Author Topic: emergency fund while FIRE  (Read 3048 times)

tag

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emergency fund while FIRE
« on: June 21, 2017, 06:53:54 AM »
Do you have one?

If so, how much?

Where do you keep it?

And how/when do you add to it?

Cossack

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Re: emergency fund while FIRE
« Reply #1 on: June 21, 2017, 07:22:05 AM »
Do you mean while you are trying to become FIRE'd or while you are FIRE'd? I think you should have access to cash for emergencies. We don't have an emergency fund specifically. But we have term deposits that roll over at different times, so if we have an emergency or see an opportunity we can use it.

tag

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Re: emergency fund while FIRE
« Reply #2 on: June 21, 2017, 10:51:34 AM »
I mean for while you are FIRE.

Right now we are saving about 40% of our income so if an emergency came up, we would just save less for that month or for however long we needed to.

But once we are FIRE, we won't have that option. So wondering what people do....

Altons Bobs

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Re: emergency fund while FIRE
« Reply #3 on: June 21, 2017, 11:57:24 AM »
When you're retired, your whole portfolio is your emergency fund. We do have a cushion in our portfolio, so if we do have an emergency, we can use the money in the cushion.

RyanAtTanagra

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Re: emergency fund while FIRE
« Reply #4 on: June 21, 2017, 12:43:32 PM »
I'm working towards FIRE still, but I have 1 years of expenses in savings.  I will probably do the same once FIRE'd.  It's earmarked for a unknown future house down payment, but it works as an emergency fund as well.  I know it's not ideal, and the money would be put to better use in the market, but I've come to enjoy the peace of mind of knowing I can effortlessly take care of any expense that crops up, or if I lost my job I'd have a year before I had to think about anything, including selling stocks and dealing with tax complications.

tag

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Re: emergency fund while FIRE
« Reply #5 on: June 21, 2017, 05:52:06 PM »
Ok so let's say you keep the equivalent to 12 months of your 4% draw in a high yield savings account - just so you have access too quick cash if you need it. That's your liquid money or your emergency fund.

Let's say something crazy happens and you have to spend 20k. How do you replace that 20k?

ixtap

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Re: emergency fund while FIRE
« Reply #6 on: June 21, 2017, 06:01:23 PM »
Ok so let's say you keep the equivalent to 12 months of your 4% draw in a high yield savings account - just so you have access too quick cash if you need it. That's your liquid money or your emergency fund.

Let's say something crazy happens and you have to spend 20k. How do you replace that 20k?

I look at the market conditions and my asset allocation and make an informed decision. It might make sense to just sit at a lower level for a while. If you are still in the accumulation phase, you would probably just save a bit from each paycheck for a period, rather than short changing other investments. Maybe tighten your other spending until everything is stabilized. The same strategies carry over.

As I see it, in addition to my liquid buffer, my credit cards give me a 30 day float period, time enough to think through the options.

redbird

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Re: emergency fund while FIRE
« Reply #7 on: June 21, 2017, 07:45:54 PM »
Ok so let's say you keep the equivalent to 12 months of your 4% draw in a high yield savings account - just so you have access too quick cash if you need it. That's your liquid money or your emergency fund.

Let's say something crazy happens and you have to spend 20k. How do you replace that 20k?

Honestly... the stock market does it itself given enough time. I just bought a house early last month, though had to apply the downpayment during my April closing date. The stock market gains lately have already given me back over 80% of what my downpayment was.

I don't have any sort of emergency fund in a savings account like that. For anything unexpected it only takes a few days to get my money out of Vanguard, and my and my husband's credit cards combined can have a very generous amount total that could be charged to them if needed. The cards could easily cover us if we couldn't wait the few days for Vanguard, and we could use the funds from Vanguard when they hit the normal checking account to pay off the cards.

Mr. Green

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Re: emergency fund while FIRE
« Reply #8 on: June 21, 2017, 10:34:50 PM »
The liquid part of our net worth (equities, bonds, CDs, cash) is just under $1 million. I keep 50k of that in cash. I like to keep 5-10k accessible quickly, either either some money in the house or in my savings account at the bank.  The rest of the money I put in CD ladders so there is money coming due numerous times a year. And of course the CDs can be broken if the full 50k is needed. There's always a deal out there somewhere for the person with a little extra pocket money so this emergency fund does double duty for me. The last time I used it to buy 18 acres of land.

tag

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Re: emergency fund while FIRE
« Reply #9 on: June 22, 2017, 03:43:11 AM »
Hmmmmm.......ok. I never put something on a credit card...unless it was life or death.

But, we do have a HELOC with a way lower interest rate and could use that in a true emergency.

Thanks all!

ixtap

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Re: emergency fund while FIRE
« Reply #10 on: June 22, 2017, 07:39:16 AM »
Hmmmmm.......ok. I never put something on a credit card...unless it was life or death.

But, we do have a HELOC with a way lower interest rate and could use that in a true emergency.

Thanks all!

The credit card interest rates were irrelevant in the previous examples. The cards were being paid off before interest rates were charged.