Author Topic: Need advice on my emergency fund plan  (Read 2092 times)

ETBen

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Need advice on my emergency fund plan
« on: February 28, 2016, 08:20:34 AM »
I've been going round and round on what to do. I have a bonus coming in 2 weeks that equates to 6 months worth of living costs. A large part of that is mortgage for me. No other debts and I'm pretty frugal about food etc. I've posted before on this but think I have finally made a plan.

Here are my considerations:

- newly single mom of 2. I need to have a few months available Bc I have no family around to help. Their father could offset other kids costs like clothes and lunches and I would pay him back. They could go on his insurance.

- I already keep a separate $1500 oh shit car/house fund. My townhouse is condo with a lot of new appliances, Windows, hvac. I think the water heater is the only older item.

- Employability: I can easily get other income in 4-6 weeks max Bc I am an RN. A lot less than what I make in my current role and not full time, but would allow me to use less savings and look for a new job. I've already calculated the minimum income we need to survive when considering other work

The Plan: the more I've read, i think I should keep 3 months in savings so it's easily liquid. And put the other 2-3 months invested in a safer 60/40 bond to stock account. It has the chance to grow and the chances of me needing a lot of it are low except in true catastrophe.

I come from very traditional thinking people so this is somewhat foreign to me. I already fully fund my 401k and don't qualify for the tax break on the tIRA. My yearly raise and extra savings this year is already slated for a Roth IRA and vanguard.

Especially other single income with kids families, I'd love to hear what you do.

GrowingTheGreen

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Re: Need advice on my emergency fund plan
« Reply #1 on: February 28, 2016, 09:19:20 AM »
This stuff is mostly personal preference.  I see nothing wrong with your plan.

SwordGuy

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Re: Need advice on my emergency fund plan
« Reply #2 on: February 28, 2016, 10:48:07 AM »
Your 60/40 stock/bond ratio seems pretty high on bonds to me. 

If you are nearing retirement age I could see it, but if you are younger, you need growth, and stocks are what will give you that growth.   With a very employable job skill set and 3 months expenses sitting around in cash, I would go for growth.  80/20 or 90/10 or even 100/0 for now. 
There are certainly many others on this forum who are way more knowledgeable about stocks and bonds than I am, but that's what I would do.

ETBen

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Re: Need advice on my emergency fund plan
« Reply #3 on: February 28, 2016, 12:06:35 PM »
Your 60/40 stock/bond ratio seems pretty high on bonds to me. 

If you are nearing retirement age I could see it, but if you are younger, you need growth, and stocks are what will give you that growth.   With a very employable job skill set and 3 months expenses sitting around in cash, I would go for growth.  80/20 or 90/10 or even 100/0 for now. 
There are certainly many others on this forum who are way more knowledgeable about stocks and bonds than I am, but that's what I would do.

My thought was to hold this emergency amount in that allocation. Separate from my regular investments at a higher stock ratio. Kind of a middle ground.

I suppose there is no right answer. Maybe a few bad ones but otherwise it probably is kind of personal choice.

nobody123

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Re: Need advice on my emergency fund plan
« Reply #4 on: February 28, 2016, 12:23:27 PM »
As a single mom, if there is child support or alimony coming in, how confident are you in your ex's ability to consistently pay?  If he loses his job, could you absorb the loss in cash flow?  You say you're "newly single", have you lived in your new place long enough to see how much utilities vary seasonally, how frequently the HOA does assessments, etc.?  Personally, I would just put it all in an online savings account until I had a year under my belt in my new situation, and then determine how much risk I was willing to take with a portion of the e-fund.

ETBen

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Re: Need advice on my emergency fund plan
« Reply #5 on: February 28, 2016, 02:36:55 PM »
Good point. I have a year in, so I have a good handle on expenses.  Not sure on how often they change the HOA, so I should check. I think they did give me their ten years history on it.  No child support or alimony Bc my income is substantial.

I think I'm going to do it. I can always add more to my savings each month if I get concerned.

mountainstache7

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Re: Need advice on my emergency fund plan
« Reply #6 on: February 28, 2016, 03:02:18 PM »
At least 6 months of expenses. If you have the risk tolerance to put part of it in stocks/bonds go for it. Some people are more conservative with their cash buffer and prefer it accounts that are FDIC insured(garbage for growth, but good safety net).