to being prepared.

Since our investments are about 95% stocks (almost all VTSAX and also a target retirement fund) we also kept our emergency fund large for the padding and also to replace our lack of investment in bonds.

That being said, when this downturn hit a couple months ago, we were at $120k in our emergency fund. Then right before things got worse we traded in our 21 year old Camry for a new Corolla. Then we dumped a bunch of our emergency fund into the market (a bit prematurely, but oh well).

Now weíre down to $70k in our emergency fund. This is fine, it can float us around 15 months or so if needed. Weíre still investing heavily while Iím working and while the markets low, but also padding up our emergency fund back up a bit, just in case. Iím ďsupposedĒ to be employed for about 15 months, but much of that is a new project that does seem a little rocky after everything that has happened lately.

If we can make the next 15 months, we can be on coast FI and I can leave my industry, find a job Iím passionate enough to make ends meet, then be FIREíd by my early 40ís. If I can keep working in my industry after this, great, but Iíll be good regardless.