Am I stupid for not having an emergency fund?

[nereo]

I do have an emergency fund.  It is woefully shy of 6months living expenses, but it is there.  Honestly, I don't really need it but it just makes me feel secure, and I have it in a 3% interest bearing checking account so I don't feel too guilty about keeping it there.

I think the "canned" advice comes from the fact that average americans live paycheck to paycheck and their retirement savings are inadequate to begin with.  So using their retirement as an emergency has especially bad consequences when the equation is already tipped against them.

There are many ways to have an emergency fund besides money in a mattress or a savings account.  having a HELOC open, ROTH contributions etc.  You could always use a credit card as your "emergency fund"  then you have 25 days to move some money over from your ROTH or HELOC or taxable brokerage account before you start paying interest on the credit card purchase (plus...you might get some credit card rewards doing it this way).

The only thing I could think of where you might need actual cash in a hurry is like a bail-bonds situation.   Might not be for you, personally.  maybe it's friday night and banks are closed and your brother gets a DUI or something....

The other thing with this is people who are in perpetual small emergencies that really shouldn't be emergencies every month - e.g. oh, I didn't know my car would need new tires.  Emergency!  Oh, ancient water heater busted.  Emergency!  Johnny needs his sports fees paid.  Emergency!  And suddenly, voila, no more retirement savings.  This is the type of stuff that should be built into the budget, or just get cash flowed by reducing investments for a month by anyone with a decent savings rate and ability to plan ahead.

Exactly.  It's also why I advocate calculating your savings rate by looking at the last year (or several years) of income / savings.  Too often someone will say they are 'saving' 10-30% of their paycheck each month, but then occasional expenses wipe it all out.  Guess what?  your savings rate is really 0%.

[Merrie]

I wonder if I should have more of an EF. We have about 3k earmarked as an EF, all our retirement is in tax-advantaged vehicles that I'd rather not pull from, we don't have much home equity, and currently about 9k ahead in YNAB but I'll probably be rolling that into a new furnace in not too long. But I've been aggressively paying down student loans instead of aggressively saving. Student loans are not springy debt. We don't have a ton of extra money each month and it took a while to build the EF we do have. I am the sole breadwinner. If we had an emergency I'd put our student loans in forbearance, but even so I expect about 3.5-4k expenses per month, so I have not even one month in an EF. I feel like my job is pretty stable. This preys on my mind, but so do the student loans. I wonder if I should save the 9k in an EF instead and restart the furnace fund.

[horsepoor]

I wonder if I should have more of an EF. We have about 3k earmarked as an EF, all our retirement is in tax-advantaged vehicles that I'd rather not pull from, we don't have much home equity, and currently about 9k ahead in YNAB but I'll probably be rolling that into a new furnace in not too long. But I've been aggressively paying down student loans instead of aggressively saving. Student loans are not springy debt. We don't have a ton of extra money each month and it took a while to build the EF we do have. I am the sole breadwinner. If we had an emergency I'd put our student loans in forbearance, but even so I expect about 3.5-4k expenses per month, so I have not even one month in an EF. I feel like my job is pretty stable. This preys on my mind, but so do the student loans. I wonder if I should save the 9k in an EF instead and restart the furnace fund.

For whatever it's worth, when we had a new HVAC system put in our house a) we were able to get it financed for 18 months at 0% interest, and b) for a clownish 3,000 sf house, it was $6400 for a paired Trane 95% efficient gas furnace and I think 14 SEER A/C unit.  I think quotes ranged from $4500 to almost $10K, so if you haven't already, get several bids before assuming you need to spend $9K.  Also, I think we got a better deal by having the work don in April, which is sort of slow season post heat/pre cooling for those guys.

[thd7t]

I wonder if I should have more of an EF. We have about 3k earmarked as an EF, all our retirement is in tax-advantaged vehicles that I'd rather not pull from, we don't have much home equity, and currently about 9k ahead in YNAB but I'll probably be rolling that into a new furnace in not too long. But I've been aggressively paying down student loans instead of aggressively saving. Student loans are not springy debt. We don't have a ton of extra money each month and it took a while to build the EF we do have. I am the sole breadwinner. If we had an emergency I'd put our student loans in forbearance, but even so I expect about 3.5-4k expenses per month, so I have not even one month in an EF. I feel like my job is pretty stable. This preys on my mind, but so do the student loans. I wonder if I should save the 9k in an EF instead and restart the furnace fund.

You are a person who will benefit from a real EF.  If you lost your job or had something go wrong at the same time that you need your furnace, you'd be squeezed more than most people, here.

[dess1313]

I wonder if I should have more of an EF. We have about 3k earmarked as an EF, all our retirement is in tax-advantaged vehicles that I'd rather not pull from, we don't have much home equity, and currently about 9k ahead in YNAB but I'll probably be rolling that into a new furnace in not too long. But I've been aggressively paying down student loans instead of aggressively saving. Student loans are not springy debt. We don't have a ton of extra money each month and it took a while to build the EF we do have. I am the sole breadwinner. If we had an emergency I'd put our student loans in forbearance, but even so I expect about 3.5-4k expenses per month, so I have not even one month in an EF. I feel like my job is pretty stable. This preys on my mind, but so do the student loans. I wonder if I should save the 9k in an EF instead and restart the furnace fund.

Its one of those things if you wait too long and try to do it in a rush it will not be easy, and will be way more expensive.  Do it in the off season and get lots of quotes.  ask lots of questions. lots here tried to BS me about stuff.  In the end i got mine for about 4.5k for a good sized house and a variable valve and all that jazz.  was worth it since i spend a lot less in heating now. How much do you have in the fund already or is that the 9k in YNAB?  You should have plenty to do a furnace, and yes you are the perfect example of someone who needs a emergency fund.  Depending on what your heating costs are, it may be smarter to do it sooner so your bills this winter are smaller.  Have any neighbors who have done it who can say what they've saved? 

Can you get a free energy audit and is there any grants for doing an upgrade?  there's loans here for minimal % for people to upgrade their furnace.  there was also a bunch of eco grants about 5 years ago when i did mine.  That could save you a few $.  The energy audits show you where your best bang for buck is usually.  And the furnace is the main one but i had drafty sills that were really bad i never knew about.

[JustGettingStarted1980]

I wonder if I should have more of an EF. We have about 3k earmarked as an EF, all our retirement is in tax-advantaged vehicles that I'd rather not pull from, we don't have much home equity, and currently about 9k ahead in YNAB but I'll probably be rolling that into a new furnace in not too long. But I've been aggressively paying down student loans instead of aggressively saving. Student loans are not springy debt. We don't have a ton of extra money each month and it took a while to build the EF we do have. I am the sole breadwinner. If we had an emergency I'd put our student loans in forbearance, but even so I expect about 3.5-4k expenses per month, so I have not even one month in an EF. I feel like my job is pretty stable. This preys on my mind, but so do the student loans. I wonder if I should save the 9k in an EF instead and restart the furnace fund.

Have you thought about getting appliance insurance? My house had two furnaces, both in their last legs (15-20 year expected lifespans, and both about 18 years old), as well as the other typical appliances when I bought it. To protect myself, I purchased appliance insurance with American Home Shield for $500/year or so. First furnace blew in about 6 months, cost me 1K to replace it with deductible instead of 6K.

Of course, if I had brand new everything, this would not be worthwhile...

[missj]

I wonder if I should have more of an EF. We have about 3k earmarked as an EF, all our retirement is in tax-advantaged vehicles that I'd rather not pull from, we don't have much home equity, and currently about 9k ahead in YNAB but I'll probably be rolling that into a new furnace in not too long. But I've been aggressively paying down student loans instead of aggressively saving. Student loans are not springy debt. We don't have a ton of extra money each month and it took a while to build the EF we do have. I am the sole breadwinner. If we had an emergency I'd put our student loans in forbearance, but even so I expect about 3.5-4k expenses per month, so I have not even one month in an EF. I feel like my job is pretty stable. This preys on my mind, but so do the student loans. I wonder if I should save the 9k in an EF instead and restart the furnace fund.

I don't know...it kinda sounds to me like you actually DO have a pretty decent emergency plan.  I mean, if you had zero EF I would say you should get one....but tripling it up to 9k at the cost of not paying down your student loans which are actively accruing interest?

So, if you lost your job you would still have 3,500-4,000 expenses per month.  But presumably at least some of those expenses could go on a credit card (groceries, gas maybe some utilities?)  SO, it sounds to me like you have about a 1 month EF.   You have a self described "stable" job.  How long do you think it would take you to replace it?  Would you be earning $0 per week while job hunting? 

I don't know if you're from the US, but I am and so I would qualify for unemployment while I job hunted which would replace probably 30% of my income.  And i have the type of job where I should be able to get a job within a couple of weeks...even if it's not the best job.  I could still "job hunt" on the side for better opportunities while taking a crappy job in the mean time.

And if all that turned out badly and I still didn't have a job after depleting my emergency fund, then I would tap my ROTH contributions with no tax penalty.

If it makes you feel better or more secure to have an EF....then have it.  I do.  I have a 3 month EF.   I don't think I really need all that but for me....the peace of mind is worth forgoing the interest I would earn on that particular amount.  Plus....my husband's business is like a rollercoaster sometimes he doesn't get paid for 6 months....then he gets paid like $30,000.  So the EF serves to get us through the lean times while preserving our standard of living.  So for me....it is worth it.  But I have all my debt paid off long ago except mortgage at 3.625%

Maybe you should try a split approach?  If you are currently allotting $600 a month towards student loans, maybe put $300 towards them and $300 towards EF/Furnace until you get it up to whatever amount you think feels comfortable.  Then switch back to all student loans when you feel secure.

[aj_yooper]

I wonder if I should have more of an EF. We have about 3k earmarked as an EF, all our retirement is in tax-advantaged vehicles that I'd rather not pull from, we don't have much home equity, and currently about 9k ahead in YNAB but I'll probably be rolling that into a new furnace in not too long. But I've been aggressively paying down student loans instead of aggressively saving. Student loans are not springy debt. We don't have a ton of extra money each month and it took a while to build the EF we do have. I am the sole breadwinner. If we had an emergency I'd put our student loans in forbearance, but even so I expect about 3.5-4k expenses per month, so I have not even one month in an EF. I feel like my job is pretty stable. This preys on my mind, but so do the student loans. I wonder if I should save the 9k in an EF instead and restart the furnace fund.

Everyone is different, but, in your situation, this is what I would do:
 
1.  Put your furnace fund money ($9k) into an emergency fund.  This will be almost 3 months of expenses which is not too much for a sole breadwinner with a mortgage.  For me, I would keep building the EF to closer to 6-12 months so your family and house are protected.
2.  Start saving money for a new furnace by paying lower amounts on your student loans. It sounds like you know you will need a new furnace and the SL won't go away, if you take a little longer.  I have used the 0% loans sometimes available to replace stuff, but be aware of the very hefty interest charges if you do not pay before the grace period.  If the furnace goes and your repair fund is not done, use your emergency fund. 

I also use YNAB and appreciate how it helps keep the $s focused on their jobs. Without YNAB it is easy to have the $ have multiple jobs-spending it twice or so. 
 

[Mrs. Crackin' the Whip]

We don't keep a large emergency fund either and we're okay with that.  Gasp!   But here's the thing...you said the magic words, "We live off half our income."  We do too.  When you have that savings power you know that within the next month or two you could easily take care of any emergencies that could happen.  In the meantime I would put it on the credit card.  (Note I do not typically advocate putting charges on your credit card that you don't have the cash in the bank to cover.)  But I would if I had to. The funny thing is that has never actually happened either.  Or if one of us lost our jobs it would just mean no additional savings and our expenses would immediately drop (i.e. daycare)

We typically have a few thousand in the bank at all times but I recently drained our savings down to $500 in paying off some student loans.  Mr. Crackin' commented about our lack of an emergency fund and we had this exact same conversation.  I told him not to get arrested in the next couple of weeks. :) After all, that's really the only thing I can think of that we would absolutely have to have cash right then!  And bond money is NOT an approved expense in the Crackin' household! 

[Merrie]

Thanks for your comments on my post, horsepoor, thd7t, dess1313, JustGettingStarted1980, missj, and ajyooper. It's helped me to think through our situation better. I talked to my husband and he agrees with me that a fatter EF would not go amiss. So we will probably put some of the money towards the furnace and save some of it and then work on feeding the EF until it gets probably closer to 10k. A few k one way or another honestly won't make much difference to the student loans (total balance somewhere around $170k, ugh) and it would make me feel a lot better about my employment situation or something huge blowing a gasket.

The current plan is to start shopping around for a furnace replacement in September. It is hard to wait for this, I want to move on it now, but it's still prime cooling season. I appreciate hearing that there are a range of prices and we will definitely get a range of quotes.