Poll

What is the most you have needed for an Emergency Fund?

$0-$5000
41 (40.2%)
$5000-$10000
25 (24.5%)
$10000-$15000
13 (12.7%)
$15000-$20000
7 (6.9%)
$20000-$30000
7 (6.9%)
$30000-$40000
4 (3.9%)
$40000-$50000
0 (0%)
Over $50,000
5 (4.9%)

Total Members Voted: 102

Author Topic: What is the most you have needed for an Emergency Fund and why?  (Read 3685 times)

K-ice

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What is the most you have ever needed for an emergency fund and why?

So I had enough to cover a few months expenses but, I am learning, a few regular months expenses are not the same as an emergency.

I still like the idea of MMM springy debt as a back-up, but I just wanted a poll to see what other's have experienced.

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

K-ice

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #1 on: April 23, 2019, 04:21:35 PM »
So I am currently in the $20-30K range.

Our first issue was a break in the main water line. The cost to repair that along with some other associated expenses has the total at $22K.

We also are having car trouble. 9y old car and literally about 10 days ago we were kind of shopping for a "new" one but decided to put it off for about 2 years. "We can't really afford it after the water main break. It's been pretty reliable. W'd like to get over the 10 year mark. It still has less than 200K km." This weekend KABOOM, or not quite, but this car repair could be major or we might just need a new car. Considering the fact that we just sunk the cost of an economy car into our house we don't have that cash lying around.

I can be somewhat criticized that these emergencies are deferred maintenance but I didn't expect them both to happen within a month. With the house we have new roof, upgraded insulation, upgraded electrical, new exterior paint etc.  So it's not like we haven't been maintaining it but none of these things were "emergencies". For the car we have been pretty good with oil changes & did new breaks last summer and basic maintenance.

I can't even imagine combining major health issues &/or job loss into the equation right now.

The amount of emergency fund you need is a game of probabilities and risk with things like job security, job type, single income, double income, overall health, age of car, age of house, renter etc all playing into the amount you should have. 

I just wanted to share my experience in case anyone is trying to budget their emergency fund. I know there are stories worse than mine so I wanted to get a feel for what you have experienced & how you dealt with it.

StarBright

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #2 on: April 23, 2019, 04:33:02 PM »
We had a really rough year the year my second kid was born. I had post birth complications that landed me in the hospital for four days. We had a high deductible insurance plan and the birth and complications took us to our out of pocket max for that year (August). Our insurance year started over October 1, and in mid October DH had an emergency appendectomy and got an infection and landed in the hospital for several days, and we hit our max out of pocket again. He was a contingent employee at several universities (adjuncting) at the time and he lost half his jobs when he landed in the hospital - cutting his income by more than half. We blew through 25k in 6 months.

That was almost six year ago and we had been saving diligently for years to be able to weather those storms. I cringe to think what would have happened if we had had another major issues during that time.

Tuskalusa

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #3 on: April 23, 2019, 04:41:28 PM »
My dad passed away suddenly. We needed $12k for funeral costs.

Buffalo Chip

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #4 on: April 23, 2019, 04:58:49 PM »
Thatís the funny thing. Put together an emergency fund about 10 years ago and havenít used it in my memory.  I guess you could call the HVAC unit conking out an emergency, but basically cash flowed it.

Laserjet3051

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #5 on: April 23, 2019, 05:05:12 PM »
1.25 years of unemployment in a HCOL area immediately following the 2008 global meltdown. Wife was a SAHM, who went back to work (after I was laid off), but household income over that 1.25 years dropped by 85%. It was incredibly painful. An EF >$50,000 would have helped mitigate some of that pain, not to mention the foreclosure.


beer-man

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #6 on: April 23, 2019, 05:12:46 PM »
Thatís the funny thing. Put together an emergency fund about 10 years ago and havenít used it in my memory.  I guess you could call the HVAC unit conking out an emergency, but basically cash flowed it.
That should be an anticipated expense anytime after 10yrs in the south, 15yrs elsewhere.
  After 9yrs of ER funding we have never known a true emergency. We fully invested our ER in 2017 and now with compounding and minimal contributions monthly itís 4.5x our yearly expenses


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Annie101

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #7 on: April 23, 2019, 05:51:21 PM »
We have had two cars totaled unexpectedly by other drivers.  Once we used our $10000 emergency fund to buy another car before our insurance check arrived and the other time we combined our insurance check with a portion of the emergency fund to get a new car.

I'm a red panda

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #8 on: April 23, 2019, 06:28:57 PM »
I had an unexpected, rare medical expense that my insurance did not cover and had to be paid upfront. It was about $15,000.


We've never had an emergency fund though. We just have money. We use it when it's needed.

BicycleB

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #9 on: April 23, 2019, 07:34:47 PM »
$4,000 to replace HVAC, but like poster above, didn't feel like emergency because I had enough money. Vendor would have been happy to accept credit.

Biggest bill requiring effort was $8k-10k plumbing cost. Shopped around, did a bit of pre-plumber digging via day labor; all in cost, about 3k. Plumber was happy with credit, so less than 1k cash.

30 years of driving cars, mostly used; zero emergencies. I listen to the car sounds and take it to mechanic when it sounds weird. Sounds silly, but no breakdowns. Surprisingly low repair/maintence costs - maybe $300-400/year to date. Average car age maybe 8-9 years.

Hail damaged roof, insurance paid the 3k bill.

$12k plumbing repair from line that broke in foundation. Insurance paid all but $500. No sweat.

MayDay

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #10 on: April 23, 2019, 07:41:30 PM »
1.25 years of unemployment in a HCOL area immediately following the 2008 global meltdown. Wife was a SAHM, who went back to work (after I was laid off), but household income over that 1.25 years dropped by 85%. It was incredibly painful. An EF >$50,000 would have helped mitigate some of that pain, not to mention the foreclosure.

2008 recession here too.

Between H and I, about 5 layoffs whole having 2 kids (with corresponding medical costs and unpaid leaves).

Each layoff we went through ~20k and then built it back up. That sucked. If we had other emergencies we might have lost our house. In retrospect we would have been better off to just foreclose.

Michael in ABQ

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #11 on: April 24, 2019, 03:54:25 AM »
Maybe $1k for car repairs, though had two similar size within 2-3 months. We had about $10k and used part of it to buy a larger vehicle for a new baby. New van was $10k and we sold the old for $6k to a relative. So with taxes and fees we only spent about $5k. Still working to build it back up but we recently added private school tuition so excess cash flow in the monthly budget is much less now.

Sugaree

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #12 on: April 24, 2019, 06:04:25 AM »
Last year nearly killed us.  Literally and figuratively.  We were hit by a tornado in March.  The engine in my husband's car blew up in April.  My car was totaled in a wreck in November.  Then he got laid off in February.  We were probably in the $20k-25k range by the time it was all said and done.  Some of it was covered by insurance, but it was nice to have the money to take care of things immediately vs having to wait on adjusters and claims handlers and stuff.

Laura33

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #13 on: April 24, 2019, 07:01:31 AM »
First tech crash here:  DH got laid off and we had to move states when I was 8 months pregnant.  We stupidly bought a new house before the old one sold (8 months pregnant = massive, overwhelming nesting instinct), and then watched the market drop in our old town and got to carry two mortgages for 13 months.  Meanwhile, I was paid by the hour, and my income dropped over 50% that year due to the baby.  Then we finally sold the house for about what we had bought it for, but for a paper loss of @$50K given the work we had put in (and probably c. -$75K from what it was worth when we decided to list it).

I don't know that we actually had to use the EF, because we had always lived well below our means, so even with my paycut and the double mortgage and the fix-up and moving costs and then the new daycare costs, we still managed to run close to even*; honestly, dual-incomes is the best safety net there is, as long as you're in different industries.  But it could have been massively worse if DH hadn't gotten an equivalent job right away, or we didn't finally get that one offer on the house -- we could easily have been down $50K or more if things hadn't lined up just right to keep us afloat. 

Having a big chunk of accessible cash may not have been necessary financially, but it was critical for my mental state.  That was the biggest upheaval of my life, and I was upset and stressed and depressed for a long time.  But I at least had the security of knowing we could survive for a long, long time; I mean, I hated when I needed to take money out instead of putting money in, but damn, I had the money there, so I didn't have to worry about digging an even deeper hole with CC debt.

The thing about life is there is always a fan, and there is always someone happy to throw shit at it.  You don't need an EF for when something breaks; that's a couple grand that you can fix with a few months of a CC payment or a car loan or whatever.  You need your EF for when multiple bad things happen at once -- when life continues to toss shit at the fan for month after month after month, and you can't see a way out and have no idea when it's going to end.  When that happens, there is truly nothing like a big-ass pile o' cash to help you keep your cool and make rational decisions instead of emotional ones.

*My recollection is that we were down a few grand by the time the house sold, but we had both kept up our 401(k) contributions, so it was more that we had less money in one account and more in another.

rubybeth

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #14 on: April 24, 2019, 07:06:46 AM »
It really depends what your responsibilities are (yourself, spouse, children, cars, house, etc.--anything you're maintaining, basically) and what your savings habits are like. If you are the type with a house and/or car but you have sinking/savings for repairs/maintenance and those are fully funded to cover major repairs, and you can swing deductibles on car/health insurance without tapping into savings, your emergency fund doesn't have to be large. But if you don't have a lot of ready cash and you have obligations you can't meet with your regular inflow, having a larger chunk in accessible cash is nice--it can be a credit card that gets paid off when the balance is due, or a low-interest HELOC for home repairs if you have enough equity.

My question to help you think about worst case scenario is:

If you got in a car accident due to no fault of your own and your vehicle was totaled and you hit your health insurance deductible and you couldn't work for 6 months, what would happen?


I said $10-15k but we really had more like $44k at the beginning of 2018. Our scenario since January 2018 was that one vehicle was totaled while we were house hunting and I was undergoing many medical tests to investigate a chronic issue. We replaced that vehicle and then our purchase offer was accepted on a house. So we tapped the savings for both the car (Jan/Feb) and the down payment (plus related moving costs) (March/April). Medical tests continued and I was told surgery was my best option. So I had surgery the week after we moved (April). I got disability checks for my first 8 weeks not working after surgery (was supposed to be 6 weeks but I was still having extreme pain and trouble walking after surgery) (April/May). And I got the bill for the surgery and hit my $3k deductible between all the tests and doctor visits. Then when I tried to go back to work, the medical issue worsened and my surgeon cut me to 3 hour work days (June). Disability would not pay me until they completed an "investigation." So down to partial pay from June until... wait for it... October. We were fine on emergency saving and my husband's salary, and I eventually got the back pay from the disability insurance, but it took until I was back to work full time for them to decide I had been disabled during that time. Sigh. So, you just never know.
« Last Edit: April 24, 2019, 07:10:12 AM by rubybeth »

Home Stretch

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #15 on: April 24, 2019, 08:29:54 AM »
Between my SO and I, we have 15-20 credit cards at any given time. We use the sign-up bonuses and rewards points to offset travel costs. Usually saves us between 50-75% of flight and lodging costs in any given trip.

Because of our incomes and perfect credit history, we routinely get auto-approved for $20k+ credit limits on each card.

I literally can't imagine a situation in which I will need to use all $230,000 of my available credit on any unexpected event. This gives me a good amount of confidence in not holding a substantial cash emergency fund. If I had to spend $100k on an emergency I would just throw it on the cards and then sell some equities to pay it off before the end of the month.

caleb

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #16 on: April 24, 2019, 10:40:55 AM »
honestly, dual-incomes is the best safety net there is, as long as you're in different industries. 

From the poll, it looks like lots of people here don't really tap much of an emergency fund, i.e. less than $5k.

What do you suppose are the common characteristics of a lifestyle that tends to avoid the big emergencies?


I'm a red panda

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #17 on: April 24, 2019, 10:59:52 AM »
honestly, dual-incomes is the best safety net there is, as long as you're in different industries. 

From the poll, it looks like lots of people here don't really tap much of an emergency fund, i.e. less than $5k.

What do you suppose are the common characteristics of a lifestyle that tends to avoid the big emergencies?

Is part of it that it just isn't much of an emergency if you have the money to cover it?

I mean, if people have $500,000+ that can be liquid within a few days, what's the emergency?
To me, an "emergency fund" is for people who are just starting out with the idea of saving. They need to earmark the money. When you have a lot of money, it doesn't mean you don't have "emergencies" - it just means financially they aren't that big of a deal.

Does it suck to pay $15,000 for a medical bill unexpectedly- yeah, that's a lot of money.  Does it make a difference to my long-term plans? Not really.

Laura33

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #18 on: April 24, 2019, 12:15:56 PM »
honestly, dual-incomes is the best safety net there is, as long as you're in different industries. 

From the poll, it looks like lots of people here don't really tap much of an emergency fund, i.e. less than $5k.

What do you suppose are the common characteristics of a lifestyle that tends to avoid the big emergencies?

No one avoids the big emergencies, except through pure dumb luck.  The question is how you weather them.  And that is based on how far below your means you live + having some other source of money when yours goes away.  Living below your means is the best safety valve, because it both decreases the amount you need when the shit hits the fan and frees up more money to save for that day.  A second income is also a great option because it spreads the risk, as both of you are unlikely to be out of work at the same time; obviously, how good or bad it serves as a shelter depends on the security of that job against the black-swan event that gets you.  A big pile of cash is another good option, for obvious reasons.

IOW, "emergency" doesn't mean "must dip into emergency fund."  For example, our "emergency" was clearly that by any definition:  we lost a big chunk of our income, had to scramble for a new job and move to a different state, and doubled our housing costs in the process, all of which pretty much "cost" us over $100K in net worth compared to the track we had been on.  I think almost anyone would call that sort of life-changing event an emergency.  And yet we weathered it fine and barely even touched our emergency fund, except for periodic cash-flow reasons, and our net worth didn't actually drop at all.  All because we had the safety net of a second income, and because we had kept our fixed expenses low, which allowed us to cover the extra costs simply by diverting the extra money that had been going to savings. 

I also agree with I'm a red panda that what constitutes an "emergency" changes as you get further along.  A car repair when you've just started your first job is a totally predictable event, but it can still present a cash-flow emergency if you haven't had time to save for it yet.  OTOH, even our c.2001 emergency wouldn't be an "emergency" now, because we're already FI and could just add the "RE" on.  So nowadays, our definition of "emergency" is limited to things like major accidents/illnesses that generate huge ongoing care costs that we couldn't currently cover.

diapasoun

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #19 on: April 24, 2019, 12:19:32 PM »
The most I've ever taken out of my EF was approximately $7.5k for a pretty catastrophic vet bill. I had the CC space for it just fine, but cashflowing that before I started to carry a balance and pay interest would not have been possible -- I don't even make $7.5k gross in a month.

TVRodriguez

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #20 on: April 24, 2019, 12:24:48 PM »
I put $20,000 - $30,000.  One year over a couple of months we had to put in a new septic system ($6,000) and pay for a funeral ($12,000 all told) and probate ($2,000).  All had to be paid in cash, no credit cards allowed.  DH & I felt extremely fortunate to be able to just write the checks without hesitation.

formerlydivorcedmom

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #21 on: April 24, 2019, 01:19:44 PM »
A few years after I bought an older home, I found out that the main water line from the street to the house had to be completely replaced, and part of the line under the house had to be regraded.  It was about $15k.  I could have gotten on a payment plan, but I paid it outright.

Six months later, I came down with mono....in my 30s!  If not for a boss with an extremely creative definition of "employment" who ensured I still got paid, I'd have been screwed.  It was 6 months before I could work more than 10 hours a week, and if I'd had to try to find a new job I would expect I'd have been unemployed for about a year (to recover enough to handle the stress of starting/learning a new job). 

Three out of the last 5 years, we've had unexpected medical bills totaling about $5k each year.  I've been really grateful I can write a check for those and not worry about it.

I'm trying to build up the emergency fund again this year, after draining it almost completely last year.  My goal is $20k.

Enigma

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #22 on: April 24, 2019, 01:37:51 PM »
What is the most you have needed for an Emergency Fund?
$0-$5000 Range

I tend to try and pay off rental investments and sock away retirement accounts as much as possible.  I have a small EF if one at all.  Thankfully, I can lean on a high credit score (0% interest CC) or parents for a personal loan if needed albeit pretty rare.

bluebelle

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #23 on: April 24, 2019, 01:55:13 PM »
I had to go back and change my vote.....I forgot about an issue about 5 years ago.   Severe ice storm, we ended up with about $17K of damage, and because it was so wide spread, with so many claims, it was about 2 months before the insurance company even got around to our claim.  But I didn't think of it as an emergency, we were starting a major reno a few months after the ice storm, and I just took the money out of that fund. 
I was lucky, when I was younger that I didn't have any major emergency, and I know luck is a big part of it.  Now that I'm older, we really don't have an EF, we are FI, so if something hit us, we would fund it from money in our various funds......I also know that I am fortunate that we both have incomes well above average, so our discretionary monthly cash flow can easily fund many would call an emergency.  It normally gets funneled into savings, but if we had a month or two of huge expenses, we could easily ratchet down spending and cover an unexpected expense that way.
I think the need for an EF depends on where your are in your FI journey.   I'm in Canada, a medical emergency doesn't bankrupt me, I've always had jobs with excellent sick leave and long term disability coverage.  While I know that no job is 'safe', I've always worked in high demand areas, and never experienced a layoff (although the next job wouldn't be too hard to find).   I was raised by depression era parents, so they instilled a very strong belief in 'living within your means'.  I've always lived below my means, although I fully admit that in my 20s, I spent most of my income, I just never spent more.   

Villanelle

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #24 on: April 24, 2019, 02:54:10 PM »
I've never thought about it, but I guess our answer is nothing because we've cash flowed everything. 

caleb

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #25 on: April 24, 2019, 04:00:47 PM »

No one avoids the big emergencies, except through pure dumb luck. 

I think there are ways to avoid risk, although they might not be optimal over the long haul.

Taking a job with a stable legacy corporation or the government would seem to reduce risk of unemployment.

Living in a condo minimizes or eliminates the risk of sudden house repairs.

Minimizing or eliminating a driving commute reduces the chance of a sudden, major car repair bill.

I'm mostly thinking about how, if a person really valued reducing volatility in their lives, they'd go about organizing their affairs. 

Luck matters, but it's possible to head off some amount of bad luck.

SimpleCycle

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #26 on: April 24, 2019, 05:47:18 PM »
Our biggest "emergency" was the time my wife's company became insolvent and stopped paying people.  The money just literally failed to show up.  So we needed about a months worth of expenses on hand in cash to avoid running into cash flow problems while we figured out other plans.  We have several expenses that can't be easily paid with credit cards - mortgage, HOA, daycare.  So to use "springy debt" for those expenses, we'd have to take a cash advance on our credit cards, which is technically a better deal than keeping cash on hand, but ehhhh.

We are consumer debt free, and our asset allocation includes some cash and some bonds, unlike many here.  So it's all just "money" in various states of liquidity or illiquidity.  We have had several "lost an entire income unexpectedly" emergencies, but you can always liquidate and transfer stock and bond investments in less than a month.

SimpleCycle

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #27 on: April 24, 2019, 05:50:39 PM »

No one avoids the big emergencies, except through pure dumb luck. 

I think there are ways to avoid risk, although they might not be optimal over the long haul.

Taking a job with a stable legacy corporation or the government would seem to reduce risk of unemployment.

Living in a condo minimizes or eliminates the risk of sudden house repairs.

Minimizing or eliminating a driving commute reduces the chance of a sudden, major car repair bill.

I'm mostly thinking about how, if a person really valued reducing volatility in their lives, they'd go about organizing their affairs. 

Luck matters, but it's possible to head off some amount of bad luck.

Sure, you can minimize risk, but you can't avoid it.  Things we have experienced:

-a $4k condo special assessment
-an employer becoming insolvent
-a sudden, unexpected year plus disability

Gator8

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #28 on: April 24, 2019, 06:44:42 PM »
We are currently at  about $7000 in unexpected medical expenses since October with another $2-3k in the coming months. Not easy to deal with for a number of reasons, but having an Emergency fund really helped.

Imma

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #29 on: April 25, 2019, 02:04:48 AM »

No one avoids the big emergencies, except through pure dumb luck. 

I think there are ways to avoid risk, although they might not be optimal over the long haul.

Taking a job with a stable legacy corporation or the government would seem to reduce risk of unemployment.

Living in a condo minimizes or eliminates the risk of sudden house repairs.

Minimizing or eliminating a driving commute reduces the chance of a sudden, major car repair bill.

I'm mostly thinking about how, if a person really valued reducing volatility in their lives, they'd go about organizing their affairs. 

Luck matters, but it's possible to head off some amount of bad luck.

How does living in a condo eliminate the risk of sudden house repairs? You may pay HOA fees, but if the elevator suddenly breaks down and needs to be replaced, or the roof sustains some damage that the insurance company doesn't pay, and the HOA doesn't have that money in their account, you still have to pay for that, right? I know several apartment owners who got stuck with massive bills because something big broke down in their building and the HOA didn't have enough money to cover it. And because you're only 1 out of maybe several dozens of owners in the building, you have a limited say in how much it will cost and which company will be asked to do the work.

One emergency that I haven't seen anyone mention so far, but that has been on my mind a lot recently, is the funeral of a loved one. If that person has no or limited funeral insurance, and no money, this can get expensive quickly. A fairly modest funeral can easily cost 5-10k in here. Even the cheapest type of funeral (cremation, no service, no viewing, not taking home the cremated remains) will still cost at least 2,5-3k. In my country there's not only a moral obligation, but also a legal obligation to pay for a parent's funeral. Even if you're not in touch. If no one claims the body, the city council will take care of the funeral, but they will still try to locate the children to send them the bill.

caleb

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #30 on: April 25, 2019, 07:46:25 AM »
How does living in a condo eliminate the risk of sudden house repairs?

Dealing with risk isn't a dichotomous situation where you either have an unknown/infinite about of risk, or you've eliminated all risk: risk is the likelihood of undesirable outcomes occurring and their resulting costs.

In the example above, living in a condo doesn't eliminate all chance of a big repair bill, but because the costs are shared many ways the expected bill would likely be smaller.

Similarly, in the US we don't often talk about it, but employers' unemployment insurance rates are a function, in part, of past claims by that employers past employees.  The risk of a layoff can never be eliminated, but it can be thoughtfully considered and minimized when deciding whether or not to pursue employment with a particular employer. 

I'm just thinking about how people build lifestyles that have lower levels of risk built in. 

I don't think death is the same sort of risk as the risk I mention above, because over a long enough time horizon it's a guarantee.  The risk seems to arise out of the unknown costs others may, or may not, leave uncovered to fall to you.  In an ideal world, that risk could be turned into a known cost with a constructive, advance conversation, but I realize that's tough and not always going to happen.

brute

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #31 on: April 25, 2019, 07:52:10 AM »
A couple years ago I had surgery, a surprise tax bill, and an air conditioner go out all in the span of a couple weeks. $16k-ish. If I hadn't just had surgery, I would have been able to handle the phone calls and hassles of spreading things out a little more, but it just wasn't happening.

Laura33

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #32 on: April 25, 2019, 08:11:52 AM »

No one avoids the big emergencies, except through pure dumb luck. 

I think there are ways to avoid risk, although they might not be optimal over the long haul.

Taking a job with a stable legacy corporation or the government would seem to reduce risk of unemployment.

Living in a condo minimizes or eliminates the risk of sudden house repairs.

Minimizing or eliminating a driving commute reduces the chance of a sudden, major car repair bill.

I'm mostly thinking about how, if a person really valued reducing volatility in their lives, they'd go about organizing their affairs. 

Luck matters, but it's possible to head off some amount of bad luck.

You can minimize risk, sure.  But you are better off planning your life to be flexible when shit happens than to focus on following a "safe" path and being shocked when you find out it's not as "safe" as you thought.

Stable legacy corporation?  Seen GE lately?
Government job?  All the folks I know have dealt with furloughs, pay-and-hiring freezes, and, oh yeah, underfunded pension plans.
Condo?  The one I used to own had persistent water problems that were the condo's fault but that I had to pay to fix while the insurance companies argued, then there were years of special assessments to pay to fix the problem and sue the builder.  The one I own now has been in litigation against an owner for years for nonpayment of dues, so there's another 3+ years of special assessments as he continues to refuse to pay and files yet another appeal.
No car commute?  Excellent!  But biking or walking exposes your body more to the idiocy of others -- still the lower-risk choice overall, but you are trading the high risk of a car repair for the slightly-higher risk of bodily injury because some idiot opened their door into you.

Yes, it is possible to lower your risks, or to trade one particularly bad risk for another more acceptable one.  That's what airbags are for, that's what insurance is for, that's why people take less money for an apparently stable job when they could chase potentially huge gains at a startup that may not be around tomorrow.  But that should never, ever be your primary focus.  You need to realize that there is no such thing as "safe" -- because, again, shit always happens, no matter how conservative your choices, no matter how much you have tried to insulate yourself, no matter how hard you try to always do the "right" thing.  And it usually comes from somewhere you never expected.*  No person in human history has ever been able to see around all the corners, no matter how hard they try.

The older you get, the more experience you have, the more it becomes plain as day that "safe" is an illusion, and if you let that fear drive your choices, you miss out on life.  In the long run, you will be infinitely better off if you just live the life you want -- if you want a condo because it's cheaper and easier to maintain, buy a condo; if you want a house so you have a yard for your dog, buy a house.  And while you're living your life, assume that bad shit is going to happen at some point, from some direction you will never see coming, and do your best to prepare for it.  Get the level of insurance and emergency fund and car/bike safety features you want; eat right and exercise and take care of yourself.  And then work on building up your resilience, so that when inevitable happens, you don't go deer-in-headlights but are instead emotionally prepared to just deal and get on with it.

*Ask me how I know.

use2betrix

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #33 on: April 25, 2019, 08:13:23 AM »
My emergency fund fluctuates between around $30k and $70k. My work as a contractor can be more volatile depending on my project length, anywhere from a few months to a couple years. The job security is also less in general.

On a project a few years ago, a multi billion dollar project that was already 30% complete was completely shut down (and is to this day). I received a call saying they were shutting down the site and to come pick up my things the next day. Over 5,000 people let go. Granted - thatís only happened once, but I was glad I had enough savings to take a several month, 8000 mile North American camping trip with my wife the week after getting the call.

Right now, my income and job security is strong and it looks like Iím guaranteed 2 years of work, barring me messing something up. Because Iím not overly impressed with the market right now vs my time to FIRE, Iím fine with our $70k emergency fund, which is around 12-15 months living expenses, depending what I were to do with that time. If I was let go today, weíd easily take 3-6 months off and travel (I wouldnít even feel too bad about getting let go, unless it was performance related, which Iíd be hard on myself over).

If another strong market dip comes along Iíll dump some extra in (I put in $20k extra on December 24th, 2018 when VTSAX dropped below 60, per my plan at that time). In the mean time, Iíll just keep my emergency fund high for that comfort and investing the rest.

caleb

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #34 on: April 25, 2019, 08:28:08 AM »
Yes, it is possible to lower your risks, or to trade one particularly bad risk for another more acceptable one.  That's what airbags are for, that's what insurance is for, that's why people take less money for an apparently stable job when they could chase potentially huge gains at a startup that may not be around tomorrow.  But that should never, ever be your primary focus.

I disagree.  Risk preferences are preferences like any other.  The risks are at least roughly knowable, and can be accounted for.  Saying that people should not account for risk in life choices is like saying that everyone should always be 100% in equities because bonds usually produce lower returns over an extended time horizon.

Some may prefer to take on greater risk and be compensated with a risk premium.  Others may prefer to take on less risk and forego that premium.  Both are choices, and if undertaken with both eyes open, the outcomes should be expected rather than creative of emergencies.

However, I'm not going to tell someone else what their risk preferences should be.

formerlydivorcedmom

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #35 on: April 25, 2019, 09:15:42 AM »
I forgot another one - one of the years we had substantial unplanned medical expenses we also had to file for emergency custody of my stepdaughter.   A situation that we thought was stable turned out to not be, so my husband had to intervene.  The order the parents agreed on (which was roughly 50/50 custody) had worked for 9 years...and then it didn't, so now my husband has primary custody.  That was about $5k in legal fees, and we knew there was a possibility we'd have to spend about three times that if the first hearing hadn't gone our way.

There is a lot that can be done to mitigate risk.  But no measures are infallible.

Friends of mine, mid-30s, healthy, with lots of kids and great jobs found out last year that he had stage 4 colon cancer.  It's very rare among young people.  They are hitting their annual out-of-pocket limit for medical expenses, and he is no longer able to work.  She had the better job, but she's having to take a lot unpaid time to help take care of him.  It's a huge chunk of money, and they are grateful they had a solid emergency fund and a lot of investments they can pull from right now. 

ElleFiji

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #36 on: April 25, 2019, 10:09:43 AM »
Yes, it is possible to lower your risks, or to trade one particularly bad risk for another more acceptable one.  That's what airbags are for, that's what insurance is for, that's why people take less money for an apparently stable job when they could chase potentially huge gains at a startup that may not be around tomorrow.  But that should never, ever be your primary focus.

I disagree.  Risk preferences are preferences like any other.  The risks are at least roughly knowable, and can be accounted for.  Saying that people should not account for risk in life choices is like saying that everyone should always be 100% in equities because bonds usually produce lower returns over an extended time horizon.

Some may prefer to take on greater risk and be compensated with a risk premium.  Others may prefer to take on less risk and forego that premium.  Both are choices, and if undertaken with both eyes open, the outcomes should be expected rather than creative of emergencies.

However, I'm not going to tell someone else what their risk preferences should be.

I'm not sure if I understand your point. Are you saying that you can foresee and mitigate your risk of an emergency, without having an emergency fund?

There might be countries with a rigorous enough social support system to allow this. But I know Canada isn't one of them.

Catastrophic neurological illness with no known cause or risk factor
Entire families lost in plane crashes or fires
A family member needing 24/7 care

Divorce
Random acts of violence
An entire sector crashing (dot com, real estate)
ņ car, bus or toboggan accident causing sudden parapalegia.


I would love to know that an emergency could be avoided. Odds are low, but I don't have the hubris to assume that the unexpected won't happen to me


caleb

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #37 on: April 25, 2019, 10:30:01 AM »
I'm not sure if I understand your point. Are you saying that you can foresee and mitigate your risk of an emergency, without having an emergency fund?

Oh no, not at all.  In the context of an emergency fund, I suppose all this means is that it would be prudent to at least have cash or cash-ready reserves proportionate to risks that include employment volatility or car dependency.

Lots of people have mentioned medical issues, which in many cases are going to be pretty unforeseeable.  Do people think of an HSA as part of an emergency fund?

Laura33

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #38 on: April 25, 2019, 02:22:09 PM »
Yes, it is possible to lower your risks, or to trade one particularly bad risk for another more acceptable one.  That's what airbags are for, that's what insurance is for, that's why people take less money for an apparently stable job when they could chase potentially huge gains at a startup that may not be around tomorrow.  But that should never, ever be your primary focus.

I disagree.  Risk preferences are preferences like any other.  The risks are at least roughly knowable, and can be accounted for.  Saying that people should not account for risk in life choices is like saying that everyone should always be 100% in equities because bonds usually produce lower returns over an extended time horizon.

Some may prefer to take on greater risk and be compensated with a risk premium.  Others may prefer to take on less risk and forego that premium.  Both are choices, and if undertaken with both eyes open, the outcomes should be expected rather than creative of emergencies.

However, I'm not going to tell someone else what their risk preferences should be.

The bolded part:  if you think you can foresee and account for all risks with reasonable accuracy, well, more power to you.  IME that kind of thinking springs from either naivete or hubris.

The italicized part:  where, exactly, did I say people should ignore risk?  All I said is that the feeling that you can avoid all risk should not be the primary driver behind your decisionmaking -- because even the "safe" options have risk.*  So live your life the way you want to live it -- including accepting a level of risk that is comfortable for you -- but don't let your desire for the illusion of safety keep you away from the things you actually want.  My advice was to consider the risks that come along with whatever path you choose and take reasonable steps to mitigate them appropriately -- but also to understand your own inability to foresee all the bad things that can and will happen no matter how safe you play it.   

Again:  Every choice has risks.  No person can see them all before they hit.  No plan is ever perfect, no life unscarred.  So make reasonable, informed decisions that you believe will help you reach your life goals; take reasonable steps to identify and mitigate the risks that come along with that choice; and then assume that your best-laid plans will fail at some point, and build your internal resilience so you are as prepared as you can be when that day comes.

*You know what was a "safe" job when I was a kid?  Working in the steel mill.  Good salary, good benefits, nice pension, etc.  In retrospect, it's laughable -- but none of those employees foresaw the economic forces and relative peace that led the companies to offshore their work, lay off their people en masse, and then default on their pensions after the employees were too old to work any more. 

Jon Bon

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #39 on: April 25, 2019, 02:35:19 PM »
Never had to use an EF, granted I have never really had an EF. I have always had some level of unobligated cash so I guess that counts? Usually It builds up into a nice little pile and I invest it all or nearly so and it piles up again.

Any emergency I have always been able to cash flow. Also having large HSA balances helps. Not sure if those are considered part of EF's or not?


bestname

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #40 on: April 25, 2019, 03:16:15 PM »
Plumbing emergency!

deborah

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #41 on: April 25, 2019, 03:43:07 PM »
My question to help you think about worst case scenario is:

If you got in a car accident due to no fault of your own and your vehicle was totaled and you hit your health insurance deductible and you couldn't work for 6 months, what would happen?


I said $10-15k but we really had more like $44k at the beginning of 2018. Our scenario since January 2018 was that one vehicle was totaled while we were house hunting and I was undergoing many medical tests to investigate a chronic issue. We replaced that vehicle and then our purchase offer was accepted on a house. So we tapped the savings for both the car (Jan/Feb) and the down payment (plus related moving costs) (March/April). Medical tests continued and I was told surgery was my best option. So I had surgery the week after we moved (April). I got disability checks for my first 8 weeks not working after surgery (was supposed to be 6 weeks but I was still having extreme pain and trouble walking after surgery) (April/May). And I got the bill for the surgery and hit my $3k deductible between all the tests and doctor visits. Then when I tried to go back to work, the medical issue worsened and my surgeon cut me to 3 hour work days (June). Disability would not pay me until they completed an "investigation." So down to partial pay from June until... wait for it... October. We were fine on emergency saving and my husband's salary, and I eventually got the back pay from the disability insurance, but it took until I was back to work full time for them to decide I had been disabled during that time. Sigh. So, you just never know.
This. But falling through the cracks. I lost at least $70,000 from my accident, even though I was insured, and live where accident insurance automatically pays income loss (if you have more than 6 months of work history in a similar situation - Iíd just moved from employment to contracting) and the health costs were effectively free.

Laserjet3051

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #42 on: April 25, 2019, 03:53:55 PM »
As this, and other threads like it demonstrate, there is much hubris and/or naivete when it comes down to identifying and managing risks. Personally, I have no interest in convincing anybody of anything, but I have, and do state my positions in order to inform and educate others. Don't agree with it? Not my concern.

Good luck to all.

BicycleB

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #43 on: April 25, 2019, 04:10:06 PM »
So if risks cannot be controlled, how much do add to your stash besides the 4% rule to account for risks that don't appear in your normal spending?

deborah

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #44 on: April 25, 2019, 05:03:21 PM »
We are talking about emergency funds. You shouldnít need to increase your current stash for emergencies. They happen rarely enough that you should be able to take the hit. You should, however, include reasonable funds in your stash for maintenance - of yourself, your home and anything else that will need it. A car engine blowing up is usually a maintenance failure rather than an emergency.

BicycleB

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #45 on: April 25, 2019, 06:07:51 PM »
We are talking about emergency funds. You shouldnít need to increase your current stash for emergencies. They happen rarely enough that you should be able to take the hit. You should, however, include reasonable funds in your stash for maintenance - of yourself, your home and anything else that will need it. A car engine blowing up is usually a maintenance failure rather than an emergency.

The talking about the emergency funds included several cases in the 20k-70k range, which is a different level than just "taking the hit" as part of my typical 20k of annual spending that my stash is designed to cover. An expense of that size could mean draining 5% to 15% of may stash, perhaps reducing my safety by a measurable amount. Since this emergency discussion included examples of thse larger expenses, I'm trying to find out how other people account for such expenses in their planning.

Cases I've considered include:
-Alzheimer's
-Other terminal illness

The cases I've included, I decided "these things usually kill you, I don't need a 30 year timeframe after they start, I'll just withdraw what's needed when it's needed and my heirs will get a smaller inheritance." But these larger unexpected expenses followed by decades of fine living...just want to make sure I'm reasonably covered.

People offering the 20k-70k emergency examples, how do account for such things in determining your stash size?
« Last Edit: April 25, 2019, 06:10:32 PM by BicycleB »

caleb

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #46 on: April 25, 2019, 06:44:46 PM »

The bolded part:  if you think you can foresee and account for all risks with reasonable accuracy, well, more power to you.  IME that kind of thinking springs from either naivete or hubris.

Here we are again thinking of risk as an all or nothing deal.

I think you're taking me to be saying more than I am. 

Here's what I'm saying.  Risk is denominated by the process of assessing and accounting for the less-than-certain but-still-possible parts of our lives.  The more of the uncertainties in our lives we can account for as risk (anticipated but uncertain outcomes), the better.  Accounting for risk does not dictate particular outcomes, it only means a rational implementation of individual preferences.

On the other hand, "emergency" is basically the category of the unknown that we don't account for as risk.  It's the unanticipated, or totally unforeseen.

My position is that its reasonable to take a rational stock of as much as possible to assess it as risk and account for it through our behavior, while making the chaotic category of the emergency (which is negatively defined as unforeseen) as small as possible.

I don't see that as hubristic, unless the gods have more of a place in your life than I want to allow them in mine.

deborah

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #47 on: April 25, 2019, 06:57:44 PM »
My grandmother lived to 98, after being diagnosed with Alzheimerís at 80. So she spent 18 years in Alzheimerís accommodation.

I looked at what I spent for 5 years, and decided on my stash requirements based on the larger expenditure years - when maintenance requirements were at their highest. Apart from maintenance, my expenses didnít fluctuate much. As my expenses went down in retirement (like a number of others have also said), this would be enough to go through such an emergency, if I had something similar happen again.

Parizade

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #48 on: April 25, 2019, 07:01:08 PM »
I spent several thousand dollars on repairs to my Toyota thinking I would drive it for another 5 years, and had just put 4 new snow tires on the vehicle because it was November in Minnesota. Then, on a dark stormy night on a remote stretch of road with no streetlights a deer jumped in front of my car. The insurance company determined the car was totaled and i was stuck with no car, so I had to use the last $7000 in my emergency fund to buy a new/used car.

js82

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Re: What is the most you have needed for an Emergency Fund and why?
« Reply #49 on: April 25, 2019, 07:04:23 PM »
I don't have a large traditional "emergency fund", but I have enough money in my taxable brokerage account that could be liquidated in a couple days with minimal capital gains, that it's pretty much moot.  Even a small(10%) allocation to bonds/similar investments in my taxable account is enough to cover pretty much any possible emergency.

In the U.S., I can't think of an "emergency" situation where a couple thousand in checking/savings, plus a good amount of available credit, plus money in a brokerage account accessible within 2-4 days wouldn't be sufficient to handle things.

Note:  I define "emergency" as a true, urgent emergency - i.e. needing money NOW NOW NOW because your car was totaled and you need a new one so you can drive to work, or you need to pay a contractor because a pipe burst in your house and you need to get things fixed ASAP.  Longer-run things like chronic illness are a different matter, and in most cases are better served by getting ahead of things via early, efficient investing rather than keeping money in a more-liquid but lower-returning form.
« Last Edit: April 25, 2019, 07:12:49 PM by js82 »