Author Topic: Emergency fund  (Read 9580 times)

VikingBraids

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Emergency fund
« on: October 29, 2013, 09:38:29 AM »
Hello,

It looks like I need to get an EF started before I start investing. I was thinking 2-6K to start for mine. How much do you have in yours and where is the money?  Savings account, invested etc?

jpo

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Re: Emergency fund
« Reply #1 on: October 29, 2013, 09:39:41 AM »
3 months expenses in a savings account.

I am confident if I lost my job I could find another very fast.

netskyblue

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Re: Emergency fund
« Reply #2 on: October 29, 2013, 09:44:52 AM »
I'm working on rebuilding mine after finally paying off my last debt.  It will be 10k in my 3.25% APY checking account, when I have it back to full.

That's just over 6 months expenses, and that's where it will stay until I have enough for a downpayment on a house.  I may increase it after buying a house.

I feel like I need AT MINIUMUM enough to cover my car insurance deductible & health insurance deductible (which happens to also be my max out of pocket), which together are 5,000.  If I were injured in a car wreck, I would need that right away, plus enough to keep the bills paid while recuperating & not working.  Although maybe if you have disability insurance, you wouldn't need that?

dorkus619

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Re: Emergency fund
« Reply #3 on: October 29, 2013, 09:52:56 AM »
Well I'm just starting my Emergency Fund, so far I have $500 in an online savings account .9%

After advice from several helpful people I've decided I'm going to reduce my 401k contributions and increase my house payments (until I get rid of the PMI) and increase EF savings until it's 'full' - which I haven't decided how much cusion I want in there yet. I think 3-6 months expenses sounds safe but not overly so.

Suze Orman's book says I need 8 months, but I think that's a bit much for my situation. I don't think my job is going anywhere and if it did, I think that I could get a new job fairly quickly. I've never been without a job.

Depends on your situation I guess. How secure your job is, How long you think it would take to find a new job, How much you could cut expenses in an emergency situation, and how much you need just to 'feel safe'

dorkus619

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Re: Emergency fund
« Reply #4 on: October 29, 2013, 10:03:48 AM »
...I feel like I need AT MINIUMUM enough to cover my car insurance deductible & health insurance deductible (which happens to also be my max out of pocket), which together are 5,000.  If I were injured in a car wreck, I would need that right away, plus enough to keep the bills paid while recuperating & not working.  Although maybe if you have disability insurance, you wouldn't need that?

Okay this is also something to consider. If you're dependent on your car, then you would need enough savings to either pay your deductible and/or buy a car. I just have liability on my car so I'd need a new car if mine got mangled.
I think it could be argued differently about the hospital money though. The hospital is going to take care of you first, then send a bill. But you do need to be able to cover that bill when it arrives. And cover expenses while healing.
Definitely worth understanding and exploring Health Savings Accounts, Disability Insurance, and gov't programs in case of an emergency like that.
(I have a health savings account which has $1200 in it now, my deductible is $2500. I plan to increase my contribution to this account next year and will feel a little better when I've got more than $2500 in it. I also have short term disability insurance that gets better the longer I'm with the company.)

mlipps

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Re: Emergency fund
« Reply #5 on: October 29, 2013, 10:22:56 AM »
Personally, I prefer 6 months of necessary expenses. It's probably more than we need, since we could cover those expenses with either of our paychecks if cut back on 401k contributions temporarily, without even accounting for unemployment, but it makes me feel better. Right now though, we are paying for husband's MBA out of pocket, so it's fluctuating a little more & might drop as low as 3-4 months expenses.

gecko10x

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Re: Emergency fund
« Reply #6 on: October 29, 2013, 10:36:53 AM »
As our financial situation improves, I've decided that there's no need for us to have an "emergency" fund.

We build funds for future known expenses (insurance, vacation, etc.), have mini-funds for unknowns (house maint., car maint., medical), plus a 1 month income buffer. Those are all kept in checking, which fluctuates from $7k-$10k. In addition, I have a small rental-maint. fund and a new car fund in a SmartyPig account. So currently have access to around $20k cash, plus I have over $50k in available credit, plus whatever credit my wife has.

In addition to having access to plenty of funds, as someone else mentioned, if your free cash flow is good you can cover quite a bit with that.

Thespoof

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Re: Emergency fund
« Reply #7 on: October 29, 2013, 11:00:05 AM »
I have a years worth of living expenses saved in my EF. I keep some in cash, some in a chequing account, some in a savings account which makes up half and the other half is in my TFSA where it can make me money as it is sitting there. I also contribute the maximum to my TFSA but I know a portion of it is my EF.

BuzzardsBay

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Re: Emergency fund
« Reply #8 on: October 29, 2013, 11:13:23 AM »
I have $10,000 in a money market at the credit union down the street.  It's there for security and convenience and not to make money.  I'm not concerned with the interest rate.  I just want to be able to write a check or walk over there if and when I need to.

bo_knows

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Re: Emergency fund
« Reply #9 on: October 29, 2013, 11:20:16 AM »
We have $10k in our Credit Union's savings account as our primary emergency fund.  I also somewhat consider our after-tax brokerage account an extension of that "emergency fund". 

vespito

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Re: Emergency fund
« Reply #10 on: October 29, 2013, 04:03:24 PM »
How stable is your job?  We have about 8 months expenses saved in Capital One.  If needed, we could also access some Roth IRA money.  My wife's job is not super stable so we like to keep a little more cash on hand.

Michread

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Re: Emergency fund
« Reply #11 on: October 30, 2013, 06:05:38 AM »
As our financial situation improves, I've decided that there's no need for us to have an "emergency" fund.


In addition to having access to plenty of funds, as someone else mentioned, if your free cash flow is good you can cover quite a bit with that.

We don't have an emergency fund either.  We have just enough in the checking acct. to pay our bills.  All other savings goes directly into Vanguard funds (taxable).  If we needed extra cash, we pull from the Vanguard savings which we have over the last 20 yrs. for larger expenses (cars, camper, ingr. pool). 

krenwren

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Re: Emergency fund
« Reply #12 on: October 30, 2013, 06:12:57 AM »
I still live P2P, I have $200 in a little buffer, working on at least a month of EF.  Job is pretty stable, could easliy find another if for some reason this one ended. 

vespito

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Re: Emergency fund
« Reply #13 on: October 30, 2013, 11:38:52 AM »
If we needed extra cash, we pull from the Vanguard savings which we have over the last 20 yrs. for larger expenses (cars, camper, ingr. pool).
Michread - if you don't mind me asking - do you just keep extra cash in your brokerage account or use a money market fund? - would it be ok to PM you about this?  I don't want to completely hijack the thread.

Challenge Mantra

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Re: Emergency fund
« Reply #14 on: October 30, 2013, 10:48:06 PM »
When I started my fund, I kept stashing until I hit $15,000 in savings.  I don't know where I got that number but I'm pretty sure it just sounded like a good goal and that covers about 10 months of expenses.  I maintain a pretty high number because I'm the primary provider in my relationship.

I also simultaneously stashed away in a Roth IRA which is a great backup if you haven't looked into those yet.  Because of my Roth, I could actually be set for over two years I think. Funny what happens when you automate your savings and forget about it!

Loud Noises

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Re: Emergency fund
« Reply #15 on: October 31, 2013, 09:20:22 AM »
I fluctuate between 4-6 months of normal expenses in my EF.  Some of this is in an online savings account, some is a buffer in my checking account, and some is "under the mattress."  When you look at each one it looks small.  But each provides extra security for a different reason. 

I also calculate EF money by normal expenses, building in an extra buffer.  If I were not bringing in income, I could trim expenses down immediately if needed.  I don't see a need for more than 4-6 months of cash because I could easily pull from a number of other places without penalty if needed. 

engineerjourney

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Re: Emergency fund
« Reply #16 on: October 31, 2013, 12:08:10 PM »
We have a little buffer in our checking account.  We have 6 months worth of expenses saved currently in our credit union's savings account.  Will be moving it to a higher interest savings account soon.  The 6 months of expenses is with no cut backs so it would definitely last longer than 6 months if required.  We would have less than 6 months put aside except that we both work in the same industry so it is possible that we would both lose our jobs if one does.  Though job loss is not likely. 

Michread

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Re: Emergency fund
« Reply #17 on: November 02, 2013, 11:10:03 AM »
If we needed extra cash, we pull from the Vanguard savings which we have over the last 20 yrs. for larger expenses (cars, camper, ingr. pool).
Michread - if you don't mind me asking - do you just keep extra cash in your brokerage account or use a money market fund? - would it be ok to PM you about this?  I don't want to completely hijack the thread.

21 yrs ago when we first purchased our home we decided to save $100/mo in Vanguard STAR (started with $1000).  At that time we had small student loans (~$5000) and our mortgage (new car & company car).  We both had secure jobs and if needed could pull from STAR or use our credit cards if we really needed cash.  We had a new home and new cars; this meant we knew we wouldn't need any large sums other than our monthly bills. 

We've never to this day needed cash in a bank other than to pay our monthly bills.  Whenever we needed to purchase anything large, we pulled from our Vanguard STAR taxable acct. (cars, ingr. pool).  The timing was right so we never lost anything by pulling from STAR.  We took the risk (and still do) and it's worked for us. 

How much you have in cash, whether in a bank, money market or Vanguard tax accts, depends on YOUR life.  We have a low beta/volatility life so we have high beta investments.   

I highly recommend The Affluent Investor by Phil DeMuth even if you are not YET affluent.