Those NOT retired: size of mustachian emergency funds

[SavinMaven]

Another thread (about replenishing an EF) got me thinking....

Back in the day, I was a Suze Orman fan. And though some always hated her, and she left her show under dubious circumstances... I can't ignore that she got me onto a better path than what I would've been on otherwise. Part of that was, I took to heart her recommendation for a cash account with 6 months' expenses in it. Viewed it as a necessary safety net to unemployment, which was driven home for me when I did become involuntarily unemployed for 7 months. I've maintained a 6 month cash emergency fund for years, and I have to admit, if I were to cut it substantially, I think I would be rather nervous about that. But there are opportunity costs to this big chunk of cash sitting at paltry interest. I'm curious to learn something about Mustachian EF practices.

Thanks for voting!

[DreamFIRE]

200 months, mostly in money market in lieu of bonds.  Earning about 1.8% and trending up.

But I'm close to 80% allocated to stocks with about one year to FIRE.

In local bank, I have only 24 months of expenses.

[NotJen]

I consider my EF to be an “if I lost my job” fund really.  I can cash flow most “emergencies” due to a high savings rate, but I’m single, so no backup income.

I used to keep 1 year of expenses in high-yield savings.  Then I started a taxable investing account and feel comfortable keeping 6 months in the EF.  It’s probably time to re-evaluate that now that my taxable account has grown - I’m thinking if I could take a 50% hit and still have a year’s expenses, I don’t need much more in a savings account.  Of course, I move the money in that account around to earn bank bonuses, so I’m making more than 1.5% on it anyway.

[Tom Bri]

Very little of my money is illiquid in the sense that I can't pull it out in a few days if needed. Stock funds I have owned for years, Vanguard funds with no sales charges and the like. Except for certain retirement funds, and my house, virtually all of it is available in less than a week.
In terms of cash in the bank, we keep a few thousand here and there. With no debt, I could even run on credit cards for a while...
So, years worth, even if I never added another dime.

[Zikoris]

We keep about two months worth kicking around, but tend to use it more as a slush fund for vacation bookings that don't line up with paydays.

Our expenses are low enough that we could easily maintain our current lifestyle with the crappiest part time minimum wage jobs in existence, and I'm pretty sure we wouldn't have any difficulty getting hired at a coffee shop or whatever, so it's kind of a non-issue.

[Hirondelle]

My job is currently stable/guaranteed for another 3 years so I don't count my EF in the "monts of unemployment"-sense. My EF is more based on what sort of emergencies I could face and how much I would need for that. So I do have enough money for "large" medical bills (European - so our large bills are just a regular doctor's visit in the USA), moving to another apartment or other situations like that. It comes down to an amount 3-5x my montly expenses :)

[SnackDog]

Emergency funds seem more appropriate for people who would lose their home or apartment if they were out of work more than a couple months. For these people it is critical to be able to survive while job hunting and avoid a downward spiral to street living or massive credit card debt.

[Nudelkopf]

I've recently scaled mine down from 6months expenses to 4 months.

Reasons: I'm in a stable government job, and I have a partner that would be able to helpe though (although our finances are still separate). My EF is only really there in case something happens to my parents (or partner) & I take some unpaid leave for a few months. Or something like needing surgery cos I've stuffed up my knee or for dental work.

[SansSkill]

My goal is an EF of 6 months, any more than that feels like a waste.
I'm counting a month of living expenses based on my current living standards, which I could drop by a quarter from one month into the next.

[zeli2033]

Right now we are in extreme debt payoff mode and we are taking advantage of a firehose of cash so we only have ~1 month of expenses at any given time. It’s certainly risky but since we will be done paying it all off in a little more than a year, we’re comfortable playing it risky until the ridiculous debt is gone. Then we will probably build an EF up to 3 months but that’s subject to change due to other savings goals.

[nobody123]

My EF is essentially a "job loss" account.  I want to ensure that my family doesn't have to adjust their lifestyle if I get fired / laid off and there's no way we could do that unless my EF covered the time I was unemployed.  DW is a SAHM so it would take some time for her to re-enter the workforce, and given my job, it would probably take at least 3 months and a potential relocation to find something similar.  So, we have 9 months of my take home in an online savings account, and are slowly growing it to 12 months.  DW and I have about 5 years of my gross salary invested in the market, plus 529s for the kids, so we're comfortable having a large cash EF.  Essentially we think we have "enough" growing in the market to ensure we're comfortable in retirement, so we're willing to sacrifice some future potential extra wealth to sleep better today.

[bluebelle]

hmm....I think I may have misunderstood 'liquid'.  I voted less than 30 days, because we have very little sitting in bank accounts.  We have a shit ton in non registered and registered accounts that we could draw from if we had to in the event of a job loss, and have reasonably high disposable income to direct at life's "oh shit" events (ie we don't have high savings for a month or two).  If we didn't have a high 'surplus' every month, I'd probably want $10K-$20K very liquid to cover off those life events of car needs major repairs, furnace failed, A/C died when its 35C out etc.  But we're at the tail end of the savings portion of our lives, we probably have enough to FIRE, but waiting until he's eligible for early (reduced) pension to get access to the cheaper extended health benefits.  ('Free Canadian health care only includes doctor/hospital, it doesn't include dental, prescriptions, optical or physio/massage etc)

[Dragonswan]

My job is currently stable/guaranteed for another 3 years so I don't count my EF in the "monts of unemployment"-sense. My EF is more based on what sort of emergencies I could face and how much I would need for that. So I do have enough money for "large" medical bills (European - so our large bills are just a regular doctor's visit in the USA), moving to another apartment or other situations like that. It comes down to an amount 3-5x my montly expenses :)

I'm closer to this.  My job is as stable as any job can be.  So my EF is measured in things that are likely to go wrong with the car or house or needing to get to my parents in a hurry.  So I voted 1-2 months because that's equivalent to the types of emergencies I would face.

[jlcnuke]

For me, my "emergency fund" morphed from "having a stash of cash in a bank account" to "don't keep money sitting around in cash but have plenty available in other ways". As my investments would certainly allow me to access them in the event of an emergency (it doesn't take much time or effort to sell shares and transfer that money to my checking account) and I can put almost any emergency expense on a credit card initially, I find that having months worth of expenses sitting in an account earning next-to-nothing no longer makes sense to me. My EF is thus just a part of my investment portfolio at this point.

[wenchsenior]

I assumed liquid to mean in cash/bank savings/cds/money market.  We tend to  have 5-10K of cash in bank, fluctuating around from month to month. So I voted 1-2 months.  If you also mean taxable VG accounts and Roth IRAs (where principal can be tapped), then we have a lot more...2-3 years' worth.

[Schaefer Light]

My EF is essentially a "job loss" account.

Same here.  And since I'm single and don't feel like I can easily find a new job, I want it to be fairly large.  I consider 6 months of expenses to be the bare minimum.  I sleep better when it's closer to 12.  I guess I could count a portion of my Roth IRA as part of my EF.  I view it as my "lose my job and can't find another one in a year, and also can't sell the house in a year" EF, meaning I don't want to touch it unless I absolutely have to.

[FindingFI]

With a stable job, the risk of opportunity cost from leaving a large chunk of money in a cash account outweighs the risk of a significant financial emergency during a market downturn in my opinion.  So I keep a few thousand in cash, and dump the rest into a taxable investment account that in the case of extended unemployment, major medical bills, etc. I can access within a few days.  Both the cash EF and taxable account are separate from planning ahead for expected large expense like car/home repairs.

[use2betrix]

I like having around 8-12 months. I do contract work so when I finish a job I’m laid off. I like to take time off and not stress. It’s also good FU money (even though I could sell stocks, don’t want to though). I work a tough position in my field and ruffle a lot of feathers. That FU money is the price for keeping my integrity and doing the best job I can. Knowing I don’t have to feel obligated to fold because I “need” my job.

[thesis]

Like many others, my emergency fund is basically a job loss fund, too. I keep about 5 months of expenses in it. About a year and a half ago I went through three months of unemployment which was pretty grueling, and got another job just in time to avoid scraping the dregs on my accounts. Scary stuff. Five months gives me much more confidence, and my skills are greatly improved now, but my situation is still single-income, which is always a bit riskier.

Although, to be fair, I also like to keep about 3k in a car account and have an HSA (not yet invested) that could cover my deductible two times over. I do like my security, but I committed to one number for the emergency fund and am sticking to it. It would be too easy to keep dumping money into that account out of fear, so I've determined that any excess will be used for non tax-sheltered investments or saving up to buy into non tax-sheltered investments.

Honestly, I think those three categories pretty much cover anything you might need: job loss, car problems, and medical costs. I guess if I were a homeowner, I might have a stash dedicated to housing expenses, too. I prefer categories over one giant bucket :)

[DreamFIRE]

I'll add that I don't consider my 200 months of liquid savings to be an emergency fund, but it would function as one.

Some people mentioned "job loss fund."  My job loss fund in my entire stash.  If I lost my job now, I would simply take any severance or unemployment compensation I was eligible for and enter a new mode of living, which I like to call "FIRE".  That would only put me about a year ahead of schedule.  I could live with that.  :)

[hdatontodo]

When I got divorced in April 2017, my ex bought me out of the house for $135K. Also there is job related concern (at age 57) after our unit was sold to another company, so this is largely a job loss fund.

I am using $44K (including 20% down) to buy a $175K townhouse outside of Baltimore. (PITI < $1K, which is less than my $1,325 apt.)

I will use the balance in conjunction with 401K w/d's. I have this 5 year job-emergency / FIRE plan than dances around Fed tax brackets, ACA income levels, and later, Soc Sec taxation avoidance.

[Steeze]

Ideally, 1 month bills in checking, 1 month in savings, all other EF in taxable account.

In practice, 1 month in checking and 3 months in savings until my taxable account has 12+ months available. Probably won't happen until next year as nearly everything goes into retirement accounts.

[dhc]

At the moment, looks like it's roughly 8 months' worth, but it varies significantly and only a small portion of that is earmarked "emergency fund", as there are many layers to where "emergency money" would actually come from.

Instead, that 8 months' worth includes:

• Checking account that I funnel into post-tax investments whenever it gets to be more than a few thousand dollars
• Savings account with the "emergency fund" money plus property taxes saved monthly (unless it's the end of the year, in which case we just paid them), plus "house maintenance and projects" money, again saved monthly and used when necessary.

That's actually a little high for my taste even considering all of the buckets. Depending on what house projects occur this summer, it might be time to move some of that out to investments.