Author Topic: When have you actually had to use emergency fund?  (Read 22146 times)

tobitonic

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Re: When have you actually had to use emergency fund?
« Reply #50 on: May 30, 2016, 08:10:48 AM »
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.

To be fair, the forum was founded off a blog that encourages boundless optimism in a country with rampant inequality, lauds technology as the solution to social ills, calls safety an expensive illusion, etc, etc. It's only natural that it tends to attract a lot of people who've been lucky enough to believe they're invincible.

And yup, we've used ours several times...cars, medical bills, home repairs, etc. And I'd still consider us exceptionally lucky people.

elaine amj

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Re: When have you actually had to use emergency fund?
« Reply #51 on: May 30, 2016, 08:32:33 AM »
We don't have a separate e-fund, but DH feels more comfortable with a significant cash buffer - so we keep a lot of cash in our checking account. Usually around $10k at least (sometimes this creeps up to $20+k). We also have another $10-20k in fairly liquid investments. Hmmm...I guess it's not that much when our expenses are a hefty $4-5k/month.

That said, I don't consider home repairs/car repairs/unexpected tax bills as emergencies. To me, they are just life expenses and we have never had issues with them as part of our daily budgets.

Large unexpected expenses (this year alone):
January - tax reassessment; had to pay back $7k+
April - medical treatment: $5k
May - water damage in our basement guest room; used the "opportunity" to update entire room: $3k+

The above are things I wouldn't have even thought of budgeting for (I did start a sinking fund for home maintenance). And the year's not over yet....

begood

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Re: When have you actually had to use emergency fund?
« Reply #52 on: May 30, 2016, 09:01:57 AM »
We have a ridiculous cash cushion - 7% of our NW. Why? If my husband lost his job, he would not qualify for unemployment benefits. And we're living in provided housing through the job, so we'd have to either buy or rent if he lost his job.

We have cash-flow in a checking account, a year's expenses in a 1.2% PenFed CD, and 6 months expenses in a 1% credit union money market savings account.

The way I'm looking at it, everything but the cash-flow checking may end up getting used for college expenses for our only kid. We should have more options (in HCOL, but could relocate to LCOL, for example) after she's launched, and at that point we may not feel like we need quite so much cash on hand to feel secure.

Zikoris

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Re: When have you actually had to use emergency fund?
« Reply #53 on: May 30, 2016, 11:11:35 AM »
I used it a number of times when I needed cash on hand to take advantage of a good flight deal for one of my vacations. Eventually I just started calling it liquid savings rather than emergency fund, because I realized I'm not the kind of person who has emergencies that need large sums of cash quickly.


Classical_Liberal

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Re: When have you actually had to use emergency fund?
« Reply #54 on: May 30, 2016, 01:16:47 PM »
I keep a ridiculously large emergency fund of 1 years expenses in a low yield (1%) savings account (a month in physical cash).  Intellectually I know this is a waste, I've haven't once tapped it for actual emergencies.  However, emotionally it's a big win.  It allows me to:

 a) Stick to my long term AA with the rest of my money, knowing I have a year in easily accessible reserves that won't tank in value at the exact wrong moment is priceless.

 b) Similar to above, but I will occasionally use some (20-30%) Efunds during market dips to buy more stocks than my normal lump sum averaging would allow, then I slowly replace as values recover.  I know, I know, evil market timer, but it just FEELS so good to get a deal.

 c) It gives me a huge sense of freedom knowing I could quit work at any point and have a year before I have to touch any of my "real" FI savings.  Many bad work situations that may have resulted in an emotional explosions instead turned to an inward smile.

 d) It gives me immediate flexibility for major purchases.  If I have a well thought out major purchase, I still tend to put it off as long as possible.  If the near perfect deal pops up on CL or wherever, I can quickly take advantage without worries about the timing of asset sales (ie tax issues, etc).

GuitarStv

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Re: When have you actually had to use emergency fund?
« Reply #55 on: May 30, 2016, 01:27:33 PM »
I don't have an emergency fund, and have never had to use one.  If something unexpected comes up and I desperately need cash, I'll sell off some of my investments (bonds or stocks).

asauer

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Re: When have you actually had to use emergency fund?
« Reply #56 on: May 31, 2016, 06:48:36 AM »
yes- unexpected heating unit repair.  Other than that, we keep it in case of job loss or an unexpected medical expense (e.g., cancer diagnosis). 

happy

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Re: When have you actually had to use emergency fund?
« Reply #57 on: May 31, 2016, 07:06:54 AM »
Hubris eh?.. by nature I'm ultra cautious and conservative so I take that as something of a compliment. In this case though I'm Ok with MMMs concept of springy debt.

boarder42

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Re: When have you actually had to use emergency fund?
« Reply #58 on: May 31, 2016, 07:46:38 AM »
for those of you talking about E-Funds for medical expenses do you not use an HSA?  you're HSA just turns into an IRA after 59.5 and if you use it on medical its tax free.  the lack of people using these for medical expenses here baffles me to no end.

horsepoor

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Re: When have you actually had to use emergency fund?
« Reply #59 on: May 31, 2016, 07:49:31 AM »
I only keep a couple $K laying around.  From most of the posts on this thread, that seems about right. 

Last year, one of my horses incurred about $4,500 in vet bills in about six weeks.  That's the biggest emergency I can think of.  But the biggest chunk of that was surgery, which I had a couple weeks to prepare for, so I actually used it for a bit of credit card churning.  In the case of an immediate veterinary emergency, the equine hospital requires payment "when rendered" but really allows 30 days from billing.  This amount actually exceeds the EF I had in place at the time, but it wasn't too difficult to hoard some cash to get it payed off by the time the CC payment came due.

The paradox of EFs is that, in general, the easier it is to build one, the less you really need it .  As a Mustachian with a 50% savings rate (and assuming job stability), most small emergencies would just mean saving less in a given month.  I don't want to go in and monkey with my pre-tax deductions to cover a $1,000 unexpected expense, but would do so to refill my EF after a rare $5K expense that zero-ed out my EF and my savings rate for a month.  If you're already spending nearly everything you make, those $1K unexpected car repairs or plane tickets or whatever create a much bigger speed bump.

Another piece of the puzzle for me is that I'm a mid-career fed, so job stability is great and I have a shitload of sick leave saved up.  I've also got a few assets that would be sold off in the case of a severe emergency like a major medical problem (e.g. if I get cancer, I'd need to sell my horse, truck and trailer, which would liquidate around $25K or more).  DH is also a mid-career fed, and he likes to keep more liquid cash around, so if our septic fails or our roof caves in, he could just write a check for it.

I'm a red panda

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Re: When have you actually had to use emergency fund?
« Reply #60 on: May 31, 2016, 07:52:42 AM »
We don't have anything earmarked emergency fund, as part of our asset allocation is our checking account. But we also have assets beyond what most Americans do.

Last year I had a $15K emergency medical procedure that was schedule with a weekend's notice and had to be paid upfront before the doctor would proceed. (Insurance later reimbursed $2k). Things like this are generally what they are for.  Most people couldn't produce that kind of money on that notice. We are frugal, and strong savers, but it's still privelage most people don't have. That's why people set aside emergency funds. For emergencies.

I'm a red panda

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Re: When have you actually had to use emergency fund?
« Reply #61 on: May 31, 2016, 07:54:25 AM »
for those of you talking about E-Funds for medical expenses do you not use an HSA?  you're HSA just turns into an IRA after 59.5 and if you use it on medical its tax free.  the lack of people using these for medical expenses here baffles me to no end.

Not everyone qualifies for an HSA. My insurance has never had this as an option.

boarder42

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Re: When have you actually had to use emergency fund?
« Reply #62 on: May 31, 2016, 07:55:55 AM »
We don't have anything earmarked emergency fund, as part of our asset allocation is our checking account. But we also have assets beyond what most Americans do.

Last year I had a $15K emergency medical procedure that was schedule with a weekend's notice and had to be paid upfront before the doctor would proceed. (Insurance later reimbursed $2k). Things like this are generally what they are for.  Most people couldn't produce that kind of money on that notice. We are frugal, and strong savers, but it's still privelage most people don't have. That's why people set aside emergency funds. For emergencies.

what emergency medical procedure isnt covered by typical insurances in the US that have OOP maximums and require payment up front?  were you out of market?  this seems odd to me

I'm a red panda

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Re: When have you actually had to use emergency fund?
« Reply #63 on: May 31, 2016, 08:02:56 AM »
We don't have anything earmarked emergency fund, as part of our asset allocation is our checking account. But we also have assets beyond what most Americans do.

Last year I had a $15K emergency medical procedure that was schedule with a weekend's notice and had to be paid upfront before the doctor would proceed. (Insurance later reimbursed $2k). Things like this are generally what they are for.  Most people couldn't produce that kind of money on that notice. We are frugal, and strong savers, but it's still privelage most people don't have. That's why people set aside emergency funds. For emergencies.

what emergency medical procedure isnt covered by typical insurances in the US that have OOP maximums and require payment up front?  were you out of market?  this seems odd to me

It is not a common procedure so it required me to go out of network. It was difficult to locate any doctor at all, there were about 4 options inside the country.  It was in the US, I was referred by multiple doctors in my network, and had no other options. The true meaning of emergency whether I earmark the fund that way or not.

The procedure was covered by my insurance but what they decided were allowable charges were well below the actual costs to me. My out of pocket max out of network is $6k, but that's in "allowable" not billed, apparently. The allowable charges were deemed only about $5k, which based on what the itemized bill shows is kinda bullshit, the fee actually wasn't that unreasonable for what was done.

« Last Edit: May 31, 2016, 08:06:12 AM by iowajes »

With This Herring

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Re: When have you actually had to use emergency fund?
« Reply #64 on: May 31, 2016, 12:07:39 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.

This is a good point.  DBF's car transmission died at the end of last year.  While the mechanic was looking at it, he discovered enough other major issues that it made more sense to scrap the car than repair it.  No biggie, we just shared my car while looking on CL for a replacement.  Then, a few weeks later, my car was totaled by a hit-and-run driver (no injuries, thank God).  We end up finding two Toyotas at great prices a week apart, sold by individuals (so no CC use possible), and were able to buy both with cash.  I didn't think of any of this as an emergency, just an inconvenience to need to replace my car years ahead of schedule, but it certainly would have been an emergency without the savings to cover it.

nobody123

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Re: When have you actually had to use emergency fund?
« Reply #65 on: May 31, 2016, 01:07:01 PM »
I keep a ridiculously large emergency fund of 1 years expenses in a low yield (1%) savings account (a month in physical cash).  Intellectually I know this is a waste, I've haven't once tapped it for actual emergencies.  However, emotionally it's a big win.  It allows me to:

 a) Stick to my long term AA with the rest of my money, knowing I have a year in easily accessible reserves that won't tank in value at the exact wrong moment is priceless.

 b) Similar to above, but I will occasionally use some (20-30%) Efunds during market dips to buy more stocks than my normal lump sum averaging would allow, then I slowly replace as values recover.  I know, I know, evil market timer, but it just FEELS so good to get a deal.

 c) It gives me a huge sense of freedom knowing I could quit work at any point and have a year before I have to touch any of my "real" FI savings.  Many bad work situations that may have resulted in an emotional explosions instead turned to an inward smile.

 d) It gives me immediate flexibility for major purchases.  If I have a well thought out major purchase, I still tend to put it off as long as possible.  If the near perfect deal pops up on CL or wherever, I can quickly take advantage without worries about the timing of asset sales (ie tax issues, etc).

Actually 1 year of expenses is my goal as well for a lot of the same reasons.  Frankly, I don't want the kids to suffer if I lose my job, so they can keep up their activities and whatnot while I look for a new job.  It would also cover relocation expenses if need be. 

I figure if we make it to one year of expenses by the time I retire, those funds will augment our SS and pension to allow us to better time when to tap the 401ks and Roths.

Telecaster

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Re: When have you actually had to use emergency fund?
« Reply #66 on: May 31, 2016, 01:40:07 PM »
The problem with selling investments is that you are likely to need the money in an economic downturn, therefore selling at depressed prices.

That is correct, but it is only a problem in the early years of your portfolio.  Using the rule of 72, your stocks should double every 12 years or so.*   So even in the event of a larger than normal stock market decline, you still should get access to most of your original dollars.  The only exception is at the very beginning, but at that point you don't have much money anyway, and it is certainly reasonable to keep a bit extra in cash at first in case something happens, and then transition into stocks as your portfolio grows. 

On the flip side, the cash drag over time on your portfolio is enormous.  In most scenarios, even at the beginning, you're simply better off being in stocks and selling them if you need to.   In the later years, you are definitely better suited to handle any emergency if you had stayed mostly out of cash. 


*usual caveats apply   

seathink

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Re: When have you actually had to use emergency fund?
« Reply #67 on: May 31, 2016, 01:52:23 PM »
for those of you talking about E-Funds for medical expenses do you not use an HSA?  you're HSA just turns into an IRA after 59.5 and if you use it on medical its tax free.  the lack of people using these for medical expenses here baffles me to no end.

I do now. Last employer did not have a high deductible plan that could be paired with an HSA. Not even an FSA. They offered an HMO. It was pretty low paying so I took the "free" medical and put more into my 401k.

I was hospitalized in a different state visiting family and the entire bill was out of network except for the ambulance ride. $17k + medical bill and the discovery of a previously unknown lifelong condition.

Based on that, and an industry with a lot of turnover & unemployment, I believe in a nice large slush fund.

screwit

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Re: When have you actually had to use emergency fund?
« Reply #68 on: May 31, 2016, 02:04:48 PM »
In January when our dog suddenly collapsed and the examinations to work out what was wrong plus overnight at the vets plus putting him down and cremating him cost us 1000 in 36 hours.

Villanelle

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Re: When have you actually had to use emergency fund?
« Reply #69 on: May 31, 2016, 02:43:40 PM »
I was going to say "never" but reading through this thread, I realize I've had several of the things others mention.  I had to buy a last minute plane ticket from Japan to the States to evacuate myself.  I'd have to pay car accident deductibles and once a Homeowners deductible for some wind damage. 

All of these were handled with the monthly slush and/or the month long credit card carrying period.  We cut unnecessary expenses and shifted things (like pantry eating to push a grocery trip out a few weeks), and that was it. On one occasion, I stopped one of our monthly investments for a couple months.  I've also stopped or decreased our monthly HELOC payment, if our balances are looking lower than usual, either due to an emergency or just extra small things.  (HELOC was used to pay off tradition mortgage.)

We keep a slush of a couple thousand in our checking account simply so we don't have to worry about overdrawing, especially because we can't always communicate and if DH is paying for 4 nights in a hotel in Singapore on the same day I do a big grocery shop and pay a credit card bill, that could get ugly.  I've never considered it an E fund, but perhaps it is.

We also have non-retirement accounts, a large HELOC (that isn't even 1/4 of the equity in the home, so even a drop in values likely wouldn't affect it), various types of retirement accounts (Roths, TSP, traditional IRA) and if things got truly awful, parents who have plenty and would be willing to help in a true disaster.  And Dh's job is exceptionally secure and our health insurance amazing (if frustrating).  He also has essentially unlimited sick time and I am not currently working.


Tris Prior

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Re: When have you actually had to use emergency fund?
« Reply #70 on: May 31, 2016, 06:36:54 PM »
Paying for water damage repair when our upstairs neighbor flooded us. Twice. (Her insurance ended up covering it as it was her fault, but it took a bit to get reimbursed and meanwhile the nice men who were tearing apart and de-moldifying our bathroom and bedroom closet* wanted their payment at the time of service.)

Emergency vet bills. Our last cat always got sick on major holidays - urinary blockage on Xmas Day, explosive diarrhea along with obvious pain on Memorial Day - and also enjoyed eating things that are not food.

Travel expenses during family health crisis.

Covering bills/mortgage after a job loss.

I mean, stuff like that is what an e-fund is for, right?

* She had an illegal washer hookup in her bedroom closet, which was directly above our closet. No idea where it was draining to. well, I mean, obviously once the thing finally shit the bed it was draining to OUR closet.... ;)

SaintsfanMS

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Re: When have you actually had to use emergency fund?
« Reply #71 on: May 31, 2016, 09:07:47 PM »
My wife and I had only been married for 1 month when Hurricane Katrina put a foot of water in our house. Fortunately, we had some cash we hadn't deposited from our wedding. Power was out for an extended period of time and many businesses were cash only. It helped us survive. Now we keep 1k in cash in the house. We do keep a better funded emergency fund in the bank should the emergency call for more than 1k. We had to utilize this after a minor hurricane a few years ago caused some roof leakage that was better to fix out of our pocket then make an insurance claim and pay the hurricane deductible.

mrcheese

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Re: When have you actually had to use emergency fund?
« Reply #72 on: June 01, 2016, 12:56:23 AM »
Last year. Within the space of a week:
My work contract was not renewed.
I had to move house at no notice requiring stumping up for a bond while paying on a mortgage for a house I couldn't yet live in.
My mother had open heart surgery.
And everything else in my life just seemed to explode at the same time. Car trouble etc, it never rains but it pours kinda thing.

But after all that, I only had 4 weeks off work and due to that gap I could take time to sort everything else out. Because I had an emergency fund, I (unemployed and homeless) could fly across the country to visit my mother at very short notice which made her so happy I don't regret paying through the nose for a last minute flight. I have enough brownie points to last me for decades now.

MoonShadow

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Re: When have you actually had to use emergency fund?
« Reply #73 on: June 01, 2016, 01:10:04 AM »
Your emergency fund doesn't have to sit in cash.  I keep mine in my roth IRA, growing in mutual funds.  The trick is that I can't draw out more than my contributions, but since my total balance is significantly beyond my contributions, it's really unlikely (at this point) to drop below my contributions should I suddenly find a real need for crisis funds.

On a related note, my oldest daughter has turned 16 and gotten her first job.  I told her my plan to open a custodial roth IRA on her behalf, and fund it for the first two years (until 18) up to the limits.  After that, I expect her to try to max it out every year til she is 25, for a total of 9 years of contributions.  If successful, this would amount to about $50K in contributions that she could use as a real emergency fund if she ever needed it, or as a basis for an early retirement if she did not.  I don't care who you are, for the kinds of crises that can be mitigated with money, $50K will go a long way.

GrOW

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Re: When have you actually had to use emergency fund?
« Reply #74 on: June 01, 2016, 04:20:29 AM »
My emergency fund has evolved over time as the amount has grown and I have learned what is and is not a true emergency. I would expect that is commonplace here in this forum.

Evolution of my emergency fund - it has transitioned to a basic savings account to fee and tax free available money in my HSA and Roth IRA accounts plus the cash portion of my taxable investment accounts (ie. take advantage of large market dips money).

Evolution of what is an emergency for me - it has transitioned from any little hiccup in my life to near catastrophic events like natural disaster, major prolonged medical issue, etc.

But to answer OP's question - I have not used money from my emergency fund in over 10 years. I consider myself very fortunate for that and hope that my luck holds out for a long time to come.

redbird

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Re: When have you actually had to use emergency fund?
« Reply #75 on: June 01, 2016, 11:38:24 PM »
I don't have a traditional sort of emergency fund anymore because I realized I never used it.

Unexpected expenses like car repairs, a tree limb falling and causing damage to my house, needing to buy a new x because the old one failed beyond repair, etc were still things I could afford and didn't even find myself using my emergency fund for. Sure, it was annoying to have to pay for these things, but I could still easily pay it immediately. The biggest expense I can think of was the tree problem. The tree had some sort of tree disease and was just starting to fall apart. I had to have some things on my house repaired (the deck, part of the roof) and I had the tree itself cut down to a stump so it wouldn't cause any more damage. I can't remember the exact figure now, but I want to say everything total cost nearly $5k. Not cheap. But I didn't end up using the emergency fund for even that.

I guess to me an emergency would literally be something much more catastrophic than those things. Like some major weather caused damage (flooding? hurricane-level winds causing a whole tree to fall on my house? things like that I suppose) or major medical expenses that my health insurance would have no or not enough coverage for. But even for those things I could probably cover some initial expenses with my cash on hand or a credit card temporarily while I am getting funds out of their accounts.

My old emergency fund sat in a safe savings account and never grew. I kinda regret having it in savings for so long just because I never did use it and it just sat there.

Playing with Fire UK

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Re: When have you actually had to use emergency fund?
« Reply #76 on: June 02, 2016, 02:25:12 AM »
Emergency funds seem to mean different things at different stages. Here are some descriptions:

Dave Ramsey Baby Step efund: Initial cash buffer.
You've previously been spending more than your income and putting extraordinary expenses on credit. Save a small cash buffer so that the next time you have a larger-than-monthly-discretionary-spending expense you can pay for it with money rather than credit. For people in the early baby steps, Christmas and annual car insurance are considered emergencies, later these are paid from a sinking fund.

Minor sinking fund - sometimes called an efund
Put money away each month so that annual one off expenses can be paid from this rather than credit.

Major sinking fund - sometimes called an efund
Put money away for major expenses like a car replacement or house repairs.

Shoe box/mattress efund
Actual cash/paper/coin money that is accessible for when a card won't work.

Job loss/huge expense efund: parachute fund
Three/six/twelve/x months' salary or expenses to cover you for something brutal. Can be either held in an instant access account or in investments. Some people have a preference for instant savings so that they don't have to pull money out of investments when the market is down. Some people like to designate this separately from other savings.

Springy credit efund
Access to a line of credit for expenses which can't be paid out of this month's salary, either to pay back over a couple of months from salary or to bridge the gap between requesting the sale of investments and getting the cleared funds to make a payment.

Who has something different?

GuitarStv

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Re: When have you actually had to use emergency fund?
« Reply #77 on: June 02, 2016, 06:22:34 AM »
I don't understand why you wouldn't just keep your money in investments and then take the money out if you need it.  That way there's never any emergency, because you have multiples of your yearly salary available for withdrawal whenever you want.

Keeping thousands of dollars sitting around doing nothing for your entire life seems like a much worse thing to do than risking the slight chance of having to take a tiny portion of your life savings out when markets and bonds are both down.

boarder42

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Re: When have you actually had to use emergency fund?
« Reply #78 on: June 02, 2016, 06:32:33 AM »
I don't understand why you wouldn't just keep your money in investments and then take the money out if you need it.  That way there's never any emergency, because you have multiples of your yearly salary available for withdrawal whenever you want.

Keeping thousands of dollars sitting around doing nothing for your entire life seems like a much worse thing to do than risking the slight chance of having to take a tiny portion of your life savings out when markets and bonds are both down.

agree i keep enough on hand to pay the bills the rest is in taxable after maxing tax preferred accounts. i dont even own bonds is it slightly riskier sure.  but i mean we're talking about adding what a year to FIRE if you have to liquidate a few grand in a down market.

Ann

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Re: When have you actually had to use emergency fund?
« Reply #79 on: June 02, 2016, 06:33:57 AM »
I don't understand why you wouldn't just keep your money in investments and then take the money out if you need it.  That way there's never any emergency, because you have multiples of your yearly salary available for withdrawal whenever you want.

Keeping thousands of dollars sitting around doing nothing for your entire life seems like a much worse thing to do than risking the slight chance of having to take a tiny portion of your life savings out when markets and bonds are both down.

I like Playing With Fire UK's breakdown.  It all depends on where you are at in your financial journey.  When you're just starting out, I think it is very helpful to have extra cash in a no/low risk account. If all you have is $1000, you don't want to risk depreciation (plus you couldn't have deversified much).  Once you have several hundred thousand, this is no longer necessary.

By the River

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Re: When have you actually had to use emergency fund?
« Reply #80 on: June 02, 2016, 07:19:51 AM »
We didn't really call it an emergency fund, just kept a few thousand extra in a low-interest saving account.  Then, we got 7 feet of water in the house after Katrina.  That cash plus credit card space provided living expenses and replacement housing until the insurance proceeds were received.   We were also able to give a $1000 gift to a friend who owned a small business to get him back running quicker. 

MrsDinero

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Re: When have you actually had to use emergency fund?
« Reply #81 on: June 02, 2016, 07:52:15 AM »
Emergency funds seem to mean different things at different stages. Here are some descriptions:

Dave Ramsey Baby Step efund: Initial cash buffer.
You've previously been spending more than your income and putting extraordinary expenses on credit. Save a small cash buffer so that the next time you have a larger-than-monthly-discretionary-spending expense you can pay for it with money rather than credit. For people in the early baby steps, Christmas and annual car insurance are considered emergencies, later these are paid from a sinking fund.

Minor sinking fund - sometimes called an efund
Put money away each month so that annual one off expenses can be paid from this rather than credit.

Major sinking fund - sometimes called an efund
Put money away for major expenses like a car replacement or house repairs.

Shoe box/mattress efund
Actual cash/paper/coin money that is accessible for when a card won't work.

Job loss/huge expense efund: parachute fund
Three/six/twelve/x months' salary or expenses to cover you for something brutal. Can be either held in an instant access account or in investments. Some people have a preference for instant savings so that they don't have to pull money out of investments when the market is down. Some people like to designate this separately from other savings.

Springy credit efund
Access to a line of credit for expenses which can't be paid out of this month's salary, either to pay back over a couple of months from salary or to bridge the gap between requesting the sale of investments and getting the cleared funds to make a payment.

Who has something different?

This has been my E-Fund evolution.

Paul der Krake

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Re: When have you actually had to use emergency fund?
« Reply #82 on: June 02, 2016, 10:42:22 AM »
One thing I have learned when I had to tap my emergency fund is that I do not have nerves of steel. Looking back, the month following my emergency was downright unpleasant.

Sure, I could have sold investments to cover the expenses, but I was already stressed out not knowing how much this event was going to cost me and the potential ramifications. The last thing I would have wanted is trying to figure out a way to minimize the impact to the portfolio and potentially my tax situation for the year on top of everything else.

My emergency fund is in a high yield savings account that so far (!) has kept up with inflation in all 3 years that I've had it, so it's not like I am really losing money by keeping a few thousands in there.

Sailor Sam

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Re: When have you actually had to use emergency fund?
« Reply #83 on: June 02, 2016, 11:58:06 AM »
I don't understand why you wouldn't just keep your money in investments and then take the money out if you need it.  That way there's never any emergency, because you have multiples of your yearly salary available for withdrawal whenever you want.

Keeping thousands of dollars sitting around doing nothing for your entire life seems like a much worse thing to do than risking the slight chance of having to take a tiny portion of your life savings out when markets and bonds are both down.

It's like any part of asset allocation - it comes down to an emotional decision.

I fall in line with Paul der Krake. As we gain assets, I think the definition of an emergency changes from finance-based, to emotion-based. If your cash strapped, a broken car or a job loss are huge financial stresses, which cause emotional stress. If you're a saver, the cost of a broken car or a new roof can be absorbed without financial trouble, but there's still some emotional stress.

As a thought exercise, try to make the emotional stress big enough. Imagine one of your kids dead, a second gravely injured in the hospital, and your wife suddenly living two hours away to be at the hospital. Consider your ability to make rational financial decisions during that time period in your life. If you truly think you can be rational (or you don't mind taking an extra hit for selling 'good' securities), then there's no reason to keep a cash e-fund. If you think one extra responsibility would cause you some sort of emotional breakdown, then have cash.

nobody123

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Re: When have you actually had to use emergency fund?
« Reply #84 on: June 02, 2016, 12:09:44 PM »
As a thought exercise, try to make the emotional stress big enough. Imagine one of your kids dead, a second gravely injured in the hospital, and your wife suddenly living two hours away to be at the hospital. Consider your ability to make rational financial decisions during that time period in your life. If you truly think you can be rational (or you don't mind taking an extra hit for selling 'good' securities), then there's no reason to keep a cash e-fund. If you think one extra responsibility would cause you some sort of emotional breakdown, then have cash.

To follow on, ask if your not into finances spouse would be able to handle (or even know how to) liquidating some investments to deal with it.  If I was in a coma for a couple of weeks, I know my wife can handle getting money out of a bank account.  Knowing how to correctly pull money out of a Roth would be a whole ordeal for her.

tomsang

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Re: When have you actually had to use emergency fund?
« Reply #85 on: June 02, 2016, 12:38:06 PM »
Typically, my checking account/saving accounts are less than 1 day of spending.  My emergency funds are my LOC, Credit Cards, Cash out a Roth, take a loan from a 401k, sell a car, and then friends, family, etc.  I could probably draw $300,000 on CC and $50k on my LOC if needed.  Typically every time I get paid it goes to pay down my LOC or investments.  My account on payday has $0.  Every check I write goes against my LOC which is at 4.25%.  I could liquidate my investments and pay off my debt and still have a few million left over outside of my 401k and houses.

I also support using debt as a tool to increase your net worth, so I may live a bit on the wild side.  I have taken out an 18 month zero interest credit card for $50k to invest at 18% with $500k of collateral.  Unfortunately, I was paid back after 13 months.  I was hoping to milk that for years.  Took out two $50k loans on my 401k to buy a rental during the economic down turn three years ago.  The value of the house increased by $200k in the past three years.  Numerous other $50k credit card zero interest loans for investments or loans to friends with good returns or at least good karma for helping out.

I have had to keep a balance on my credit card at 7.65% on a number of occasions.  I feel great about it as by not tying up dollars in a zero or low interest account I have been averaging 20%+ over all of those years.  If a few times I can't pay off the credit card, I feel that is all positive.  I get very anxious when money is sitting in my account earning less than 1%.  Then I am on the hunt for an investment that will have a good risk/reward. 

Debt is not evil.  It is a tool to be used like any other tool.  It can be dangerous if it is used poorly.  My LTV is less than 20%, so I am  not crazy but my million plus of debt could give some on these boards a heart attack.

Of course, when people pay off their sub 4% 30 year fixed mortgage it drive me crazy that they are wasting a gift from the government.  Everyone does what helps them sleep at night. 

SomedayStache

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Re: When have you actually had to use emergency fund?
« Reply #86 on: June 02, 2016, 12:55:55 PM »

To follow on, ask if your not into finances spouse would be able to handle (or even know how to) liquidating some investments to deal with it.  If I was in a coma for a couple of weeks, I know my wife can handle getting money out of a bank account.  Knowing how to correctly pull money out of a Roth would be a whole ordeal for her.

This is an exceptionally good point and one that I hadn't considered.  I have a 'life records' printout with all account numbers and customer service numbers.  I update this at tax time and my parents and my husband know where it is should I die (or we both die)...but my husband wouldn't know the difference between our untouchable TSP balance and the Roth balance, and the Roth contributions vs. earnings difference.  Yikes.  I must ponder the best way to write out these instructions.

slugline

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Re: When have you actually had to use emergency fund?
« Reply #87 on: June 02, 2016, 01:40:45 PM »
I nicknamed my e-fund of several months of expenses as "The 9/11 Fund"  after the last time I experienced job loss. Having that around genuinely helps me sleep better.

Yes, I'm probably missing out on some investment gains but that's the case with any type of insurance. Knowing that 97% of my assets are outside the e-fund helps me sleep better about that pesky problem. :)

boarder42

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Re: When have you actually had to use emergency fund?
« Reply #88 on: June 02, 2016, 02:06:34 PM »

To follow on, ask if your not into finances spouse would be able to handle (or even know how to) liquidating some investments to deal with it.  If I was in a coma for a couple of weeks, I know my wife can handle getting money out of a bank account.  Knowing how to correctly pull money out of a Roth would be a whole ordeal for her.

This is an exceptionally good point and one that I hadn't considered.  I have a 'life records' printout with all account numbers and customer service numbers.  I update this at tax time and my parents and my husband know where it is should I die (or we both die)...but my husband wouldn't know the difference between our untouchable TSP balance and the Roth balance, and the Roth contributions vs. earnings difference.  Yikes.  I must ponder the best way to write out these instructions.

great thought i should probably write up how to manage our finances and show my wife how to do it.  much better than putting a bandaid of an E-Fund out there.  i dont like to bandaid problems i'm an engineer i like to have solutions to them.

jackiechiles2

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Re: When have you actually had to use emergency fund?
« Reply #89 on: June 02, 2016, 07:52:13 PM »
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.

Don't most hospitals allow you to make payments though? 

MoonShadow

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Re: When have you actually had to use emergency fund?
« Reply #90 on: June 02, 2016, 09:14:57 PM »
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.

Don't most hospitals allow you to make payments though?

As a matter of law, yes.

Jaguar Paw

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Re: When have you actually had to use emergency fund?
« Reply #91 on: June 03, 2016, 07:53:16 AM »
I think that this thread has is going to make me slash my emergency fund. Check back in 10 years to see if it was a terrible mistake.

boarder42

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Re: When have you actually had to use emergency fund?
« Reply #92 on: June 03, 2016, 08:03:45 AM »
I think that this thread has is going to make me slash my emergency fund. Check back in 10 years to see if it was a terrible mistake.

awesome breakthru!! you're 10 year self will thank current self for having extra money to fund FUN!

StarBright

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Re: When have you actually had to use emergency fund?
« Reply #93 on: June 03, 2016, 08:41:23 AM »
Count us in the "when it rains it pours camp." I was always worried that we overfunded our emergency fund (I have a strong tendency towards anxiety issues so I worry about not having enough and also that I have too much) but then:
  • I had pancreatitis and emergency gall bladder removal a week after giving birth and hit my max out of pocket for the year. also dug into my separate out of network deductible.
  • A week after our new insurance year started my husband had an emergency appendectomy and we hit the max out of pocket again.
  •   Because he missed classes (adjuncting at the time) for his appendectomy he had all of his spring classes cancelled at one institution cutting his projected income in half. His contract said he couldn't miss any days of teaching and there was no exception for emergency health issues.
  • Fridge died, water heater gave up and leaked everywhere so we had to buy a new water heater and pay for industrial fan rental etc., then a huge storm came and a tree came through our roof and we had to take out several 80-100 foot trees.
  • Husband had his summer class cancelled because a tenured prof wanted the class - he had already taught it for a day when they cancelled his contract.
  • And then finally we had an awesome turnaround but it still cost a bunch of money - DH found out he got his full time job but we had ten days to move. They ulimately reimbursed us for about 80% of the move but it took several months to get the money.


In the end I'd say we drew down our emergency savings by about 25k over three years (that is in addition to cash flowing to the best of our ability). 2013-2015 were really rough for us.

I know there are those on here who will say "well your DH shouldn't have tried to be a prof." - but that is ultimately one of the reasons we had saved a huge emergency fund and we ended up needing it - so there ya go :)
 

Classical_Liberal

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Re: When have you actually had to use emergency fund?
« Reply #94 on: June 03, 2016, 10:57:53 AM »
This is a good thread!  It seems that folks decision on Efunds breaks down to a couple of factors.  How far one is along the FI path, more assets = less risk in holding more volatile assets for emergencies.  Secondly, how much emotional benefit holding an Efund provides. 

In my anecdotal experience, Efund has evolved over time and may well continue to do so.  This seems very valid and only time will tell if it evolves further.

The logic of posters who argue the Efund drag on returns is very sound, but I also find it hard to ignore the emotional impact of other posts (I am one of those).  If one logically recognizes these losses on returns as an exchange for security/emotional benefit, I don't see this decision any different than AA arguments.  I also think it's fair to point out each person's situation is significantly different.  Many people pay off a house, have future pensions, ect.  These things add to security and emotional benefits, while dragging returns as well. If one does not own, doesn't expect pensions, single income, knows that help from family/inheritances to be unlikely, has an aggressive AA, ect.  It is fair to say such a person has little backup for large scale emergencies, outside of asset sales at the worst emotional (and perhaps financial) time.  A person like this probably gets more emotional return from a large Efund.

In financial matters I usually listen to my internal Mr Spock, but sometimes my internal Captain Kirk wants to party with green chicks, hence the emergency fund.

MoonShadow

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Re: When have you actually had to use emergency fund?
« Reply #95 on: June 03, 2016, 02:29:10 PM »

The logic of posters who argue the Efund drag on returns is very sound, but I also find it hard to ignore the emotional impact of other posts (I am one of those).

There is a way to have your cake and eat it too, in this regard.  A Permanent Portfolio, a simple allocation plan designed by the late Harry Browne, is designed to be well defended against losses in any market conditions.  It has only had two or three down years since 1970, and never concurrent years.  It includes a significant cash or cash equivalents portion, which is the main reason that most advisers don't like it, because it gives up gains in favor of protecting against losses; but it has still averaged about 7% annually since 1970.  So if you keep your e-fund in a mix like the PP, odds are very high that it will all be available to you should you need it, but your e-funds won't be missing out on all the gains either.  Most people who use the PP, just consider a portion of it their big e-fund anyway.   I mentioned before that I consider the contributions amounts to my Roth IRA to be my e-fund, and this is how 90% of my Roth IRA is allocated.

The PP is 25% domestic stock equity fund (S&P 500 fund works), 25% Long term bonds, 25% precious metals; 25% short term bonds, money market, etc.  It is rebalanced once each year or sooner, or anytime one of the allocations is off by more than 10% (drops below 15% or rises above 35%).  It's simple, rules based & designed to protect the capital from any kind of down market losses, so it's ideal for funds that you might need at any time.

Peacefulwarrior

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Re: When have you actually had to use emergency fund?
« Reply #96 on: June 04, 2016, 07:25:02 AM »
I guess that the very frugal lifestyle most on this board lives makes for fewer expensive "emergencies". I mean if you go snowboarding/wakeboarding every weekend, drives a $100k sports car and lives in very expensive home you just find yourself in more situations where expensive emergencies could come up. Personally I keep a $7.600 emergency fund just in case. Simply makes me feel more secure. But I understand the frustration.

Dicey

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Re: When have you actually had to use emergency fund?
« Reply #97 on: June 04, 2016, 08:25:59 AM »
I answered this upthread, but realized I forgot something. We flipped a house last year for fun and profit. Come tax time, my dad had just passed away and we were busy with all that entails. Our tax bill was $12k. It was so nice to be able to just write a check and stay focused on the important family things. Blows my mind that a twelve thousand dollar tax bill was just a blip on the radar and not a hair-on-fire emergency.

boarder42

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Re: When have you actually had to use emergency fund?
« Reply #98 on: June 05, 2016, 02:20:37 PM »
I guess that the very frugal lifestyle most on this board lives makes for fewer expensive "emergencies". I mean if you go snowboarding/wakeboarding every weekend, drives a $100k sports car and lives in very expensive home you just find yourself in more situations where expensive emergencies could come up. Personally I keep a $7.600 emergency fund just in case. Simply makes me feel more secure. But I understand the frustration.

I wakeboard every weekend I have no typical e fund in a safe interest account all my money is invested in index funds . I think it's a risk profile thing.  And I would argue the snowboarders and wakeboarders probably don't have large e funds here on this forum as they are more extreme risk taking sports but that's besides the point that people here are too risk averse to a fault of the dollars that could be earned with your dollars working for you. Doesn't matter how much you bike to work if you keep 30k in the checking account "just in case".  You are costing yourself 95k in gains at 10% (since your safe account likely doesn't keep up with inflation I'm using market avg minus 1%) over 15 years (my assumption on the avg time to fire on these forums).

Peacefulwarrior

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Re: When have you actually had to use emergency fund?
« Reply #99 on: June 06, 2016, 07:04:12 AM »
I guess that the very frugal lifestyle most on this board lives makes for fewer expensive "emergencies". I mean if you go snowboarding/wakeboarding every weekend, drives a $100k sports car and lives in very expensive home you just find yourself in more situations where expensive emergencies could come up. Personally I keep a $7.600 emergency fund just in case. Simply makes me feel more secure. But I understand the frustration.

I wakeboard every weekend I have no typical e fund in a safe interest account all my money is invested in index funds . I think it's a risk profile thing.  And I would argue the snowboarders and wakeboarders probably don't have large e funds here on this forum as they are more extreme risk taking sports but that's besides the point that people here are too risk averse to a fault of the dollars that could be earned with your dollars working for you. Doesn't matter how much you bike to work if you keep 30k in the checking account "just in case".  You are costing yourself 95k in gains at 10% (since your safe account likely doesn't keep up with inflation I'm using market avg minus 1%) over 15 years (my assumption on the avg time to fire on these forums).

I figure you don't have any kind of insurance then - as the money is better spent invested?