Investment timing

[Murse]

Hello folks, back again for some wisdom.

As my nest egg gets bigger I find myself getting more and more comfortable with having cash sit in my account in case of emergencies. Currently I have told myself I am okay with a maximum of $2000 in My account, everything else gets shipped to vanguard.

Recently I decided to automate my investments to vanguard, I get paid around the first every month. I scheduled these automatic deductions for the 15th. I have become okay with keeping even more money in my account until the 15th. I justify this by telling myself if an emergency happens, I have a decent likelyhood it will hit before the cash is automatically withdrawn. Am I being paranoid? Should I change the automatic deductions to the 3rd or 4th? All thoughts are welcome.

[Cwadda]

I'm not sure anyone can answer this question but you. It's an emergency fund. What are you most comfortable with doing?

[Murse]

I'm not sure anyone can answer this question but you. It's an emergency fund. What are you most comfortable with doing?

I used to be comfortable with just $1000 maximum in my account and everything else being shipped to vanguard. I find myself slowly keeping more money out then I have in the past, im looking for insight. Is this normal? Is it okay? Should I go back to the mindset of "you could always use your credit card in case of an emergency?"

[Hargrove]

Cwadda's not being glib. Nobody can answer this for you - emergency funds are loaded with the appropriate amount of money that leaves you stress-free about needing money set aside. For some, this has to protect rental assets or homeownership or whatever, too.

I have like 25k in credit with balances paid off every month that never exceed 1-2k. I don't keep more than 100 bucks in cash and have no stress whatsoever.

Some people need 2k.

Some people keep 30k.

If you can't sleep without 30k in checking, that's an awfully steep price, but you're going to be best able to determine what your threshold is.

If you need someone to say "it's not wildly irresponsible to use credit for your emergency fund," it's not, IF...

1) Your monthly cashflow would solve most emergencies by just not funneling into savings
2) Your credit would cover any gaps in that available cashflow or any immediate needs without racking up balances (could be paid with monthly cashflow before interest dings)

As for timing, 15 days of interest on one-month's savings is not a significant cost if you're getting peace of mind out of it. I get paid similarly and deduct on the 5th, because I want that savings to go up ASAP. If anything, I get stress from waiting for it to go up, not from lacking an emergency fund.

[sol]

I need my emergency fund to cover a single missed pay period.  Beyond that, I have access to all of my taxable investments and my Roth principle on about three days of notice, so those provide a huge amount of bonus emergency funds, in a real emergency.  Don't constrain yourself to thinking your EF has to be in cash.

[Mother Fussbudget]

[agreeing with Sol here]

Perhaps there is a 'change in perspective / point-of-view' that might help with this...

You should be able to connect your Vanguard brokerage account with your bank account.  Most brokerage accounts have a money-market fund account that acts like cash, earns the same interest as cash (almost zero), and is transferable back to your bank account like cash.

In other words - you can always use the cash balance in your Vanguard account as your EF.

[Cwadda]

[agreeing with Sol here]

Perhaps there is a 'change in perspective / point-of-view' that might help with this...

You should be able to connect your Vanguard brokerage account with your bank account.  Most brokerage accounts have a money-market fund account that acts like cash, earns the same interest as cash (almost zero), and is transferable back to your bank account like cash.

In other words - you can always use the cash balance in your Vanguard account as your EF.

Great idea. You can play around with the balances in the bank vs. Vanguard MM and find something you're very comfortable with.

[Murse]

I have over 25k in my brokerage which I consider more than enough in case of an emergency. My monthly expenses are roughly 1k (living large.) my fear is not losing my job but mostly "what if my car breaks down." I do not own a house, I have short-term and long term disability insurance, health insurance, no wife, no children. I need to know that what I am doing is logical.

For Someone who's only real risk is car issues (I commute 45 minutes each way to work.) living expenses of 1k/month, credit card limits of around 13k, monthly free cash flow of >3k, >25k in a brokerage. should I have >2k in savings at all times?

[Cwadda]

It seems like $2k is enough. You've always got credit cards and can transfer stuff from your brokerage if say, the transmission goes and that's a $2500 bill.

My parents keep something like $25k in their checking accounts...I wish they'd do it more like your way!

[Murse]

It seems like $2k is enough. You've always got credit cards and can transfer stuff from your brokerage if say, the transmission goes and that's a $2500 bill.

My parents keep something like $25k in their checking accounts...I wish they'd do it more like your way!

Sorry Cwadda, I just want to clarify. I am actually wondering if I should go back to my original 1k maximum account balance, shoving everything else into investments.

[Cwadda]

I used to be comfortable with just $1000 maximum in my account and everything else being shipped to vanguard.

It looks like you've sort of already answered this question yourself. Why not $1500? :)
Also, the difference between $1k and $2k isn't very much.