Author Topic: Do I already HAVE an emergency fund?  (Read 4609 times)

Oldsmobile

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Do I already HAVE an emergency fund?
« on: December 14, 2013, 11:30:12 AM »

I keep reading all these inspirational stories here and there's apparently at least two ways to have an emergency fund:  access to credit cards, or cash & cash equivalents. 

Today, I updated the ol' net-worth spreadsheet, and I had a minor revelation.  Of the various places I have money, some of them are convertible to cash quickly:  Sharebuilder, Vanguard STAR, savings bonds, money market at the credit union, etc.  I had never earmarked any of them as an emergency fund before, but maybe I should think as such.

As of today, these total $11,266.80.  I could also pull money out of the Roth in  a dire emergency, I suppose, but that's not an attractive option, so I didn't count that.  I also have about $22,000 in available credit spread over four cards, and I never carry a balance.

I think I'm probably covered.  Employment is extremely stable (public safety in government) and I don't worry about losing my job.  What do you think of this?

Frankies Girl

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Re: Do I already HAVE an emergency fund?
« Reply #1 on: December 14, 2013, 11:49:05 AM »
Sounds about right.

My take on emergency funds has been that if you're in debt and have no access to credit easily, then you need to keep a certain amount (usually around 1-2K) in a savings or MM account to prevent you from adding to the existing debt. If you have no debt, you probably shift most cash coming in to other investments, so keeping a few thousand around is probably a given, and as long as you have a line of credit or are able to access funds within 2-3 days, you should be fine.

Like now, (since we have no debt) we tend to funnel around $2K a month into investments, so in any given month we could shift that amount over to any emergency that cropped up - so it is unlikely that we'd even need to tap savings itself.

Oldsmobile

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Re: Do I already HAVE an emergency fund?
« Reply #2 on: December 14, 2013, 07:39:12 PM »
Right.  No debt other than mortgage, which gets extra payments every month.  I'm in the debt-free-is-superior camp, so I pay extra. 

Every paycheck has money going into the Roth and various other places.   And I live pretty simply.  I have difficulty spending money, especially after it's been saved. 

Guardian

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Re: Do I already HAVE an emergency fund?
« Reply #3 on: December 22, 2013, 02:16:58 AM »
Just so you have another voice chiming in -- seems like you're doing very well for yourself.

My "safety net" as a college student, should I need something in the most dire situations, is my father. He's an engineer in the medical supplies industry and lives decently simply.

Otherwise, be healthy, make good choices, let go of fear and worry and self-doubt. All is well :)

aj_yooper

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Re: Do I already HAVE an emergency fund?
« Reply #4 on: December 22, 2013, 02:51:26 AM »
Having that EF is a good feeling!  Nice job.  Also, when you live below your income, you have a renewing slush fund each month.

chucklesmcgee

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Re: Do I already HAVE an emergency fund?
« Reply #5 on: December 22, 2013, 11:01:25 AM »

Of the various places I have money, some of them are convertible to cash quickly:  Sharebuilder, Vanguard STAR, savings bonds, money market at the credit union, etc.  I had never earmarked any of them as an emergency fund before, but maybe I should think as such.

What do you think of this?

I think it's totally fine to keep this as is. The need for a discrete emergency fund really dissipates once you begin accumulating a decent stache outside retirement funds. Only thing you need to consider is the possibility that your stocks could lose value when you need them. This possibility becomes much less of a concern as your stache grows bigger.

LauraG

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Re: Do I already HAVE an emergency fund?
« Reply #6 on: December 22, 2013, 12:46:13 PM »
My only concern with your new approach is that if your investments are volatile (stocks and to a lesser extent bonds) you may end up having to withdraw funds when they've lost value (for example, if you're laid off during a recession). An emergency fund that's in stable investments or a savings account reduces this risk. It's hard to tell from your description of your investments if this is a danger for you.

Personally, I keep about six months expenses in a savings account so that I lower my risk of needing to withdraw money from my investments. But I'm perhaps overly risk-adverse.

Jamesqf

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Re: Do I already HAVE an emergency fund?
« Reply #7 on: December 22, 2013, 02:19:19 PM »
There are so many zero-interest-for-a-year (or more) credit cards these days that I really don't bother keeping more than next month's mortgage & payments as an EF, and that only because self-employment means income doesn't come on guaranteed days,

plainjane

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Re: Do I already HAVE an emergency fund?
« Reply #8 on: December 22, 2013, 04:45:03 PM »
There are so many zero-interest-for-a-year (or more) credit cards these days that I really don't bother keeping more than next month's mortgage & payments as an EF, and that only because self-employment means income doesn't come on guaranteed days,

my fear is that if your emergency comes at the same times as the banks are tightening credit limits, then you have an issue. maybe you don't need much of one if you have well diversified income streams and few risks / responsibilities, but you should still be aware that your EF is dependent on others to a greater extent than it would be if you held more in cash.

Jamesqf

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Re: Do I already HAVE an emergency fund?
« Reply #9 on: December 22, 2013, 08:50:38 PM »
my fear is that if your emergency comes at the same times as the banks are tightening credit limits, then you have an issue.

Sure, you have to be ready to change strategies as circumstances change.  I don't think the banks can change the 0% rate in mid-term, though, so if I have an emergency that costs say $5K (which I just did), I can put it on a card and have until the end of 2014 to pay it off.

Now maybe next year the banks will stop sending me 0% card offers, and I'll need to re-evaluate my strategy, maybe go back to keeping a $5-10K EF in my checking/savings accounts.

Bruised_Pepper

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Re: Do I already HAVE an emergency fund?
« Reply #10 on: December 22, 2013, 09:16:55 PM »
I'll also point out that it's not just about having enough assets to offset the risk of those assets going down in value, it's about how well diversified you are.  If the market crashes and your stocks lose a lot of value, your bonds have probably gotten more valuable.  Sell those instead.  If you're well diversified, you can just sell whatever is "up".