Author Topic: What is the MMM take on an Emergency Fund?  (Read 10840 times)

lexde

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What is the MMM take on an Emergency Fund?
« on: July 20, 2016, 04:39:46 PM »
I'm a fairly new reader, and am about 1/4 of the way through the MMM blog. I'm definitely ready to implement some badassity into my life and stop sucking so much!

As a brief background:
  • I'm 26
  • Making $48K, expecting increase with additional credentials before 2017
  • $56K in SL debt, no other debt
  • Net Worth: $-31K
  • Spendypants SO, separate finances
  • $1200 monthly expenses that I am working on reducing
I know, this student loan debt is an EMERGENCY! (I am thankful for the education, though!) I am currently putting $1000 of my $2800 take-home into these loans and am working on reducing expenses further.

My question for today, though, is: How do you handle Emergency Funds?

Last year, a huge emergency came up which caused me to need $1,500 cash in hand within about 12 hours. I was able to make it, barely, and without borrowing, thanks to an emergency fund. I want to know the Mustachian method of handling emergency funds (my apologies if this is a covered topic, and I just haven't gotten to it yet, but I'm inspired to improve!). Right now, I have that $1,500 in a standard, no-interest-to-speak-of savings account. Blech. But short of stuffing it under my mattress, I don't see a better alternative to accessible liquid assets -just in case-. I also have a few months of expenses in a high-yield savings account (a measly 1%), in case of longer-term-but-less-immediate emergencies, such as losing an income, or a major car or home repair.

I wanted to know what you guys think about accessibility versus making your money work for you. I don't foresee needing this cash any time soon, but I want to have it available just in case. I've read from other sources that you should keep a liquid emergency fund with a few months' expenses, but wanted to see if there were other options out there.

zinethstache

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Re: What is the MMM take on an Emergency Fund?
« Reply #1 on: July 20, 2016, 04:48:37 PM »
Many people opt for a home HELOC in lieu of cash.

You could get really clever and if you are good with CCs/Lines of Credit. You can invest your cash in a fund you can access fairly quickly and use the interest bearing cash for very short term like days or a week.

I opt for cash. I know I have way too much cash on hand but I sleep better at night. Different  financial gurus have their own recommended stash.

I just had a major life change and my 6 month emergency fund became a 12 month emergency fund (living expenses-wise) I am not sure I want to reduce it.

as you have more responsibilities, your need for a bigger fund can grow beyond just living expenses.

Lagom

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Re: What is the MMM take on an Emergency Fund?
« Reply #2 on: July 20, 2016, 04:52:55 PM »
Welcome!

There are a lot of philosophies on this topic, even around here. Personally, I have enough cash flow that outside of a couple thousand I keep in a savings account tied to checking, I would just charge an emergency on a credit card and pay it off the next month. With insurance, I can't think of many realistic scenarios where I would have to pay more out of pocket than I could make up in that fashion. Worst case, I can get more cash out of a brokerage account and just use credit cards while I wait for it to clear. If I owned a house, a HELOC would be even better.

Your work and family situation also matter a lot. The chance of either I or my wife getting laid off is extremely low, we could easily afford to live on one of our incomes even if the unlikely occurred, etc., so I am also not as worried as others might be about making up for an extended period of unemployment.

As for the student loan emergency, that depends on your interest rate. If it's low (the most common benchmark on this board seems to define that as less than ~5-6%), it's fine to prioritize savings over paying it off.

Also, while I know this is unsolicited relationship advice, be very wary of making a long-term commitment to a SO with totally different spending habits. It rarely works out well in every example I've seen (including my own relationship with my ex wife).
« Last Edit: July 20, 2016, 05:11:42 PM by Lagom »

lexde

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Re: What is the MMM take on an Emergency Fund?
« Reply #3 on: July 20, 2016, 04:57:35 PM »
Many people opt for a home HELOC in lieu of cash.

You could get really clever and if you are good with CCs/Lines of Credit. You can invest your cash in a fund you can access fairly quickly and use the interest bearing cash for very short term like days or a week.

I opt for cash. I know I have way too much cash on hand but I sleep better at night. Different  financial gurus have their own recommended stash.

I just had a major life change and my 6 month emergency fund became a 12 month emergency fund (living expenses-wise) I am not sure I want to reduce it.

as you have more responsibilities, your need for a bigger fund can grow beyond just living expenses.

That's a really good take on it. HELOC is not an option for me at this point as my SO is the one on the house title/mortgage, he just purchased it, and I am effectively a renter (we took this into account when deciding who pays what for the mortgage, I pay slightly less as he is gaining equity and I am not, yet). The way that you framed the cash EFund option is well thought out though and kind of reaffirms my decision to keep it in liquid funds, some of which are accessible immediately, the rest (high yield savings, online only account) take a few days to hit my account. Once I'm on the house, I'll look into a HELOC as I did see it mentioned a few times on MMM's blog as well.

lexde

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Re: What is the MMM take on an Emergency Fund?
« Reply #4 on: July 20, 2016, 05:09:31 PM »
Welcome!

There are a lot of philosophies on this topic, even around here. Personally, I have enough cash flow that outside of a couple thousand I keep in a savings account tied to checking, I would just charge an emergency on a credit card and pay it off the next month. With insurance, I can't think of many realistic scenarios where I would have to pay more out of pocket than I could make up in that fashion. Worst case, I can get more cash out of a brokerage account and just use credit cards while I wait for it to clear. If I owned a house, a HELOC would be even better.

Your work and family situation also matter a lot. The chance of either I or my wife getting laid off is extremely low, we could easily afford to live on one of our incomes even if the unlikely occurred, etc., so I am also not as worried as others might be about making up for an extended period of unemployment.

As for the student loan emergency, that depends on your interest rate. If it's low (the most common benchmark on this board seems to define that as less than ~5-6%), it's fine to prioritize savings over paying it off.

Also, while I know this is unsolicited relationship advice, be very wary of making a long-term commitment to a SO with totally different spending habits. It rarely works out well in every example I've seen (including my own relationship with my ex wife).

Thank you very much for all of the advice; I greatly appreciate all of it. My chances of getting laid off are pretty low, too, however, my field is saturated and it takes me a month or longer to find a decent job (148 applications to be hired previously, 105 for this job) that is willing to pay market rate for my skills rather than undercut. I don't foresee that I will lose my job, but I still like to be prepared since my assets are minimal.

As for student loans, I have 6.1, 5.9, and 5.1 percent on those loans, so I would like to get them erased as quickly as possible. It's just not something I want hanging over my head and the thought of 10 years of repayment is incredibly daunting (I have cut it down by 2 years already and would like to have it paid off in the next 3 with a raise and MMM techniques in paring down my expenses!).

As for the spendypants, I may or may not be able to convince him that time is better than buying things, especially if our quality of life doesn't really see any improvement due to these purchases. Maybe I can compromise with an annual bigger vacation, to cut down on daily expenses, but I do acknowledge the difference in lifestyles there but am not sure how set he is in his ways. I will be trying to lead by example, though, and hopefully he will get on board. Having F___ YOU money is important to him, so I'm hoping to show him that having enough of it means early retirement and a F___ YOU to working for a paycheck, too. If not, we can always re-evaluate.

Lagom

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Re: What is the MMM take on an Emergency Fund?
« Reply #5 on: July 20, 2016, 05:19:11 PM »
I totally get wanting the loans out from over your head. I made the same choice because I think less stress and more happiness >> slightly more optimal math, but I thought it worth pointing out that a 5% student loan is not the kind of hair on fire debt emergency MMM is referring to.

Based on what I can infer from your posts, it does sound like your SO may be the type that can eventually come around, especially since he values having FU money. It's when the distance between partners is too wide that compromise can become an ever moving target with neither person ever being satisfied. If it's more that you both save a fair amount, but you save more than him, prefer slightly fewer dinners out, vacations, etc., that's definitely reconcilable. I just know too many people who have been burned by ignoring fundamentally different core values on this front that I can't help but put my nose where it doesn't belong when the topic comes up :)

Good luck. You're doing great so far!


lexde

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Re: What is the MMM take on an Emergency Fund?
« Reply #6 on: July 20, 2016, 05:37:06 PM »
I totally get wanting the loans out from over your head. I made the same choice because I think less stress and more happiness >> slightly more optimal math, but I thought it worth pointing out that a 5% student loan is not the kind of hair on fire debt emergency MMM is referring to.

Based on what I can infer from your posts, it does sound like your SO may be the type that can eventually come around, especially since he values having FU money. It's when the distance between partners is too wide that compromise can become an ever moving target with neither person ever being satisfied. If it's more that you both save a fair amount, but you save more than him, prefer slightly fewer dinners out, vacations, etc., that's definitely reconcilable. I just know too many people who have been burned by ignoring fundamentally different core values on this front that I can't help but put my nose where it doesn't belong when the topic comes up :)

Good luck. You're doing great so far!

The "big topic" differences are DEFINITELY something to consider, and finances is absolutely one of them. I really appreciate you taking that from my post, because even if I do have a (admittedly sneaky!) plan to bring him around to my dream of FIRE, it's always good to have that consideration in the event that it wasn't really acknowledged by both parties.

As far as the 5%s go, I still consider that pretty high, but more than that, I don't want to owe anybody anything! So that will be a big milestone for me and keep me pumped through this process!

Thanks again so much for all of your input, it's been exceptionally helpful!

ender

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Re: What is the MMM take on an Emergency Fund?
« Reply #7 on: July 20, 2016, 08:38:53 PM »
Last year, a huge emergency came up which caused me to need $1,500 cash in hand within about 12 hours.

I can't think of a situation I would need $1500 cash in 12 hours where a credit card wouldn't suffice, at least temporarily, so I'm curious - what caused this?

dignam

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Re: What is the MMM take on an Emergency Fund?
« Reply #8 on: July 20, 2016, 08:46:10 PM »
I'm not a pro Mustachian by any means, but my theory on emergency funds is they need to be liquid, or at least relatively liquid.  As ender said CC can cover any immediate cost temporarily until you un-invest whatever your emergency funds are in.

Personally I have a couple grand in checking, and don't bother with savings.  I also have several grand in a brokerage account invested entirely in safer bond funds.  I can access that money within a day or two if need be.

As far as student loans, I say big deal.  You can write off interest and as long as you're not paying like 9%, just take your time.  CC would be debt emergency.
« Last Edit: July 20, 2016, 08:47:55 PM by dignam »

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Re: What is the MMM take on an Emergency Fund?
« Reply #9 on: July 20, 2016, 09:42:14 PM »
The emergency fund topic is hotly debated, but I'm of the viewpoint that it is best to keep it as small as you feel comfortable.  For one, true emergencies are rare (the water heater going out isn't an emergency, it is an irregular but predictable expense).  Since they are rare, you can have those green soldiers working for you, and then call them back if you need them,  instead of keeping them on the sidelines for maybe years at a time.  Odds are you are better off selling some mutual funds or even putting the expense on a credit card rather than keep cash over long periods of time. 

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Re: What is the MMM take on an Emergency Fund?
« Reply #10 on: July 20, 2016, 10:34:03 PM »
Right now I keep around 6 to 8 months expenses in high-yield savings accounts (thanks to my totally wonderful credit union & online bank, $5k is at 2% and the rest is at 1%).

Because I'm prone to worrying, this cushion in savings helps me feel comfortable with a more aggressive investment portfolio than I'd otherwise be able to stomach. Nonetheless, I'm working on feeling comfortable with less $$ in savings.

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Re: What is the MMM take on an Emergency Fund?
« Reply #11 on: July 20, 2016, 11:06:23 PM »
I think of my money market based emergency fund as a cross between an emergency fund and a super stable bond (my money market pays 1%). My taxable vanguard acct is mostly stock, and I use the emergency fund as my taxable bond. This is excluding my retirement accounts of course, which are totally separate. It's good to see everyone's take on this.
« Last Edit: July 20, 2016, 11:07:58 PM by dcamnc »

Dicey

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Re: What is the MMM take on an Emergency Fund?
« Reply #12 on: July 21, 2016, 07:55:14 AM »
Have you looked into consolidating your SL's and lowering the interest rate via So-Fi or similar? There is a thread about this, possibly in Ask A Mustachian. Alternatively, what about using zero percent CC offers to whack away at the balances?

As to EF, I had cancer when I was 22 and was off work for four months. Damn glad I had one then; haven't needed it since. Well, I guess I have, but when you have plenty of cash on hand, nothing seems like an emergency. I'm a bit of a contrarian around here. I believe in cheap, affordable fixed-rate 30-year mortgages and big, fat EF's. I'm also FIRE.

Shocker alert: at the moment, we have a hefty five-figure amount in cash. It's our EF, but it's also what I like to call our Opportunity Fund. Last year, we flipped a house. Paid cash for everything, netted 75 grand. We've used that profit for 25% down payments and rehab costs on two rental properties. We're casually watching the market. We may do another flip, or buy another rental, or both.

My point is that cash gives you choices. The best thing to do is some of everything. Pay down your SL's, save in tax-sheltered retirement accounts, get the match, save (invest) in taxable accounts, keep a decent-sized EF/OF. Avoid lifestyle creep, don't get into CC debt you can't manage. Learn how to hack credit cards to pay for travel. Pay close attention to your SO's spending habits. Financial infidelity/incompatibility is a leading cause of marital strife, and divorce is expensive, not to mention emotionally devastating.

Finally, keep reading. See if you can figure out who retired early, with both student loans and a mortgage or two and is now happily traveling the globe.

little_brown_dog

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Re: What is the MMM take on an Emergency Fund?
« Reply #13 on: July 21, 2016, 08:03:45 AM »
We keep a traditional cash efund in a high interest savings account (3mo of expenses). However, we also use it as a catch all for any cash savings, which means we also withdraw for vacations, repairs, etc. This isn't a problem for us because we are not spendy, watch our savings closely, and continuously top up the fund with cash every month. This method would not be good for someone who has a tendency to be a bit slap happy with spending, or for those who do not routinely and consistently move funds into the account to make up for any withdrawals.

Having immediate cash on hand is beneficial for us right now because we are in our pregnancy/baby years, and things like medical emergencies, unexpected hospital or doctor's bills, etc are more likely for us. For example, our daughter had to be hospitalized after she was born, and we got an $800 bill. Sure, we could put it in investments and jump through a couple hoops to free it up in a time of need, but right now I like knowing we have to do absolutely nothing to have immediate access.
« Last Edit: July 21, 2016, 08:05:18 AM by little_brown_dog »

patchyfacialhair

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Re: What is the MMM take on an Emergency Fund?
« Reply #14 on: July 21, 2016, 08:46:24 AM »
We also keep a traditional emergency fund in a savings account.

While I understand the "math" behind using CCs or HELOCs as a springy debt cushion, those can be taken away from you pretty easily. A CC company can cancel your cards, and a bank can non-renew your HELOC, which leaves you in a horrible place. Same logic with using your investments as an emergency fund. In the most likely scenario, you lose your job during a downturn, which coincides when stocks also take a turn. That's not fun.

To me, personal finance isn't just about maximizing rates of return across the board. Different buckets of money will have different uses and should be treated accordingly, with the understanding that an emergency fund in a savings account is there to provide emotional security, not make you rich.

ltt

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Re: What is the MMM take on an Emergency Fund?
« Reply #15 on: July 21, 2016, 09:52:44 AM »
I say stash some cash in your home, or have some fairly liquid in a bank where you can get to it quickly, and realize the money is not necessarily going to work for you.  I don't view emergency funds as an investment.  We had a storm which uprooted trees on our property.  One large tree fell on our home--needed to have it removed fairly quickly and had to come up with close to $1,000.  The company which did the removal doesn't take credit cards, and it's a pay when the work is finished service.  We had enough in checking to cover it; however, you just never know when these types of situations will arise.  Not every business out there takes credit cards.  You could also get a line of credit attached to your checking.

Nick_Miller

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Re: What is the MMM take on an Emergency Fund?
« Reply #16 on: July 21, 2016, 11:02:21 AM »
To me, personal finance isn't just about maximizing rates of return across the board. Different buckets of money will have different uses and should be treated accordingly, with the understanding that an emergency fund in a savings account is there to provide emotional security, not make you rich.

I strongly agree with this. I don't care about getting a 1% or whatever on my emergency fund. We keep at least $20,000 in cash on hand at all times. Although we obviously factor it into our net worth, we don't even think about cash unless something big comes up. It it our "oh sh*t!" fund.
« Last Edit: July 21, 2016, 11:22:03 AM by Nick_Miller »

charis

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Re: What is the MMM take on an Emergency Fund?
« Reply #17 on: July 21, 2016, 11:19:25 AM »
I could transfer cash out of my HELOC online and into my checking account on the way to the atm at the credit union.  That's sort of negates the need for an EF (we have one anyway) in my opinion since it would actually take long to get cash out of my online savings account.

SomedayStache

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Re: What is the MMM take on an Emergency Fund?
« Reply #18 on: July 21, 2016, 12:42:02 PM »
Nobodies linked to this yet?  Huh.

http://www.mrmoneymustache.com/2011/04/22/springy-debt-instead-of-a-cash-cushion/

Just the though of counting on springy debt to be my efund makes my heart rate rise and my breathing quicken.  Obviously a full-on MMM approach isn't what I will personally take.  But reading the blog and forums has changed my general mindest from a DR approach (6 months cash!) to deciding that I will keep 2-3 months cash on hand and then funnel excess into a Roth account.   (https://www.bogleheads.org/wiki/Roth_IRA_as_an_emergency_fund).  Once I reach the point where I am maximizing our tax-advantaged savings I will re-evaluate.


patchyfacialhair

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Re: What is the MMM take on an Emergency Fund?
« Reply #19 on: July 21, 2016, 01:46:59 PM »
Nobodies linked to this yet?  Huh.

http://www.mrmoneymustache.com/2011/04/22/springy-debt-instead-of-a-cash-cushion/

Just the though of counting on springy debt to be my efund makes my heart rate rise and my breathing quicken.  Obviously a full-on MMM approach isn't what I will personally take.  But reading the blog and forums has changed my general mindest from a DR approach (6 months cash!) to deciding that I will keep 2-3 months cash on hand and then funnel excess into a Roth account.   (https://www.bogleheads.org/wiki/Roth_IRA_as_an_emergency_fund).  Once I reach the point where I am maximizing our tax-advantaged savings I will re-evaluate.

It's the lack of control that worries me. A bank can easily cancel a line of credit at the worst time, but they're unlikely to straight up freeze or steal your cash out of a savings account. As much as we like to wax poetic about safety being an expensive illusion, I'd much rather forego the potential gains from $20K sitting idle, which literally allows me to not worry about finances when the inevitable life event trips me up.

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Re: What is the MMM take on an Emergency Fund?
« Reply #20 on: July 21, 2016, 02:00:38 PM »
I'm with patchy here. I keep about 9 months of expenses in cash. I know it's a lot, but we still max out our rIRA and both 401ks while investing any excess in a taxable acct. Oh, we also have about $20k in CC limits that we could use in a real pinch.

In the end, do whatever helps you best sleep at night. I feel better knowing that if a real emergency came up, I could cover it with no liquidity problems at all. Other people feel fine with some credit cards and/or a HELOC; that's cool for them.

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Re: What is the MMM take on an Emergency Fund?
« Reply #21 on: July 21, 2016, 08:42:24 PM »
It's the lack of control that worries me. A bank can easily cancel a line of credit at the worst time, but they're unlikely to straight up freeze or steal your cash out of a savings account. As much as we like to wax poetic about safety being an expensive illusion, I'd much rather forego the potential gains from $20K sitting idle, which literally allows me to not worry about finances when the inevitable life event trips me up.

^^ ++

Lines of credit are probably going to be there when you need it, but if SHTF economically, banks have a way of calling in loans and generally making credit less useful.  Plus some places don't take credit cards.

My approach is to just have a high "floor" on my checking account, plus some cash physically on hand.  I generally keep around $10k in my checking account - plus or minus, but in that range.  I lose a bit of interest on it, but the mental sanity is worth it to me.  It means I can (normally - I'm in "abnormal running" now for reasons I won't get into) leave my credit card on "pay the full statement balance automatically," and if I spend more in a given month, not a problem.  I don't have to worry about writing checks for insurance, because the money is there.  The little bit of income I lose on that is more than made up for in not having to spend any mental cycles thinking about my checking account balance.  And if we do need a chunk of cash, it's a trip to the bank (if we need physical cash).

aspiringnomad

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Re: What is the MMM take on an Emergency Fund?
« Reply #22 on: July 21, 2016, 10:24:12 PM »
It's the lack of control that worries me. A bank can easily cancel a line of credit at the worst time, but they're unlikely to straight up freeze or steal your cash out of a savings account. As much as we like to wax poetic about safety being an expensive illusion, I'd much rather forego the potential gains from $20K sitting idle, which literally allows me to not worry about finances when the inevitable life event trips me up.

^^ ++

Lines of credit are probably going to be there when you need it, but if SHTF economically, banks have a way of calling in loans and generally making credit less useful.  Plus some places don't take credit cards.

My approach is to just have a high "floor" on my checking account, plus some cash physically on hand.  I generally keep around $10k in my checking account - plus or minus, but in that range.  I lose a bit of interest on it, but the mental sanity is worth it to me.  It means I can (normally - I'm in "abnormal running" now for reasons I won't get into) leave my credit card on "pay the full statement balance automatically," and if I spend more in a given month, not a problem.  I don't have to worry about writing checks for insurance, because the money is there.  The little bit of income I lose on that is more than made up for in not having to spend any mental cycles thinking about my checking account balance.  And if we do need a chunk of cash, it's a trip to the bank (if we need physical cash).

$10k seems very reasonable to me, but I've often seen people get carried away with $20-30k+ in their checking account. Over the long term that cash drag is pretty substantial and it's unnecessary if you do have access to springy debt. HELOC's can be had for ~3.5% fixed right now and the worst case scenario for 99% of HELOC consumers would be the bank freezing the line, so I think the risk associated with them is a bit overstated (but understandable given the housing crisis the country just endured). I generally keep very thin margins in my checking account and sleep well because I have a HELOC and several credit cards. I like to know that my dollars are working for me at all times, but EF amounts are certainly a function of individual circumstances and risk tolerance.

lexde

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Re: What is the MMM take on an Emergency Fund?
« Reply #23 on: July 22, 2016, 05:25:54 AM »
Last year, a huge emergency came up which caused me to need $1,500 cash in hand within about 12 hours.

I can't think of a situation I would need $1500 cash in 12 hours where a credit card wouldn't suffice, at least temporarily, so I'm curious - what caused this?

Wrongful arrest of family member (had him confused with someone else). Once it got cleared up everything was fine and charges were dropped, but the jail does not take anything but certified funds.

lexde

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Re: What is the MMM take on an Emergency Fund?
« Reply #24 on: July 22, 2016, 05:32:32 AM »
Nobodies linked to this yet?  Huh.

http://www.mrmoneymustache.com/2011/04/22/springy-debt-instead-of-a-cash-cushion/

Just the though of counting on springy debt to be my efund makes my heart rate rise and my breathing quicken.  Obviously a full-on MMM approach isn't what I will personally take.  But reading the blog and forums has changed my general mindest from a DR approach (6 months cash!) to deciding that I will keep 2-3 months cash on hand and then funnel excess into a Roth account.   (https://www.bogleheads.org/wiki/Roth_IRA_as_an_emergency_fund).  Once I reach the point where I am maximizing our tax-advantaged savings I will re-evaluate.

It's the lack of control that worries me. A bank can easily cancel a line of credit at the worst time, but they're unlikely to straight up freeze or steal your cash out of a savings account. As much as we like to wax poetic about safety being an expensive illusion, I'd much rather forego the potential gains from $20K sitting idle, which literally allows me to not worry about finances when the inevitable life event trips me up.

This is my take on it, too. My EF is only about 8.5K but I'm also 26, "renting" (SO owns house) and no kids, so I feel that 8.5-10K is my 'safe' amount. I admittedly feel MUCH more secure day to day knowing that I could lose my job, lose my car, and lose a place to live, and would be okay (for a short time, anyway). The chances of all three happening at once are very small, so I feel even more secure.

Syonyk

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Re: What is the MMM take on an Emergency Fund?
« Reply #25 on: July 22, 2016, 07:20:02 AM »
Last year, a huge emergency came up which caused me to need $1,500 cash in hand within about 12 hours.

I can't think of a situation I would need $1500 cash in 12 hours where a credit card wouldn't suffice, at least temporarily, so I'm curious - what caused this?

Wrongful arrest of family member (had him confused with someone else). Once it got cleared up everything was fine and charges were dropped, but the jail does not take anything but certified funds.

I spent a while in the back of a police car learning someone with my first and last name was a far less reputable character than I. Fortunately nothing else of our identities matched...

stashgrower

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Re: What is the MMM take on an Emergency Fund?
« Reply #26 on: July 22, 2016, 11:16:15 PM »
I keep it as cash. Though it's annoying not to get more return, I like the peace of mind and liquidity.

whodidntante

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Re: What is the MMM take on an Emergency Fund?
« Reply #27 on: July 23, 2016, 12:10:02 AM »
The way I look at it is, you need to have a plan for what you will do if you have an emergency, and that doesn't necessarily require a giant pile of cash. 

I currently have more than 2 years of living expenses available in cheap credit.  I would be surprised if I cannot access at least 6 months worth, even if all hell is breaking loose. 

I only keep enough cash for incoming bills and a little cushion so I don't have to watch my expenses to the penny.  Current cash is less than 0.5% of my portfolio. 


cacaoheart

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Re: What is the MMM take on an Emergency Fund?
« Reply #28 on: July 23, 2016, 10:20:26 AM »
Cash does seem particularly useful for renters, given that HELOCs aren't an option and in emergencies credit cards aren't always accepted. A cash advance from a credit card might be an option, but likely an expensive one. It's too bad the MMM article linked to focused on options exclusive to homeowners.

Zikoris

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Re: What is the MMM take on an Emergency Fund?
« Reply #29 on: July 23, 2016, 02:19:07 PM »
I don't even want to call it an emergency fund because I have yet to meet an emergency that didn't accept credit card, but I do keep around $1500-$2000 in cash as a "convenience fund" for if I want to take advantage of some great deal on flights or something, because those tend to disappear pretty quickly.

I believe the official MMM position leans more towards "springy debt".

Paul der Krake

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Re: What is the MMM take on an Emergency Fund?
« Reply #30 on: July 23, 2016, 02:32:57 PM »
Bail (and maybe ransom?) is literally the only scenario where you would need instant access to funds. Everything else can wait a couple days or be charged to a card.

I even wonder if you could somehow a local bank and the online savings institution so that the local bank could let you withdraw funds ahead of time.

redbird

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Re: What is the MMM take on an Emergency Fund?
« Reply #31 on: July 23, 2016, 03:10:35 PM »
I used to have a specific emergency fund, but no longer. I never used it and I'd rather have my money stay invested and doing its thing there.

If an emergency crops up, that's what credit cards are for. I pay them off every month and have no debt, so honestly I have plenty of room on the cards to charge even a larger emergency. But if it's super expensive (I don't know - some medical emergency that isn't covered by health insurance?) - well, at that point you can probably get billed and still have plenty of time to sell investments as required.

randymarsh

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Re: What is the MMM take on an Emergency Fund?
« Reply #32 on: July 23, 2016, 03:26:52 PM »
I'm roughly similar to you OP finance wise and I just keep a couple thousand beyond monthly expenses in checking/savings. I have credit card limits that are north of $50,000 and parents I could bum from if I really needed to. I would like to save another couple thousand once the last of higher interest SLs are gone though.