Author Topic: Emergency Fund - help me convince my wife we don't need one  (Read 8539 times)

NICE!

  • Pencil Stache
  • ****
  • Posts: 687
  • Location: Africa
Emergency Fund - help me convince my wife we don't need one
« on: January 19, 2015, 01:13:40 AM »
Fellow MMMers - I'm 100% on board with MMM's assertion that an emergency fund is not necessary for people with their financial act together. We still maintain one (just over $1k) in my family, but I believe it is entirely unnecessary and would love to make those dollars our employees. Furthemore, we have $2k in a car replacement fund and $2k in a travel fund (and we add to both of those monthly).

I'm in the military, she does work that pays very little (let's call it volunteering on steroids), and our net worth is nearing 250 kilodollars. Expenses are less than half of income, while our savings rate is in the 40% range and our giving/charity rate is about 10%. I told her that if we find out that the military is cutting me (distinct possibility in this budgetary environment), then we'll have at least 6 months to buckle down and save (we could probably kick the savings rate up to 65% while still giving to charity), not to mention the fact that I'll be given separation pay.

Can anyone help me with some talking points to convince her? I think her barriers are based upon different money views - she says she doesn't have the same trust in the market as I do, but I say that even if the markets crash hard  (50%+) we'd still be able to extract living expenses for 3-5 years (assuming no additional income). Also, when she was young her mother struggled to provide for their family for a good decade before she solidified their financial standing. I think that's probably a big contributor, too.
« Last Edit: January 19, 2015, 01:40:12 AM by NICE! »

NICE!

  • Pencil Stache
  • ****
  • Posts: 687
  • Location: Africa
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #1 on: January 19, 2015, 01:39:29 AM »
Honestly 1k of liquid backup money is hardly killing your passive returns. If it gives your SO peace of mind. Just let it go.

Well, that's not all of it. We have over $2k in savings for a car replacement and $2k in a travel fund. I feel that those can be considered part of the e-fund. Do you? Would you feel any differently if we said $5k instead of $1k?

I should've included that in the original post - will edit it.
« Last Edit: January 19, 2015, 01:44:44 AM by NICE! »

1967mama

  • Handlebar Stache
  • *****
  • Posts: 2159
  • Age: 52
  • Location: Canada
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #2 on: January 19, 2015, 01:47:38 AM »
Personally, I wouldn't consider a car replacement fund and a travel fund to be part of my emergency fund. I know there are lots of anti-Dave Ramsey folks in these parts, but I do like what he has to say about wives and emergency funds :-)

ETA link to Dave Ramsey article (specific reference in section entitled "Men and Women are Different"
http://www.daveramsey.com/article/the%2Dtruth%2Dabout%2Dmoney%2Dand%2Drelationships/lifeandmoney%5Frelationshipsandmoney/
« Last Edit: January 19, 2015, 02:01:50 AM by 1967mama »

coffeehound

  • 5 O'Clock Shadow
  • *
  • Posts: 88
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #3 on: January 19, 2015, 01:48:44 AM »
Honestly 1k of liquid backup money is hardly killing your passive returns. If it gives your SO peace of mind. Just let it go.

Well, that's not all of it. We have over $2k in savings for a car replacement and $2k in a travel fund. I feel that those can be considered part of the e-fund. Do you?

I should've included that in the original post - will edit it.

Nope.  It's not the the same as the car fund or the travel fund, because  those are for travel or a car.  The 'Emergency Fund' is specifically labeled for an emergency.  It's use is clear:  it provides your wife, who is working a job that's underpaid, a sense of security.

I'm with Flix.  Let it go.  It's $1K that'll give your wife some extra peace of mind.  It won't kill your passive income in the long or short term.

NICE!

  • Pencil Stache
  • ****
  • Posts: 687
  • Location: Africa
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #4 on: January 19, 2015, 03:05:31 AM »
Ok, you guys/gals (and my wife) are right - $1k is pretty insignficant compared to our NW. It buys her some piece of mind.

Siobhan

  • Stubble
  • **
  • Posts: 113
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #5 on: January 19, 2015, 08:38:39 AM »
We keep 20k in ER funds and at any given time up to 6k in travel.  It's under 2% of our portfolio and has come in handy more times then I can count, most recently when we had a major roof leak in our rental house, and the property manager didn't tell us for two months (and yes we are going after the management firm currently).  It wasn't covered by our insurance since it wasn't reported right away as "sudden and catastrophic loss" and cost us 6k out of pocket to repair the roof and interior damage.  We keep a "rental house" repair fund but it wasn't that big so we had to take a few grand out of the ER fund.

It's also come in handy for unexpected overseas PCS expenses, footing out the cost of a PCS that took us, I kid you not, 6 months to receive reimbursement due to a finance snafu, and a very expensive last minute trip across country for the family to say goodbye to a dying relative.  In 08-09 it allowed us to buy a larger position in the bottom of the market as well.

If nothing else, it buys piece of mind but the 1% interest rate does kill me.  We were able to move 10 of it to NFCU CDs when they offered the 5% rate back in September so that made me feel a little better.

Lia-Aimee

  • Stubble
  • **
  • Posts: 117
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #6 on: January 19, 2015, 10:44:13 AM »
How much of your investments are in fixed-income that are liquid? I don't see why you need a cash emergency fund if you have, say, t-bills or bond funds in non-retirement accounts.  If a big emergency comes up,  worst case is that you sell equities at a loss.   

That said, I think having a small amount of your portfolio in cash (maybe 3%-5%) is a good idea should an unplanned buying opportunity arise. 

Villanelle

  • Magnum Stache
  • ******
  • Posts: 3112
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #7 on: January 19, 2015, 10:50:59 AM »
I think a small (and I'd call $1k small) emergency fund to be smart, or at the very least not wasteful.  I think you are wise to let her have this. 


I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 8010
  • Location: United States
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #8 on: January 19, 2015, 11:02:33 AM »
My entire savings account is my emergency fund.  I believe some of my money should be liquid though, and won't tie it up into investments that may take more than a trip to the ATM to get it.

Zikoris

  • Magnum Stache
  • ******
  • Posts: 3538
  • Age: 33
  • Location: Vancouver, BC
  • Vancouverstachian
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #9 on: January 19, 2015, 11:15:28 AM »
Like everyone else, I think you should just let it be.

I really just wanted to comment to say that "kilodollars" is an awesome word to use and I haven't heard it before.

aj_yooper

  • Handlebar Stache
  • *****
  • Posts: 1091
  • Age: 8
  • Location: Chicagoland
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #10 on: January 19, 2015, 11:18:09 AM »
Definitely do not have an emergency fund, if you never ever have an emergency.  We do. 

You may have an income emergency in 6 months so I would start saving for that now.  I think you have a case of mañana thinking.

RyanAtTanagra

  • Handlebar Stache
  • *****
  • Posts: 1155
  • Location: SF Bay, CA
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #11 on: January 19, 2015, 11:40:02 AM »
I agree that the two separate savings accounts of $2k each would be enough for me to act as an emergency fund if needed.  My house savings doubles as my emergency fund.  But if an extra $1k in savings helps someone sleep better at night, that is money well.... saved

Yankuba

  • Handlebar Stache
  • *****
  • Posts: 1357
  • Location: Long Island, NY
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #12 on: January 19, 2015, 01:51:55 PM »
I think a small (and I'd call $1k small) emergency fund to be smart, or at the very least not wasteful.  I think you are wise to let her have this.

Agreed

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #13 on: January 20, 2015, 05:12:14 PM »
Could be semantics.

We don't have an emergency fund.

But we typically keep 5% in cash.

begood

  • Pencil Stache
  • ****
  • Posts: 971
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #14 on: January 20, 2015, 07:36:34 PM »
Could be semantics.

We don't have an emergency fund.

But we typically keep 5% in cash.

+1

JCfire

  • Stubble
  • **
  • Posts: 145
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #15 on: January 21, 2015, 06:48:01 AM »
Fellow MMMers - I'm 100% on board with MMM's assertion that an emergency fund is not necessary for people with their financial act together. We still maintain one (just over $1k) in my family, but I believe it is entirely unnecessary and would love to make those dollars our employees. Furthemore, we have $2k in a car replacement fund and $2k in a travel fund (and we add to both of those monthly).

I'm in the military, she does work that pays very little (let's call it volunteering on steroids), and our net worth is nearing 250 kilodollars. Expenses are less than half of income, while our savings rate is in the 40% range and our giving/charity rate is about 10%. I told her that if we find out that the military is cutting me (distinct possibility in this budgetary environment), then we'll have at least 6 months to buckle down and save (we could probably kick the savings rate up to 65% while still giving to charity), not to mention the fact that I'll be given separation pay.

Can anyone help me with some talking points to convince her? I think her barriers are based upon different money views - she says she doesn't have the same trust in the market as I do, but I say that even if the markets crash hard  (50%+) we'd still be able to extract living expenses for 3-5 years (assuming no additional income). Also, when she was young her mother struggled to provide for their family for a good decade before she solidified their financial standing. I think that's probably a big contributor, too.

Think about it as paying (7%*$1000/365) approximately $0.20 per day to keep your wife on board with the rest of your "crazy" MMM tenancies.  That's a steal of a deal.

TrulyStashin

  • Handlebar Stache
  • *****
  • Posts: 1030
  • Location: Mid-Sized Southern City
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #16 on: January 21, 2015, 07:16:18 AM »
Having peace of mind about money is the whole point, isn't it?

Though not directly on point, MMM articulates the philosophy here as he tells the story of why losing $12,000 didn't matter:  http://www.mrmoneymustache.com/2013/11/11/get-rich-with-the-position-of-strength/

MrsPete

  • Magnum Stache
  • ******
  • Posts: 3519
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #17 on: January 21, 2015, 06:49:42 PM »
Nope, I can't help you with this one because I disagree.  I mean, over the years we've needed money from our emergency fund for a number of reasons:  Replacement of the roof, replacement of the heat pump, repairs to the car, a night in the hospital (high deductible health plan).  As someone else said, this amount isn't going to be a make-or-break in terms of interest, and it's good to know that you have a moderate amount of cash at the ready. 


Bob W

  • Magnum Stache
  • ******
  • Posts: 2947
  • Age: 60
  • Location: Missouri
  • Live on minimum wage, earn on maximum
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #18 on: January 21, 2015, 07:09:29 PM »
Some people carry 1k in their pocket.   Lighten up.

gergg

  • 5 O'Clock Shadow
  • *
  • Posts: 23
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #19 on: January 21, 2015, 09:46:32 PM »
In addition to various rainy day funds (I budget with YNAB), I keep $1k in cash for little emergencies and 3 months of expenses + 30% cushion in a 50/50 stock/bond portfolio in betterment for big emergencies.  Here's a blog post about their strategy on keeping it invested: https://www.betterment.com/resources/personal-finance/safety-net-funds-why-traditional-advice-is-wrong/.

Sdsailing

  • 5 O'Clock Shadow
  • *
  • Posts: 92
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #20 on: January 21, 2015, 09:59:59 PM »

$1000 is most definitely not an emergency fund. I don't really understand how anyone could maintain a checking account balance of less than that.  Almost certainly your emergency fund should be larger, not smaller.

Hayden Frys Mustache

  • 5 O'Clock Shadow
  • *
  • Posts: 39
  • Age: 32
  • Location: Iowa
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #21 on: January 21, 2015, 11:00:54 PM »
You can also remove the basis from your Roth if you're in a tight spot - which is basically my plan for emergency purposes

innerscorecard

  • Pencil Stache
  • ****
  • Posts: 590
    • Inner Scorecard - Where financial independence, value investing and life meet
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #22 on: January 21, 2015, 11:06:03 PM »
Classic bull market thinking. You should listen to your wife more.

wtjbatman

  • Handlebar Stache
  • *****
  • Posts: 1313
  • Age: 36
  • Location: Missouri
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #23 on: January 22, 2015, 05:58:28 AM »
I like that the OP was convinced by us/his wife three days ago and now agrees with her, but people keep posting and telling him he should just let her have the EF. I think he got the message.

Of course that didn't stop me from posting either :D

NICE!

  • Pencil Stache
  • ****
  • Posts: 687
  • Location: Africa
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #24 on: January 22, 2015, 07:55:53 AM »
Classic bull market thinking. You should listen to your wife more.

Oh hi, you clearly know me very well. This has nothing to do with market timing. Thanks for your irrelevant input.

wtjbatman - well said, although I don't mind the advice. I do mind snarky/judgemental comments like the one above or others telling me to chill out. As if I were freaking out...We're talking about $1k here.

cazaubon

  • 5 O'Clock Shadow
  • *
  • Posts: 25
  • Location: Montréal, Canada
Re: Emergency Fund - help me convince my wife we don't need one
« Reply #25 on: January 22, 2015, 11:08:13 AM »
We keep $1k inside the house in case of a natural disaster (power outage, flood, ice storm, earthquake).  I also keep about $25,000 in the bank for a car, travel, veterinary or house repair crisis.  It's a very small percentage of our assets so I don't worry about it not earning more than the 1% the bank pays.