Author Topic: When have you actually had to use emergency fund?  (Read 22088 times)

Kiwi Mustache

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When have you actually had to use emergency fund?
« on: May 26, 2016, 11:05:33 PM »
I've never been sold on the idea of an emergency fund. People say they use it for medical bills (had these recently, paid $2000 for them, no problem), unexpected car bills (had several $500-1000 bills over last decade, no problem) or job loss (haven't had one of these so can't comment).

I figure why put money aside if you have it sitting there for decades? I'm thinking of putting it into index funds if I did have one so at least I'm keeping up with inflation, my other savings all go into paying back mortgages and buying further rental properties.

Thoughts?

englyn

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Re: When have you actually had to use emergency fund?
« Reply #1 on: May 27, 2016, 12:27:27 AM »
Me either. I've always had either savings sitting around (in a to-be-invested or a to-be-house-deposit fund or a mortgage offset) or at worst had to pay for something on credit card and pay it off in full the next month. I've paid for 2 periods of several months' unemployment from mortgage offset.

If you're paying back the mortgages faster than required anyway, and you have any offset accounts, chuck an emergency fund in there. In your case you might need cash fast to cover for tenant damage / vacancy, and that kind of emergency fund can double for any other kind of emergency.

And, yikes, think seriously about diversification, you sound like you may be very tied to a local residential property market.

hodor

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Re: When have you actually had to use emergency fund?
« Reply #2 on: May 27, 2016, 12:54:27 AM »
Just like any form of insurance it's a complete waste of money, until you need it.

Dicey

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Re: When have you actually had to use emergency fund?
« Reply #3 on: May 27, 2016, 12:58:37 AM »
A few of the biggest reasons are catastrophe (i.e. natural disaster or house fire), job loss and medical expenses.

When I had cancer at age 22, I was damn glad I had one. After I finished treatment, I took a vacation before I returned to work, because I needed to feel like myself again. My EF allowed me to do that, even after I'd paid my 20% share of the medical costs. So unbelievably, incredibly worth it.

Playing with Fire UK

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Re: When have you actually had to use emergency fund?
« Reply #4 on: May 27, 2016, 01:50:06 AM »
I'm more concerned about having access to more than one current account with a typical month's bills and spending in it than having a single account with months of bills and spending in it. I've been blocked from my accounts due to fraud, hacks and my own errors multiple times, but never needed an efund since I've been on the mmm train. If something big needs funding I'll sell some investments.

If I was only saving in a retirement plan and wouldn't have access to the money immediately, I'd have a separate investment fund that I could access any time.

muckety_muck

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Re: When have you actually had to use emergency fund?
« Reply #5 on: May 27, 2016, 03:18:54 AM »
We needed a new roof one time, that was a big expense we weren't anticipating (home inspector said it looked good but maybe needed a few patches... but after living there a few months we realized it was actually really old and a few patches wouldn't fix it).

Otherwise I think we have generally cash-flowed everything else or had a sinking fund for expected expenses (planned home renovations, travel, etc)

But- we've never had job loss, a catastrophe/natural disaster of any kind, our parents are all still alive (so no last-minute funeral/medical/estate expenses to deal with), have been relatively healthy with no major medical events in the past 10 yrs except childbirth - fully covered by insurance, etc. Haven't lost a spouse. I feel like that would be a big one. Loss of a 2nd income permanently would be pretty detrimental especially because one would probably need to take a (unpaid) leave of absence from work for a while. Our siblings are financially stable so we don't have them asking us for money either. Lucky overall I guess!

little_brown_dog

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Re: When have you actually had to use emergency fund?
« Reply #6 on: May 27, 2016, 05:32:54 AM »
Baby's unexpected hospital bill - $1000 after insurance

Our efund is just our cash savings, about 3 months worth at any given time. We could have easily pulled money directly from the checking account to cover it, but it was nice to just take it from the savings and not even have to think about whether the checking account balance could cover it ontop of our usual expenses.

While we are lucky that we can just cover major issues like this no problem in our general cash flow, it is important to remember not everyone has an income so high/expenses so low that they can do that. I would hazard to guess most people have incomes that would require some type of emergency savings for a $1000 unexpected expense. So in general, the efund is probably one of the smartest generalized saving strategies for people of all income levels.

Paul der Krake

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Re: When have you actually had to use emergency fund?
« Reply #7 on: May 27, 2016, 05:49:04 AM »
Car accident- had to buy a new one before the insurance company paid out the claim.

ender

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Re: When have you actually had to use emergency fund?
« Reply #8 on: May 27, 2016, 05:51:28 AM »
This is something I've thought about. We are buying a house, which will drop our actual cash on hand a lot - when you have $60k cash around you don't really even think about uses for your emergency fund since.. well you have multiple years of living expenses saved, in cash.

But now, we're going to have a much more normal 3-6 months emergency fund (well, we could pull tons of Roth principle too if we had to). We have quite a bit in HSAs which covers medical and have been building a car fund, which means the emergency fund will cover basically major home repairs and job loss (that we think of at least :o). And job loss is partially offset by unemployment, assuming I would not get fired.

meerkat

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Re: When have you actually had to use emergency fund?
« Reply #9 on: May 27, 2016, 05:56:43 AM »
  • Debit card got hacked and I had to wait on a new one to arrive in the mail. In this case my emergency fund meant being able to easily withdraw cash to get me by for a few days. (This was before I had a decent credit line going so I only had one other card with a low limit.)
  • The dog hurt her paw requiring stitches and staples (and therefore anesthesia) forty-eight hours before our cat passed away (which we had the vet perform since the cat would have had a long, painful death at home otherwise). That was a fun week.
  • As others have said, hospital bills and plane tickets for a funeral. With hospital bills the billing system takes so long to get its act together that you do at least have some warning that it's coming, so depending on your cashflow you can immediately start putting some aside after the hospital stay and hopefully will have accumulated enough by the time the invoice rolls in. (Be sure to call and ask if the invoice really truly reflects all charges, I recently called and was told some stuff was still pending with insurance so I opted to wait and pay later when they had the full total. They had no problem with this.)
  • Car issues less than a month after replacing our roof, which itself was a semi-emergency situation since a hole developed and it wasn't worth patching the hole just to replace the roof in a couple years like we had originally planned.

boarder42

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Re: When have you actually had to use emergency fund?
« Reply #10 on: May 27, 2016, 06:00:00 AM »
i dont have a typical E fund.  i have all my money invested - my roth is now 6 years old so i will have 5500 this year and that will grow annually.  i have an HSA for all medical bills as most americans on this forum should have maxed out. i have taxable investments i can tap prior to tapping my roth if something devastation came up. the opportunity cost to not invest this money on the outside chance something MIGHT happen isnt worth it to me.  I would invest it in indexes if i were you.  you may have to sell for a loss (THE HORROR) but more than likely you will come out ahead b/c you'll never tap it, our jobs are very secure and if one of us lost our job we can survive on the other's salary.  everyone is different and we have high enough incomes that allow the luxury of not keeping a typical E fund. 

happy

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Re: When have you actually had to use emergency fund?
« Reply #11 on: May 27, 2016, 06:13:44 AM »
Never actually.  I have multiple available sources of credit should I need it -  cc, line of credit and capacity to redraw from mortgage.
Last "emergency" my son totalled my car. I made sure the replacement car equalled the insurance payout.  The only need for money was bridging whilst awaiting the cheque from the insurance - used cc, then paid that off with low interest line of credit… then the cheque came within a week or two. Cost me way less than $100 in interest.

nobody123

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Re: When have you actually had to use emergency fund?
« Reply #12 on: May 27, 2016, 09:40:25 AM »
We have an emergency fund for two reasons: 1. Job loss or 2. Catastrophic medical event (cancer and heart disease, which runs in both of our families).  Luckily we've never had to pull anything significant out of it yet.


kite

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Re: When have you actually had to use emergency fund?
« Reply #13 on: May 27, 2016, 10:27:38 AM »
I think about what kind of emergencies could happen to me, and how do I handle each?  My E Fund isn't one pile of cash.  It's spread across a few accounts.
For one, we have an HSA.  The first $2000 of which is cash, the remaining balance is invested.  But all of it is for medical emergencies.  We pay routine co-pays out of cash flow, and will reimburse ourselves out of the HSA in retirement, treating it like an IRA.  But if we had a sudden medical event that eclipsed our ability to use cash flow, we're covered. 

Then there is the "stuff happens" fund.  This is for the new tires, transmissions, felled trees, bail money (jk) kind of unplanned expenses that only in retrospect are actually irregular life expenses and not genuine emergencies. 

We have a HELOC that we would tap for big housing emergencies.  I bought my first house the year Andrew hit Florida.  I remember news reports about how the homeowners with HELOCs were able to get work started a whole lot sooner than those who had to wait for insurance or FEMA money.  So when I could, I protected myself the same way.  Now that we have income property, this has proved quite useful.  Hurricane Sandy hit my state very hard.  I know of a few homeowners who had their insurance money within days, and others who are still waiting.  They couldn't use their EF to rebuild because they needed it to rent somewhere else. 

Lastly, there is my spouse's IRA.  Much of it is cash equivalent.  His risk tolerance is different from mine.  Our total portfolio is balanced, but his is at least 50% cash.  If we had to, we'd draw that down.

Besides natural disasters and medical events, we faced the other likely need for an EF.  Job loss.
I had a job loss in 2008 that was unexpected and lasted 13 months.  Unemployment benefits covered the mortgage and health insurance, but nothing else.  Faced with uncertainty about how long the 2008 market implosion would last, we wanted to ensure our savings and investments lasted as long as possible. I'd thought I was frugal before, but this experience caused me to rethink and challenge assumptions, to see just how little we could live on.  Broken appliances didn't get replaced out of the shit happens fund, because we needed that money to eat.  8 years later with a very full economic recovery, we still have not replaced the microwave or dishwasher.  No problem.  Easy to live without.  The other thing we learned was that buying in bulk revealed itself to be a folly for our situation.  Do I take money out of the market, at the bottom, to invest it in rice, chicken parts or toilet paper that I won't use for weeks or months?  On a small scale, this is trading equities for commodities.  Commodities, in the case of perishable foods, that cost money (running a freezer) to own.   

Having been an adult thru a few extended market downturns, including the one that took my job, I see what's wrong with thinking index funds will always go up, up, up.  They don't.  The worst position to be in is to face several unexpected expenses all at once in a market bottom, where not only is the value down, you've also wiped out your own recovery potential. 

Finally, and most importantly, my most valuable emergency resource is personal relationships.  Friends and extended family members who'll know when i've faced an emergency and help with a chainsaw, shop vac, cash advance, meal or shoulder to cry on.  It's not all about the money.

BigHaus89

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Re: When have you actually had to use emergency fund?
« Reply #14 on: May 27, 2016, 12:37:48 PM »
I've never really had an E fund and have not had the need for one. I have a lot of resources I can pull from if need be. Roth IRA, 401k Loan, credit cards, investments, significant other, family, etc. Granted, I have only been out of college 4 years and my job is very,very secure so I am fortunate in many aspects. I still have student loan debt so I don't feel the need to have money sitting on the sidelines.

MrsDinero

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Re: When have you actually had to use emergency fund?
« Reply #15 on: May 27, 2016, 12:43:17 PM »
Since I've actually had an ER fund, 0 times.

Before I had an ER fund I can think of 4 "emergencies" where I could have really used one:
1)  hot water tank blew in the middle of winter, didn't have money in the budget for a replacement
2)  one of my parents had a stroke, was in ICU (they are fine now), but needed a plane ticket and rental car asap
3)  Money for car insurance deductible
4)  Debit card was stolen and checking account was wiped out.  I had to borrow money from my parents until I could get everything reinstated.

SimplyMarvie

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Re: When have you actually had to use emergency fund?
« Reply #16 on: May 27, 2016, 01:25:40 PM »
We DO have an emergency fund. At the moment, we budget to keep only revolving monthly expenses in our checking account and have most of our savings in retirement accounts that are hard to touch if we need cash quickly. (Because we have yet to fully max out the tax advantaged accounts.) We also live at least a $1200 plane ticket away from family in an emergency, and while we are only temporary residents of the country we're living in so if the excrement hit the rotating blades for any reason (natural disaster, civil unrest, medical crisis for one of us), we would need to front the costs an evacuation until my work benefits kicked in. We also have kids, aging cars, and other unexpected crises.

We have a general line of credit with our bank for $20,000. That occasionally gets used for big purchases, travel, etc. and so isn't always at a $0 balance. (and really isn't right now, ugh. Home leave and international moves are expensive, and I am only a padawan here.)

We have a $1000 cash emergency fund for things like dental work, large car repairs (the day my aging but beloved car blew a head gasket... *sigh*) that are beyond what we can manage within our regular budget. This gets 'refilled' the next payday, and we just live with lower means that month, so it's kind of an over-flow cash on hand. If we budgeted differently, we wouldn't need this, but it prevents us from not meeting our savings/debt payment goals that month. I suppose we could use the card for this, too... but a) cash makes me feel safer and b) it's kind of a cash economy out here in the wilds.

Ideally, I would also have one high limit credit card stashed in our evacuation bags that is never, ever, ever touched and ready to go if Putin rolls through here with a tank or a volcano randomly explodes. Sadly, the card I was using for this has an unexpected 'feature' that it puts a hold on the account if it isn't used for a swipe purchase for 30 consecutive days. So I am card shopping.

mies

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Re: When have you actually had to use emergency fund?
« Reply #17 on: May 27, 2016, 01:42:08 PM »
I've dipped into emergency savings a couple of times. In 2008, I was rear ended by drunk driver on the interstate and my car was totalled. I lived 25 miles away from work at the time so I had to replace my car. The amount of money I got for my old car was not quite enough to cover the comparable car to replace it, so I took like $3,000 out to cover the difference. No worries. The car I bought was a year newer and had half the miles of the one it was replacing. It seemed like a good deal.

I also lost my mind at the job I had in 2009 and walked out the door in frustration never to return again. Part of that was probably from the head injury I got from the drunk driver hitting me in 2008. I didn't have any backup plan or job lined up so I dipped in to my funds again. It only took me about a month to find a new job, but having a couple of years worth of expenses in the bank made the decision to leave that stressful job much easier. I have no regrets.

Laserjet3051

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Re: When have you actually had to use emergency fund?
« Reply #18 on: May 27, 2016, 02:40:48 PM »
The hubris from some of you very lucky folks is remarkable. Job loss and extended unemployment can and does happen, to highly credentialed, experienced professionals. Until you've gone through it personally, you can understand just how vital an e-fund is. And if you have children to feed and clothe, during said downtime, that fiscal lifeline takes on a whole new dimension of value.

Where you place your e-fund is up to you, but insuring yourself against catastrophe is important.

Kaydedid

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Re: When have you actually had to use emergency fund?
« Reply #19 on: May 27, 2016, 02:58:59 PM »
Sewer or water line breakage on properties you own.  Our water lateral burst, right on the edge of our property, and was ~3k to fix.  Not a big deal, but if the sewer line went, it'd be >~8k to fix, which would definitely be efund time.  In general, you don't have much warning for these breaking, and they need to be fixed ASAP.

Cassie

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Re: When have you actually had to use emergency fund?
« Reply #20 on: May 27, 2016, 03:17:43 PM »
WE have had one our entire lives. WE have used for medical bills, job loss, plane tickets to visit sick parent, expensive vet bills and probably more that I can't remember from the past 40 years.

BrickByBrick

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Re: When have you actually had to use emergency fund?
« Reply #21 on: May 27, 2016, 03:37:12 PM »
I've noticed a recent surge in FIRE articles coming out against emergency funds.  I don't get it.  Their argument usually boils down to they would just take the money from one of their taxable investment accounts or something if they needed it - to which I say you're just splitting hairs at that point.  I don't care where it comes from so long as it's relatively liquid.

Others argue they'll just use a HELOC or even consumer debt (cc), which seems counter-intuitive if you are including job losses, incapacitation, death of a spouse, etc. in your emergency fund contingencies.

I have not had to use mine yet, but I'm currently facing an uncertain job situation along with many of my co-workers.  While most of them are anxious I basically just shrug, because I have plenty of margin until the next job if a layoff came tomorrow.

Paul der Krake

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Re: When have you actually had to use emergency fund?
« Reply #22 on: May 27, 2016, 04:24:09 PM »
The problem with selling investments is that you are likely to need the money in an economic downturn, therefore selling at depressed prices. Tax efficiency typically dictates that you place bonds, who are less subject to steep declines, in the tax-advantaged accounts, where they are less accessible.

I envy homeowners who have access to a no-fee or low-fee HELOC at rates barely above inflation. For the rest of us, the prudent move is to keep a couple thousands in a high yield savings account.

Dezrah

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Re: When have you actually had to use emergency fund?
« Reply #23 on: May 27, 2016, 04:37:44 PM »
Yes, we blew through ours.

A new job wound up being a bad fit.  We had no income for about 6 months before we got the momentum to get another job.  Using the EF meant that we DIDN'T have to borrow money from relatives so I had the right to politely tell them to fuck off whenever people wanted to get in our business.  We figured it out for ourselves eventually.  THAT was the real value of an EF.

Sailor Sam

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Re: When have you actually had to use emergency fund?
« Reply #24 on: May 27, 2016, 04:41:36 PM »
I keep ~2k in a regular savings account, which I uses as slush fund. That's where events like car repair and floating bills from business travel comes from.

I keep another 50k in a money market fund. I recognize that keeping that much cash is an emotional decision, and that my feeling of security is nothing but a perception. However, the cash does make me feel secure. I don't feel the same level of comfort when I think of my cushion being a HELOC or credit cards.

As a kid, the septic field attached to my parents house failed about 2 weeks after they purchased the house. The city demanded they pay 9k for some sort of bill, that very day, or face the Health Department declaring the house unlivable. They ponied up, and it made an impression on me. I've used my personal fund to provide lost wages to a family member who's laid up due to pregnancy. I'm happy to help, and very happy I didn't have to sell any securities to cover the expense.   

BlueHouse

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Re: When have you actually had to use emergency fund?
« Reply #25 on: May 27, 2016, 06:10:10 PM »
I keep a lot of cash in savings/checking.  I don't usually think of it as an e-fund and things that have come up (car accident,  home repair items, etc) have been covered out of savings.  I think of them as common things that happen in life. 
I haven't had a major medical expense ($1500 was my tops) and if I did have long-term unemployment or major medical catastrophe, I would be devastated to lose that money, because I think of it as part of my stash.  I cash flow my life out of those accounts.  Once something's in one of my retirement or investment accounts, it's not coming out until FIRE unless something very very very bad were to happen. 

Mongoose

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Re: When have you actually had to use emergency fund?
« Reply #26 on: May 27, 2016, 06:34:32 PM »
We're currently using part of an emergency fund to give ourselves a chance to realign income streams after job losses. We've been able to have some extra freedom to take lower paying but low stress jobs while we try to reset what we are doing. Not saying life is ideal but it would suck badly without a cushion of easily accessible savings.

Miss Piggy

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Re: When have you actually had to use emergency fund?
« Reply #27 on: May 27, 2016, 07:52:01 PM »
Do his and hers motorcycles count?   ;)

Seriously, I don't think we've ever used our emergency fund for anything that felt like an emergency. Maybe that's the point...if you have the money available, any valid expense is just that--an expense. I guess when you don't have the money available, then it could feel like an emergency.

worms

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Re: When have you actually had to use emergency fund?
« Reply #28 on: May 28, 2016, 12:43:23 AM »
I have a "Bills" account that doubles as an emergency fund - I transfer cash into it at the start of every month, itemised for the monthly equivalent of every monthly, quarterly or annual bill. The transfers are automatic deductions from my main account and I update these whenever the bill comes in higher than previously.  Over time this leads to a significant sum sitting there against future bills and this provides an emergency cushion. 

If I need to dip into the bills account for an unforeseen cost, then I retain the sum as a negative figure in whatever account has required it - for example, I paid my father's funeral costs last month by credit card and was able to pay off the card by transferring from the bills account.  Although the card company have my balance as zero, my finances show a -£4,500 sum on the card account until that is either paid back out of his estate or I have it paid off by increased monthly savings.  Crucially, though, it helps me concentrate my mind on the fact that I still have a debt that needs repaid from somewhere and that my bills account is owed the money.

mpg350

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Re: When have you actually had to use emergency fund?
« Reply #29 on: May 28, 2016, 04:44:48 AM »
The only times I have had some large bills come up were all related to home repairs.
 
Needed a new a/c was around $3800

Some wood repair for house $2,000+

Some $400-500 car repair issues over the years but these are the ones I can remember...will at one point
need a new roof that will be around $5,000+

IceNine

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Re: When have you actually had to use emergency fund?
« Reply #30 on: May 28, 2016, 05:57:32 AM »
Just recently had transmission rebuilt in one car, new rear end in another car, emergency tree work all within 6 weeks.
$6000.  I'm sure glad I had an E fund.

Zamboni

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Re: When have you actually had to use emergency fund?
« Reply #31 on: May 28, 2016, 07:30:48 AM »
Loved one had a house electrical fire start while at work during the day, lost pretty much all possessions, didn't have renter's insurance, and didn't have an e-fund. The shear emotional trauma kept him from thinking straight, and the financial stress wasn't helping. I was very glad I had an emergency fund then, as it was nice to be able to help out.

I only keep a few thousand completely liquid in savings but have 6+ months in my Roth that I could tap. Besides medical, unemployment, and car accidents, things that could happen:
1. On the plus side, someone could suddenly need money for a good reason, like qualifying for world championships or some kind of awesome opportunity abroad. Usually there is some lead time for getting this money, but it's nice to just have it.
2. Another family or personal catastrophe, like the fire.
3. Someone I love could end up in jail and need to be bailed out. Don't be too high horsey about this: sometimes completely innocent people end up in jail.
4. Zombie apocalypse.
« Last Edit: May 28, 2016, 10:35:11 AM by Zamboni »

Jaguar Paw

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Re: When have you actually had to use emergency fund?
« Reply #32 on: May 28, 2016, 09:07:18 AM »
I wonder how much much people keep in checking and savings for "emergency fund". I only put it in quotes because it may not be called an ef but if it's in the bank doing close to nothing, it's really all that it is. I know this would vary greatly based on lifestyle, kids, job stability etc. for example, we have around 6 months in savings which I think is way too much as wife and I both have jobs we love and we would have to commit criminal acts to lose.

SimplyMarvie

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Re: When have you actually had to use emergency fund?
« Reply #33 on: May 28, 2016, 09:53:09 AM »
I wonder how much much people keep in checking and savings for "emergency fund". I only put it in quotes because it may not be called an ef but if it's in the bank doing close to nothing, it's really all that it is. I know this would vary greatly based on lifestyle, kids, job stability etc. for example, we have around 6 months in savings which I think is way too much as wife and I both have jobs we love and we would have to commit criminal acts to lose.

I think you're on to something here and that what we think of as our Emergency Fund is just what other people keep as slush money in their checking accounts. Perhaps it's semantics... but Mr. Marvie is dealing with some bad money memes from his family of origin and his default is money in checking = money he can (and should!) spend, before it goes away. So  for us, anything that is not in the monthly spending budget cannot just hang out in checking as a slush fund for the pay period where we have an unexpected expense. It has to be moved over to an Emergency Fund (that the Mister doesn't have regular access to) so it doesn't get spent on donuts and video games.

Also, liquidity is a BIG issue. If work said "Get your kids on next plane out!", or someone was in a terrible car accident (medical bills must be paid upfront before services are rendered here) I do not have time to wait for it to be business hours in the US, call my broker, put through a stock transaction, and wait for the money to hit my account in 24-48 hours. Our Emergency Funds are things I can access any time, day or night, in under an hour.

If you don't need that sort of thing, great! I'm super glad for you... but I also kind wonder if you've fully and carefully considered the potential for unexpected peril to strike your life. ;)

ender

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Re: When have you actually had to use emergency fund?
« Reply #34 on: May 28, 2016, 09:58:21 AM »
Realistically you can also use a credit card pretty trivially to float most expenses for the few days while you do the transfer, should you have to sell/withdraw from a taxable account.


ShortInSeattle

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Re: When have you actually had to use emergency fund?
« Reply #35 on: May 28, 2016, 10:50:58 AM »
We've been lucky in that we never needed to use ours. But I was glad to have it, primarily in case we ever experienced an extended period of unemployment. A lot of friends lost jobs back in 01 when the stock market was crashing. That wouldn't be a good time to withdraw from retirement accounts.


ender

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Re: When have you actually had to use emergency fund?
« Reply #36 on: May 28, 2016, 12:07:14 PM »
We've been lucky in that we never needed to use ours. But I was glad to have it, primarily in case we ever experienced an extended period of unemployment. A lot of friends lost jobs back in 01 when the stock market was crashing. That wouldn't be a good time to withdraw from retirement accounts.

One thing to keep in mind, you can put money into retirement and leave it cash (or highly stable).

For example we might not be able to fill our IRA space this year but have talked about putting some money from our emergency savings into a Roth IRA and leaving it in a money market account. This lets us "borrow" from ourselves sort of, in that we can pay back that emergency fund in the future while still taking advantage of the 2015 retirement space. Or withdraw it if needed.

This feels like complete hackery but... hey the rules say you can withdraw Roth IRA principle at anytime.


Tyson

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Re: When have you actually had to use emergency fund?
« Reply #37 on: May 28, 2016, 12:15:43 PM »
I keep $2500 in savings.  I had to use $2k of it this month (timing belt replacement on my car and a new roof on the house).  I have ALL my other money in 401k, Roth IRA, and Vanguard VTSAX.  Keeping $2500 allows me to deal with these hiccups without having to sell off any of the investments. 

SwordGuy

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Re: When have you actually had to use emergency fund?
« Reply #38 on: May 28, 2016, 01:08:18 PM »

Food, gas and lodging when the credit card got cut off due to fraud when I was travelling.

Have replaced 3 cars with cash when their time came.  Some were accidents, some were just at the end of their natural lifespan.

Just replaced 1 car and a double-unit HVAC system in the same week, all for cash.   The emergency fund took a hit on those two items!

And we've also used it to purchase distressed rental properties for cash at a good price.

Jaguar Paw

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Re: When have you actually had to use emergency fund?
« Reply #39 on: May 28, 2016, 01:37:02 PM »
I keep $2500 in savings.  I had to use $2k of it this month (timing belt replacement on my car and a new roof on the house).  I have ALL my other money in 401k, Roth IRA, and Vanguard VTSAX.  Keeping $2500 allows me to deal with these hiccups without having to sell off any of the investments.

Realistically that makes way more sense than what I'm doing as we have 30K sitting there doing absolutely nothing when it could be working for us... I may have to reevaluate. Do you have wife? kids? Sorry to pry, Thanks!

Tyson

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Re: When have you actually had to use emergency fund?
« Reply #40 on: May 28, 2016, 02:12:56 PM »
I keep $2500 in savings.  I had to use $2k of it this month (timing belt replacement on my car and a new roof on the house).  I have ALL my other money in 401k, Roth IRA, and Vanguard VTSAX.  Keeping $2500 allows me to deal with these hiccups without having to sell off any of the investments.

Realistically that makes way more sense than what I'm doing as we have 30K sitting there doing absolutely nothing when it could be working for us... I may have to reevaluate. Do you have wife? kids? Sorry to pry, Thanks!

I have wife and daughter.  I've also gone through long term unemployment twice, despite being highly skilled (but specialized) in the IT industry.  So I know what it's like to have to scrape by for a long time.  The main thing I found was we could make it on unemployment for a long time.  But we as a family had to be honest about the fact that we would have to dial down our lifestyle a lot.  This was before I found MMM.  Once I got working again, I found MMM and we just kept the lifestyle dialed down because we'd already acclimated to it and were just as happy as before.  Started stashing the extra $$ at an accelerated rate. 

I don't worry about another long term layoff, at least not for a while.  Might as well have those $$ working hard for me.  One thing that I did learn - it's better to have a lot of savings/investments versus paying off your mortgage if you have job instability.  No matter how much extra you pay to your mortgage, they can still take your house if you lose your job and miss a few payments.  With savings/investments its a lot more secure because you can just pay stuff off by selling investments.  Having $175k in investments (with $20k easily accessible), makes keeping only $2500 in cash a lot easier to live with.  OK, here's the actual breakdown:

401k - $150,000
Roth IRA - $12,000
Taxable - $8,000
Cash - $2500

So I can raid my $2500 very easily, then hit the taxable for $8k after that.  The IRA's you can access the principal at any time without penalty, so that's another $12,000.  That's about $22,000 that's fairly easily accessible.

Note, I was very bad at saving anything before my layoff and before MMM, so all the Roth, Taxable, and Cash I have saved up in the last 11 months.  I expect every one of those numbers to double next year, and so on.

Apologies if that was more detail than you were looking for...
« Last Edit: May 28, 2016, 02:17:52 PM by tyort1 »

csprof

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Re: When have you actually had to use emergency fund?
« Reply #41 on: May 28, 2016, 04:26:50 PM »
I don't call it an emergency fund - but we keep about 2% of our total liquid assets in a 1% yield savings account at the same bank as our primary checking accounts.   The savings account serves as a very-needed buffer.  My wife and I both frequently float several thousand dollars of work travel expenses, and while we usually get reimbursed before the CC is due, sometimes things get delayed, so I don't try to be too aggressive about pushing everything into longer-term investments.

But in general I'm with the others in this thread who figure that a real emergency is a good reason to sell stock.  Can't really time it anyway or we'd all be rich. :)  I can't think of too many emergencies that would require me to spend more than, say, $20k without enough time to transfer funds from Vanguard, so the savings account + credit cards serve as a useful buffer for the ~3 business days it might take to get access to real amounts of money.

(Maybe I'm missing the hypothetical emergency that's check-only, same-day, and exceeds, say, $10k.  Major appliance replacement -> credit card;  car towed -> under $1k usually, cash only;  ???).

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Re: When have you actually had to use emergency fund?
« Reply #42 on: May 28, 2016, 05:01:44 PM »
I have a large EF and we have never had to use it so far. But it helps me sleep at night and feel no risk whatsoever about what the market does. I could help out family in a time of need, buy our next vehicle when ours dies, or sustain a job loss or recession. I'll probably never be one who goes without an EF.

SimplyMarvie

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Re: When have you actually had to use emergency fund?
« Reply #43 on: May 29, 2016, 11:10:18 AM »
(Maybe I'm missing the hypothetical emergency that's check-only, same-day, and exceeds, say, $10k.  Major appliance replacement -> credit card;  car towed -> under $1k usually, cash only;  ???).

I don't think there are a lot, especially if you live in the US, where credit cards are accepted just about everywhere. I'm not in the US, and am often in developing countries where credit card acceptance is spotty (currently, that's mostly because of the huge card cloning/skimming problem in this country.) I actually keep a separate cash emergency fund in Euros and local currency in our emergency bags, specifically in case there's an earthquake or civil unrest, in addition to a cash emergency fund in the bank which I could access through work in a pinch. I am not the norm, and don't suggest everyone take this up!

letired

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Re: When have you actually had to use emergency fund?
« Reply #44 on: May 29, 2016, 01:29:46 PM »
I used my cash savings/emergency fund to bridge the 6 months between graduating from grad school and the paperwork/payroll finally going through on the new (public university, I negotiated my salary up to the next 'tier', so they had to do a ton of paperwork to change the job listing/description) job that I accepted in month 4.

Technically, I probably could have pulled money from my Roth, but I don't know that I knew that at the time, and I'm glad I didn't have to. That money can never go back!

I continue to keep an emergency fund/cash cushion for a) another extended period of unemployment or b) emergency house repairs or c) house repairs that cost more than I can cashflow in a month/credit card grace period.

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Re: When have you actually had to use emergency fund?
« Reply #45 on: May 29, 2016, 06:02:12 PM »
In 2012 and 2013 we had a series of situations that resulted in my then-fiancé and I having to fly across the country multiple times, ultimately moving across the country and setting up a new apartment. All together we spent about $15,000 between flights, hotels, funeral clothes, a pushed up wedding, a moving company, etc.

The way I have our "funds" set up is as virtual sinking funds on top of our actual savings and checking accounts that get debited when transactions match a certain pattern. I can't tell you how much of that we were able to cashflow vs how much we actually dipped into savings for, but I do know that having a chunk of money around has been invaluable, both for piece of mind and for being able to, for example, pay for my in-college sister's plane ticket home without blinking.

In the past we've also used it as a source of cash for opportunities like paying off a car or killing my wife's student loan, or for optional medical things that insurance doesn't cover. We're always careful to not draw down past 3 months of expenses, because it's also our job loss fund.

JustTrying

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Re: When have you actually had to use emergency fund?
« Reply #46 on: May 29, 2016, 09:13:12 PM »
Never. But I agree with others that I keep it for big things like job loss rather than for little things like buying a new water heater or doing other repairs. Pretty much the only way I'd need to use it would be if I ended up in the hospital for awhile or losing my job, which has not happened yet!

mwulff

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Re: When have you actually had to use emergency fund?
« Reply #47 on: May 30, 2016, 12:12:41 AM »
We don't have an emergency fund as such, but we keep a reasonably large amount of savings in liquid form.

Things we have used our fund for include:

1. Investing in solarpanels.
2. Buying cars cash
3. Home renovation projects
4. Helping other people in need.

We have been spared major emergencies luckily. But it's nice to have funds available at a moments notice.

We don't keep cash lying around though, it's all in bank accounts.

TravelJunkyQC

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Re: When have you actually had to use emergency fund?
« Reply #48 on: May 30, 2016, 07:07:07 AM »
My emergency fund is a line of credit of 5,000$ at a rate of prime + 0,5% (my investments make more, which is why I don't keep cash and instead have a LOC).

I have never used it yet. I've been unemployed from my field for several months before, and during those times, I have picked up freelance work (and temporarily was a waitress and working in a gym) while looking for full-time work. In my defence though, I don't have children, and my personal costs are around 1,000$ a month. If I had any dependants, I would absolutely either increase my LOC, or have more in easily accessible cash. I can allow myself to be more "on the edge" so to speak, since I have only myself to fend for at the moment.

CU Tiger

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Re: When have you actually had to use emergency fund?
« Reply #49 on: May 30, 2016, 07:49:11 AM »
We used ours after a car accident to help with the purchase of a used car.

The best thing about our eFund, which is sitting in a Prime Reserve fund, is that it helps me sleep at night. It would cover 2 years of our ground level expenses. I mean it would cover property tax, utilities, and the food and clothing we would need to get by. No luxuries, obviously.

Everyone is different, and I know there are people who don't even need an eFund, but having mine makes me feel more secure.