Author Topic: Not confident in dropping the E-fund  (Read 1081 times)

HeyMickey!

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Not confident in dropping the E-fund
« on: April 09, 2019, 09:59:58 AM »
Hey all! So I watched the newest MMM show (great work, boys!) on Emergency funds vs Stash, and I while I'm not swayed to completely drop my E-fund into the market, I probably have too many $s squirreled away not earning for me. I'm just not confident enough to say how much should go.

(I also have YNAB, so these categories do not overlap)
I have set aside:
$500 for car emergencies
$300 for replacement tech (phone/lappy)
$500 for dr appts
$5000 for other emergencies
$500 for emergency travel (hurricane season)

So $6800 just chillin in case of catastrophe. How can I optimize this asset, while also having it available at a moments notice?
 

Aggie1999

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Re: Not confident in dropping the E-fund
« Reply #1 on: April 09, 2019, 02:34:28 PM »
Ally 2.20% savings accounts or one of the "high" interest local checking accounts where you have to make X debit transactions per month, login once, etc.

GuitarStv

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Re: Not confident in dropping the E-fund
« Reply #2 on: April 09, 2019, 02:35:08 PM »
How likely do you think that you'll need something on your car fixed, a new phone or laptop, a doctor's appointment, emergency travel, and five grand worth of unspecified expenses all on the same day?

If the answer is 'Not very', then consolidate this money into a single emergency fund . . . pick a reasonable value to keep this fund at (maybe four grand?), and then invest the rest of it.

Telecaster

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Re: Not confident in dropping the E-fund
« Reply #3 on: April 09, 2019, 02:58:38 PM »
Hey all! So I watched the newest MMM show (great work, boys!) on Emergency funds vs Stash, and I while I'm not swayed to completely drop my E-fund into the market, I probably have too many $s squirreled away not earning for me. I'm just not confident enough to say how much should go.

(I also have YNAB, so these categories do not overlap)
I have set aside:
$500 for car emergencies
$300 for replacement tech (phone/lappy)
$500 for dr appts
$5000 for other emergencies
$500 for emergency travel (hurricane season)

So $6800 just chillin in case of catastrophe. How can I optimize this asset, while also having it available at a moments notice?

Do you have a credit card?   That will give you a month to access your money.   That's timely enough for most emergencies.   

I don't really recommend this because it is a form of self-deception, but I created what amounts to an e-fund brokerage account.   Basically money I might need  to access some day.   It was also a self-insurance account (which is kind of the same thing as an e-fund), so I was also making regular contributions of the difference in cost between a low deductible policy and a high deductible policy. 

What happened is the account got big, and I decided I didn't need an e-fund.   So you might try something like that.  Just have a pot of money in a separate brokerage account that is your e-fund. 

I should also point out that thing like replacement tech and doctors appointments aren't emergencies.  Those are regular predictable expenses.   

katsiki

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Re: Not confident in dropping the E-fund
« Reply #4 on: April 09, 2019, 02:58:44 PM »
Ally 2.20% savings accounts or one of the "high" interest local checking accounts where you have to make X debit transactions per month, login once, etc.

+1.  For the latter option, this is often a Kasasa cash account.  Google it with your state or region.  You can get 3-4% in many states.

thd7t

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Re: Not confident in dropping the E-fund
« Reply #5 on: April 10, 2019, 02:18:03 PM »
I haven't done this either, but I think that a strategy that would work for me would be to build a larger "second emergency fund" in a taxable investment account. 

Build it to the size that you want your main fund to be ($6,800) and then fund it again with your existing emergency fund when it gets up to size.  Then, you get two benefits.  First, you have more money invested, which is good.  Second, your emergency fund can take a serious hit in the market and still be where you need it to be.  Even if you don't end up needing it, you have more money invested.


Rosy

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Re: Not confident in dropping the E-fund
« Reply #6 on: April 10, 2019, 03:57:02 PM »
Hey all! So I watched the newest MMM show (great work, boys!) on Emergency funds vs Stash, and I while I'm not swayed to completely drop my E-fund into the market, I probably have too many $s squirreled away not earning for me. I'm just not confident enough to say how much should go.

(I also have YNAB, so these categories do not overlap)
I have set aside:
$500 for car emergencies
$300 for replacement tech (phone/lappy)
$500 for dr appts
$5000 for other emergencies
$500 for emergency travel (hurricane season)

So $6800 just chillin in case of catastrophe. How can I optimize this asset, while also having it available at a moments notice?

HeyMickey:) - my choice would be to have $1800 in my regular checking which pays me 1% interest. These are small emergencies that can be handled in a "slush' fund and even a 10% return gains you very little in the big scheme of things - but having it on hand at a moment's notice would let me sleep at night:)

The $5K you earmarked for other emergencies - well, those true, expensive emergencies don't tend to occur often enough for me to want to hold onto the money.
While I wouldn't want to invest it either - I do have my true EF in a CD at 3.25%.

But, I'd certainly try to deal with most emergencies by using my credit card first which gives me 2% cash back for everything and 3% on travel expenses. It is like a 30-day free loan and gives me time to consider how best to handle the emergency.

Everyone is wired differently and some of us come from a background or have had experiences that make us feel insecure about not having direct and immediate access to our money. It is what it is - you can always change your mind down the road. I know I need X available to make me feel secure and I don't really care that this means I am not optimizing to the nth degree - I can live with that.

COEE

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Re: Not confident in dropping the E-fund
« Reply #7 on: April 13, 2019, 04:28:40 PM »
I have significantly more just chilling in savings as an EF.  I'm comfortable with it.  It's about 10% of my NW.  I do consider about 3/4 of my EF to be part of my bond allocation (I-bonds and T-bills)

I currently keep a 1 year emergency fund.  I can't fathom only having $6k in cash.

FireAnt

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Re: Not confident in dropping the E-fund
« Reply #8 on: April 13, 2019, 07:58:14 PM »
I watched the video too and now reconsidering my ER fund- it's pretty high (6 months worth of expenses). I have it in an online bank but that still is only 2.35%.

Did anyone catch the part about writing checks against your mortgage? Was he talking about taking a line of equity against your mortgage? It was unclear to me, but I'm curious about it.

COEE

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Re: Not confident in dropping the E-fund
« Reply #9 on: April 14, 2019, 11:37:27 AM »
Did anyone catch the part about writing checks against your mortgage? Was he talking about taking a line of equity against your mortgage? It was unclear to me, but I'm curious about it.

Yes - He's talking about a HELOC.  I'm not a fan, personally, but I get why some people are.

I watched the video and realized he was talking about not having a bunch of cash in 0% checking account.  That I agree with!  I only have a few thousand in my normal 0% saving account at any time.  I keep the rest in high interest savings, T-bills, I-bonds, etc.  So I guess I'm in line with him.  I typically try to avoid selling equities at all costs though.

FireAnt

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Re: Not confident in dropping the E-fund
« Reply #10 on: April 14, 2019, 12:06:03 PM »
Did anyone catch the part about writing checks against your mortgage? Was he talking about taking a line of equity against your mortgage? It was unclear to me, but I'm curious about it.

Yes - He's talking about a HELOC.  I'm not a fan, personally, but I get why some people are.

I watched the video and realized he was talking about not having a bunch of cash in 0% checking account.  That I agree with!  I only have a few thousand in my normal 0% saving account at any time.  I keep the rest in high interest savings, T-bills, I-bonds, etc.  So I guess I'm in line with him.  I typically try to avoid selling equities at all costs though.

Thanks for the answer!

My impression is that he was not advocating for a large amount even in a high interest savings account either.

ender

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Re: Not confident in dropping the E-fund
« Reply #11 on: April 14, 2019, 08:19:54 PM »
I haven't done this either, but I think that a strategy that would work for me would be to build a larger "second emergency fund" in a taxable investment account. 

Build it to the size that you want your main fund to be ($6,800) and then fund it again with your existing emergency fund when it gets up to size.  Then, you get two benefits.  First, you have more money invested, which is good.  Second, your emergency fund can take a serious hit in the market and still be where you need it to be.  Even if you don't end up needing it, you have more money invested.


+1