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Learning, Sharing, and Teaching => Investor Alley => Topic started by: MTBmustachian on November 26, 2019, 02:34:27 PM

Title: How much cash do you keep on hand for an emergency fund?
Post by: MTBmustachian on November 26, 2019, 02:34:27 PM
Standard wisdom says to keep 3-6 months of living expenses in cash as an emergency fund. Even within that wisdom, there's a pretty big range of variability.

So, how much do YOU keep in cash as an emergency fund? And what are the factors that you used to decide?

(Also, I just sold a house so I no longer have access to a HELOC as MMM recommends.)
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Chrissy on November 26, 2019, 03:44:04 PM
We keep $20k-$30k in our chequing account.  We've just always had this number.  Before we had kids, it was 6mo of expenses.  Now that we're paying childcare for 2, it's 3mo expenses.  We didn't really decide, it's just where we feel comfortable.  There's certainly no reason to have more:  we have easy access to $65k in taxable, and maybe $50k in available credit on existing credit cards.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: RWD on November 26, 2019, 03:44:49 PM
I keep enough to pay the month's worth of credit card balances, mortgage, car loan, and utilities bills. Anything in excess is eventually (once per quarter) swept to my brokerage account. Our credit cards have a combined limit well above our annual spending so I am not too worried about the need to cover sudden emergencies.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: MTBmustachian on November 26, 2019, 04:17:44 PM
I keep enough to pay the month's worth of credit card balances, mortgage, car loan, and utilities bills. Anything in excess is eventually (once per quarter) swept to my brokerage account. Our credit cards have a combined limit well above our annual spending so I am not too worried about the need to cover sudden emergencies.

Interesting, so you basically keep 1 month's expenses on hand?

This is sort of what I was interested to hear. Like you, I have a ton of credit card spending power available to me (not that hard to get), and it seems smartest to keep as much cash as possible invested.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: JAYSLOL on November 26, 2019, 06:21:27 PM
I also usually keep just enough to cover the balance on my credit card, rent and other expenses that come up monthly in my checking account.  I also keep between 1 and 3 months worth of cash in a high interest savings account, which I use to help with larger planned or unplanned expenses.  Also sometimes Iíll use that savings account to just throw a bunch into the market if thereís a significant dip, like last December.  Market timing, I know, lol.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: RWD on November 26, 2019, 06:48:26 PM
I keep enough to pay the month's worth of credit card balances, mortgage, car loan, and utilities bills. Anything in excess is eventually (once per quarter) swept to my brokerage account. Our credit cards have a combined limit well above our annual spending so I am not too worried about the need to cover sudden emergencies.

Interesting, so you basically keep 1 month's expenses on hand?

This is sort of what I was interested to hear. Like you, I have a ton of credit card spending power available to me (not that hard to get), and it seems smartest to keep as much cash as possible invested.

In theory, yes. Though in practice a lot more is usually sitting in our savings account waiting for me to actually go and invest it.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: ScreamingHeadGuy on November 26, 2019, 08:37:39 PM
At least 5 monthsí expenses ($15k). 
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Malcat on November 26, 2019, 08:45:05 PM
About $1000 in cash, but we have ~65K in LOC available and a lot of monthly cash flow.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Travis on November 26, 2019, 09:29:53 PM
I keep enough to pay the month's worth of credit card balances, mortgage, car loan, and utilities bills. Anything in excess is eventually (once per quarter) swept to my brokerage account. Our credit cards have a combined limit well above our annual spending so I am not too worried about the need to cover sudden emergencies.

Interesting, so you basically keep 1 month's expenses on hand?

This is sort of what I was interested to hear. Like you, I have a ton of credit card spending power available to me (not that hard to get), and it seems smartest to keep as much cash as possible invested.

I keep two month's expenses in checking. I put as much as possible on credit cards and pay them off with last month's income so on the 31st I'm down to roughly one month of expenses. The next day it fills back up.  I don't have anything in my life that would be an emergency big enough to require paying more than a month's expenses in cash.  I have a very stable job with predictable income, otherwise I wouldn't be doing this.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Calimerostache on November 26, 2019, 09:57:02 PM
I am pretty conservative : I have about a year
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: MTBmustachian on November 26, 2019, 11:39:02 PM
Wow in a few short responses, we've seen answers across the spectrum! Everything from $1,000 to 1 month, to 3 months, 5, and a year.

Very interesting...

I am pretty conservative : I have about a year

Can you elaborate on your decision-making process here?
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Malcat on November 27, 2019, 06:03:54 AM
Wow in a few short responses, we've seen answers across the spectrum! Everything from $1,000 to 1 month, to 3 months, 5, and a year.

Very interesting...

I am pretty conservative : I have about a year

Can you elaborate on your decision-making process here?

Well, yeah.

There's no one-size-fits-all answer. You really have to look at your own situation and your own risks.

In my personal situation, it simply makes no sense to keep cash around at this point. There isn't a single scenario where it would possibly be beneficial.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Car Jack on November 27, 2019, 06:37:41 AM
In cash, I've got about a year's worth.  I used part of that to pay for our roof to be redone last month ($15k) and will pay DS#2's college tuition for the spring in the next couple weeks ($4767).  But I have over 7 years of spending in US Savings Bonds, so I could go down to nothing in e fund and be fine.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Brother Esau on November 27, 2019, 06:40:14 AM
About 1 years worth of expenses.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: DadJokes on November 27, 2019, 07:10:37 AM
We keep enough in our checking account to cover the mortgage for one month. The likelihood and financial severity of any emergency is low enough (great health insurance, stable government jobs, good support system, etc.) that I see no reason for us to have thousands of dollars earning 2% or less. If anything comes up that we can't cash flow, we can always withdraw Roth IRA contributions.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: AerynLee on November 27, 2019, 07:38:00 AM
Up until now we've kept $2k in savings. DINKs with stable jobs and living off less than 1 income for the last 4 years so we've been throwing every bit of extra at debt. We also have ridiculous amounts in available credit on our cards, rapidly growing home equity, and the ability to borrow $50k from DH's 401k if we really needed to.

Two weeks ago we paid off the last of the non-mortgage debt (!!!) so now I'm re-evaluating. I think I'm going to slowly work up to about $10k in savings. That's about 4 months spending for reference but the idea is to have money for things like a new roof that will come up at some point in the next few years. Plus flexibility for things like being easier to leave a job if one of ours turns bad or taking a sabbatical or any number of things that can come up
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: 2sk22 on November 27, 2019, 07:50:36 AM
I know this number is an outlier but that's what works for us, in terms of peace of mind. We have about 6 years worth of living expenses in money market and savings accounts.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: walkerstudios on November 27, 2019, 07:58:12 AM
$12k is the line where my wife feels comfortable. About 6 months I'd say. We could stretch to 12 as our overhead is very low and we're both champs at side hustles when needed, which thankfully have always been more for fun - hobbies that pay - than necessary. Still, a good skill to have in the back pocket as life is fond of throwing curveballs.
Walker
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: the_fixer on November 27, 2019, 08:20:18 AM
In the past we maybe had $500 - $700 in the bank everything else was always invested. Still keep $500 in checking at all times.

As we get closer to FIRE and we are maxing out everything and have a surplus I have been starting a few CD ladders I did 3 months expenses this year, will do 3 more months next year to bring us to a full year worth of super lean expenses or about 6 months fat fire expenses.

So far all in CD's maturing each month so we always have some availability.

My thought is that it will help us control our income for ACA,  allow us to work our Roth ladder easier, take a sabbatical or if we have a downturn shortly after RE we can live off it without touching investments.

Suboptimal I suppose... Maybe I will put it into our standard investments once we have a few years of fire under our belts.

Sent from my Pixel 2 XL using Tapatalk
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: RobertFromTX on November 27, 2019, 08:30:03 AM
$3,000 minimum in checking account, $6,000 in VMMXX for e-fund. Still in accumulation phase.

Really my e-fund is my credit card. I've never had a charge to it that I couldn't pay off in a month or two.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: SpareChange on November 27, 2019, 08:55:24 AM
Untill recently, kept about $200 or so above expenses to be incurred before next payday (two weeks). Stable job. Renter. Buffered by LOC, credit cards, sizable and growing taxable investments, high savings rate. Now that I'm PT, I might edge it up a bit. 
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Calimerostache on November 27, 2019, 09:09:43 AM
Wow in a few short responses, we've seen answers across the spectrum! Everything from $1,000 to 1 month, to 3 months, 5, and a year.

Very interesting...

I am pretty conservative : I have about a year

Can you elaborate on your decision-making process here?

I ve had a stable job for fifteen years. despite this I have always felt the need to have about a year of cash available in case (unexpected medical bill, house repair, car repair)... call me pessimistic if you want.
In any case, it so happened that i decided to quit my job (without another one lined up) and i now think itís a good idea to have one year of cash available.
I feel like I wonít have to settle for the first opportunity .

Definitely realize that itís not necessity the most rational decision... but thatís he one I live the most peacefully with... and I think thatís really the answer to your question ... what are you comfortable with.
Makes me think that it gives me time to make the right decision for my next job.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: jdhansen on November 27, 2019, 05:54:15 PM
Right now we have $1000 in our emergency fund as we work to pay off our last remaining debts.  After that DW wants to keep 8 months in the emergency fund about $20K as she says 8 months is the longest we have gone without finding a replacement job when we were both unemployed and she wants to be covered if that ever happens again.

Seems okay to me, even if not optimal.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: norajean on November 27, 2019, 06:46:16 PM
Never had an emergency fund nor wanted one.  Sounds like cash drag to me.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: the_gastropod on November 27, 2019, 07:14:35 PM
MMM has a video about this. He basically suggests the emergency fund is unnecessary. Check it out: https://www.youtube.com/watch?v=tFpJrqp0l_4&app=desktop
Title: How much cash do you keep on hand for an emergency fund?
Post by: nancyfrank232 on November 27, 2019, 10:48:09 PM
We keep anywhere from 5-10% in cash

Itís not for any particular purpose.

Just like to have it around.

I adopted the habit in the 90s from Warren Buffett using Berkshire Hathaway to hold ďemergencyĒ cash
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: MTBmustachian on November 28, 2019, 12:40:19 AM
Never had an emergency fund nor wanted one.  Sounds like cash drag to me.

Yeah, hence the question. My forecasted returns really skew one way or another depending on how much cash I plan to keep out of the market long-term. I just started playing with the numbers of having a big emergency fund VS a small emergency fund, and the differences over the course of 10 years are substantial.

MMM has a video about this. He basically suggests the emergency fund is unnecessary. Check it out: https://www.youtube.com/watch?v=tFpJrqp0l_4&app=desktop

Thanks for sharing that! Didn't realize MMM was doing newer content on Youtube... interesting. That said, I have read all of this info from MMM before in older blog posts.

I didn't realize my discussion of "emergency fund" was implying that I'd be keeping my money in the 0% bucket. That seems ultra-stupid--you should at least keep it in a 2% money market savings account. I keep around $1,000 in my checking account, and the rest of my easily-accessible cash in a 2% savings account.

My plan a few months back was to open a HELOC, which he recommends at the end of the video too. But I just sold my house so that's no longer an option.

The motivation of this question is that if there's a drop in the market and you have an emergency, you don't want to be selling shares in order to cover that emergency.

Then some people would say, "that's why you diversify into bonds." But as I just opened a taxable brokerage account for the first time and have been researching which assets I want to hold in that account, the clear wisdom is that it's better to hold your bonds in a tax-advantaged account and NOT a taxable account. But if I hold my bonds in my SEP IRA or ROTH IRA and not my brokerage account, that means I can't as easily sell off my bonds and access that capital.

Which brings me back full circle to keeping cash in a money market savings account in case something happens.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Fomerly known as something on November 28, 2019, 05:13:02 AM
About 6 months in an account labeled "emergency fund" and another $10,000 in various sinking fund savings accounts.  I was leaning the other way (steadily lowing the cash on hand) because I have a "stable" government job, until last year's government shit-down and I had to use my emergency fund to "front" my daily expenses for about a month when I got paid again.  I bumped it up because I didn't like how close I was feeling to having to access my investments as I saw the savings account balances go down.  (And what if another emergency happened). 
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Wrenchturner on November 28, 2019, 05:53:16 AM
$5k to avoid a banking fee.  A bit more than I'd like.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Malcat on November 28, 2019, 05:58:28 AM
Never had an emergency fund nor wanted one.  Sounds like cash drag to me.

Yeah, hence the question. My forecasted returns really skew one way or another depending on how much cash I plan to keep out of the market long-term. I just started playing with the numbers of having a big emergency fund VS a small emergency fund, and the differences over the course of 10 years are substantial.

MMM has a video about this. He basically suggests the emergency fund is unnecessary. Check it out: https://www.youtube.com/watch?v=tFpJrqp0l_4&app=desktop

Thanks for sharing that! Didn't realize MMM was doing newer content on Youtube... interesting. That said, I have read all of this info from MMM before in older blog posts.

I didn't realize my discussion of "emergency fund" was implying that I'd be keeping my money in the 0% bucket. That seems ultra-stupid--you should at least keep it in a 2% money market savings account. I keep around $1,000 in my checking account, and the rest of my easily-accessible cash in a 2% savings account.

My plan a few months back was to open a HELOC, which he recommends at the end of the video too. But I just sold my house so that's no longer an option.

The motivation of this question is that if there's a drop in the market and you have an emergency, you don't want to be selling shares in order to cover that emergency.

Then some people would say, "that's why you diversify into bonds." But as I just opened a taxable brokerage account for the first time and have been researching which assets I want to hold in that account, the clear wisdom is that it's better to hold your bonds in a tax-advantaged account and NOT a taxable account. But if I hold my bonds in my SEP IRA or ROTH IRA and not my brokerage account, that means I can't as easily sell off my bonds and access that capital.

Which brings me back full circle to keeping cash in a money market savings account in case something happens.

Again, it really depends on your personal circumstances.

Can you get a personal LOC?
What are your expenses like and how deeply can they be cut?
Do both you and your spouse work?
How secure are your jobs?
How difficult would it be in an economic downturn to find jobs?
What level of non-job-loss emergencies might you expect? And are they easily covered by a few paycheques of cash flow?

At the end of the day, you either guaranteed lose money by storing a large e-fund proactively, or you risk possibly losing money selling in a down market, or you risk accruing debt interest on an LOC.

Which risk are you more comfortable with?
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Nick_Miller on November 28, 2019, 07:17:23 AM
About $25,000, give or take. That's a non-negotiable for our family.

I watched Pete's video. I guess my thought is "not every single thing has to be optimized." It takes mental energy to optimize, and his approach seems like a pendulum that might result in increased income sometimes, but could also result in being forced to sell stocks at inopportune times.

That being said, I don't understand the 0% argument. There are plenty of checking accounts that offer 2% at least these days.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Malcat on November 28, 2019, 07:25:38 AM
About $25,000, give or take. That's a non-negotiable for our family.

I watched Pete's video. I guess my thought is "not every single thing has to be optimized." It takes mental energy to optimize, and his approach seems like a pendulum that might result in increased income sometimes, but could also result in being forced to sell stocks at inopportune times.

That being said, I don't understand the 0% argument. There are plenty of checking accounts that offer 2% at least these days.

Like most things Pete says, the benefit isn't really in terms of him providing a "how to" tutorial and more of a "have you thought about it this way?" questioning of norms.

People are inundated with sources dictating that they "must have X amount e-fund", but not a lot of people pointing out that it's not always optimal.

Pete makes people question their own assumptions, but the real benefit is in deciding for ourselves.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Nick_Miller on November 28, 2019, 07:31:50 AM
About $25,000, give or take. That's a non-negotiable for our family.

I watched Pete's video. I guess my thought is "not every single thing has to be optimized." It takes mental energy to optimize, and his approach seems like a pendulum that might result in increased income sometimes, but could also result in being forced to sell stocks at inopportune times.

That being said, I don't understand the 0% argument. There are plenty of checking accounts that offer 2% at least these days.

Like most things Pete says, the benefit isn't really in terms of him providing a "how to" tutorial and more of a "have you thought about it this way?" questioning of norms.

People are inundated with sources dictating that they "must have X amount e-fund", but not a lot of people pointing out that it's not always optimal.

Pete makes people question their own assumptions, but the real benefit is in deciding for ourselves.

I agree with your assessment. Pete can be a bit paternalistic about certain things, as we all know, but I like that he doesn't have a one-size-fits-all "program" for people. I think he is very smart and pretty darn honest in sharing his views. And I don't think any of us here mind having norms challenged. I would just personally find this pendulum approach too much of a roller coaster ride. Our ER fund is set it an forget it. We'll try to optimize other things.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: MTBmustachian on November 28, 2019, 07:52:27 AM

How secure are your jobs?
How difficult would it be in an economic downturn to find jobs?
What level of non-job-loss emergencies might you expect? And are they easily covered by a few paycheques of cash flow?

Well if I knew what the emergency would be, then I wouldn't need an emergency fund now would I?

Same thing with job security, finding new jobs, etc. If you could forecast all of these things you wouldn't end up back on your heels dipping into an emergency fund.

I mean I get where you're trying to go with this, but if I've learned anything over the past year, it's that horrible things can happen that you would never have dreamt would happen to you. And it seems like a lot of Pete's message is about being a badass and being prepared for anything... the question is just figuring out how to do that best.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Malcat on November 28, 2019, 09:23:16 AM

How secure are your jobs?
How difficult would it be in an economic downturn to find jobs?
What level of non-job-loss emergencies might you expect? And are they easily covered by a few paycheques of cash flow?

Well if I knew what the emergency would be, then I wouldn't need an emergency fund now would I?

Same thing with job security, finding new jobs, etc. If you could forecast all of these things you wouldn't end up back on your heels dipping into an emergency fund.

I mean I get where you're trying to go with this, but if I've learned anything over the past year, it's that horrible things can happen that you would never have dreamt would happen to you. And it seems like a lot of Pete's message is about being a badass and being prepared for anything... the question is just figuring out how to do that best.

To a degree.
However, you can pretty much risk asses anything and decide how much opportunity loss risk you want to take vs hedging the potential risk.

As much as anything in life can happen, there's really only a finite degree to which it can financially affect you.

There's pretty much only loss of income and emergencies that cost money.

You can only lose so much income and there are only so many emergencies that can cost you a substantial amount of money, and many of those can be hedged with insurance, although, again, you need to risk assess the value of the insurance involved.

One of my very real risks is permanent job loss through substantial disability, and I'm virtually uninsurable as a result of my illness. However, we've risk managed our life to account for it, so it's really a non issue.

I don't say this from a position of excess optimism, I'm actually coming from a position of having had many many very BAD and expensive things happen.

And no, I don't at all agree that just because I can anticipate possible emergencies that that means that I wouldn't dip into an emergency fund. I'm not at all suggesting that everyone can predict what will happen, that's insane.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: hops on November 28, 2019, 09:50:24 AM
We keep a minimum of $25k in an easily accessible (money market) emergency fund. That amount might increase as our circumstances change. If we could obtain better short-term disability insurance coverage we might reevaluate.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: RWTL on November 28, 2019, 10:06:04 AM
Around 3 months currently.  As we get closer to FI over the next few years, we're shooting for 1 year.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: JSMustachian on December 05, 2019, 03:26:31 PM
We have very secure jobs so we keep about $7,500 to $10,000 in a money market account to help cover any major home repairs like AC replacement or roof. Anything over that we can cash flow.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: 2sk22 on December 06, 2019, 02:39:13 AM

How secure are your jobs?
How difficult would it be in an economic downturn to find jobs?
What level of non-job-loss emergencies might you expect? And are they easily covered by a few paycheques of cash flow?

Well if I knew what the emergency would be, then I wouldn't need an emergency fund now would I?

Same thing with job security, finding new jobs, etc. If you could forecast all of these things you wouldn't end up back on your heels dipping into an emergency fund.

I mean I get where you're trying to go with this, but if I've learned anything over the past year, it's that horrible things can happen that you would never have dreamt would happen to you. And it seems like a lot of Pete's message is about being a badass and being prepared for anything... the question is just figuring out how to do that best.

To a degree.
However, you can pretty much risk asses anything and decide how much opportunity loss risk you want to take vs hedging the potential risk.

As much as anything in life can happen, there's really only a finite degree to which it can financially affect you.

There's pretty much only loss of income and emergencies that cost money.

You can only lose so much income and there are only so many emergencies that can cost you a substantial amount of money, and many of those can be hedged with insurance, although, again, you need to risk assess the value of the insurance involved.

One of my very real risks is permanent job loss through substantial disability, and I'm virtually uninsurable as a result of my illness. However, we've risk managed our life to account for it, so it's really a non issue.

I don't say this from a position of excess optimism, I'm actually coming from a position of having had many many very BAD and expensive things happen.

And no, I don't at all agree that just because I can anticipate possible emergencies that that means that I wouldn't dip into an emergency fund. I'm not at all suggesting that everyone can predict what will happen, that's insane.

The book Living Off your Money by Michael H. McClung has some useful definitions:

Now, the situation under discussion here is a bit different - we are talking about the wealth accumulation phase so different factors are involved. However, it is still useful to think in terms of known and speculative risk.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: reeshau on December 06, 2019, 02:58:15 AM
I didn't realize my discussion of "emergency fund" was implying that I'd be keeping my money in the 0% bucket. That seems ultra-stupid--you should at least keep it in a 2% money market savings account. I keep around $1,000 in my checking account, and the rest of my easily-accessible cash in a 2% savings account.

2%, post inflation, is 0%.  Or worse.  But nominally, yeah, at least keep it in a MM, where you can either write a check or transfer cash within a day or two.  Or pay your credit card bill immediately.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: lisabobisa on December 06, 2019, 06:02:57 AM
Right now I have $3000 but I want to have 15,000.  That's about 5 months worth of expenses.

I made the mistake of dipping into my emergency fund to buy my house.  Then got into a car accident which depleted it even farther.  (should have waited to buy that house until I had saved about 50% more but alas.....)  I most likely would not have had enough if another emergency popped up and I did not like that feeling. 
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: YoungGranny on December 06, 2019, 07:04:43 AM
We have $8,500 which is 3 months of expenses for us. Used to keep it at $10k but I realized that was just to have an even number so we dropped it a bit. We also have high incomes so in a month where we have property taxes to pay or something like that we just invest less. That always makes me question keeping an emergency fund because in 7ish years I've never touched it but I always hear when you need it the most is when you wish you had it, so I keep it Į\_(ツ)_/Į.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Car Jack on December 06, 2019, 07:59:51 AM
So DS#1's tuition bill came in ($8500) and he's going to live on campus for his last semester, so I figure another $5k or so.  I've got $40k at Redneck, about $10k in my base account and of course, as of today, $373k in US Savings Bonds in paper, so can instantly become available cash.  DS#2's tuition for the spring is $4767 at community college and since he's been building an account forever as a "college fund", that'll pay the bill along with the next full year.  Our annual spending, ignoring college and single expenses (this year a $22k car and a $15k roof!) is $50k.  So keeping a year's spending in cash isn't all that difficult.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: OurTown on December 06, 2019, 08:23:55 AM
Right now it's about $20 grand.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: BobTheBuilder on December 06, 2019, 09:10:27 AM
What I spend in a busy month (2k) in checking, and 400Ä cash in case ATMs don't work. I have to say I run zero risk of losing my full income. Worst case scenario in Germany is 60% of last net pay in case of unemployment for a year. That aligns with my savings rate. So I am good for at least a year unless the apocalypse hits. In that case money won't matter anyways :-)
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: ChickenStash on December 06, 2019, 09:58:26 AM
I don't really make a distinction between my emergency fund and all the rest of my savings other than some being more liquid than others. I keep virtually no cash beyond some tip money. The checking account carries enough to pay the normal bills and any extra is sent to my brokerage account where everything else is.

Credit can cover just about anything on short notice. If it can wait 3 business days I can get it out of the brokerage account simply enough.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: MTBmustachian on December 06, 2019, 12:36:20 PM
I don't really make a distinction between my emergency fund and all the rest of my savings other than some being more liquid than others. I keep virtually no cash beyond some tip money. The checking account carries enough to pay the normal bills and any extra is sent to my brokerage account where everything else is.

Credit can cover just about anything on short notice. If it can wait 3 business days I can get it out of the brokerage account simply enough.

Interesting...

How long have you had your brokerage account for? I'm just funding my first taxable account right now. I guess what I'm concerned about is the possibility of poor returns in the immediate future and then having a big emergency expense of some sort. But if I had had a brokerage account for the past 5 years and my investments in that account had already seen serious gains, even if there was a small drop in the markets in the future and I had to pull some money out, I wouldn't feel as bad about it.

Guess that's more psychology than it is numbers :)
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: robartsd on December 06, 2019, 12:59:57 PM
I do most of my banking with an online bank, but I also have an account at a local credit union that I established long ago. The local credit union holds $1000 in savings and very little in checking. Direct deposit goes into online savings and an automatic transfer sufficient to cover monthly expenses moves money into checking. I avoid allowing the savings account dropping below this transfer amount (so 1 month's expenses + $1000 is my lower threshold for my emergency fund balance). The savings account does accumulate a surplus, but I consider most of that to be short term savings for irregular expenses (travel, home improvement, etc.). Rather than transfer out a lump sum to investments, when the savings account balance gets larger than I think is needed, I increase the monthly budget for investing.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: MoneyQuirk on December 10, 2019, 01:34:11 AM
$500.

But I work a government (well, military) job that allows me to have near 100% confidence of that next paycheck.

So as soon as I get the money it's going into investments :).
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: reeshau on December 10, 2019, 03:02:09 AM
But if I had had a brokerage account for the past 5 years and my investments in that account had already seen serious gains, even if there was a small drop in the markets in the future and I had to pull some money out, I wouldn't feel as bad about it.

Guess that's more psychology than it is numbers :)

Yes!  You have stated the opposite of the "getting back to even" syndrome.  One of my top 3 stocks is Disney.  I have owned it long enough that I used to call myself a "Pixar shareholder in exile."  That was some of the first stock I ever bought, back in 2000.  As Disney shares, they have a cost basis of $6.  I am highly amused when I see Disney's daily fluctuations come as multiples of my cost basis.  And if it came time to need to sell them, I wouldn't really care what they did yesterday, or in the last month.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: DadJokes on December 10, 2019, 05:11:36 AM
$500.

But I work a government (well, military) job that allows me to have near 100% confidence of that next paycheck.

So as soon as I get the money it's going into investments :).

Have you been in the military during a government shutdown? I remember people not getting paychecks for 1-2 pay periods back in 2011 or so. I would suggest keeping at least a one month buffer just because of that.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Travis on December 10, 2019, 06:03:16 AM
$500.

But I work a government (well, military) job that allows me to have near 100% confidence of that next paycheck.

So as soon as I get the money it's going into investments :).

Have you been in the military during a government shutdown? I remember people not getting paychecks for 1-2 pay periods back in 2011 or so. I would suggest keeping at least a one month buffer just because of that.

Federal civilians had to do without paychecks a few times during the various shut downs, but we (military) still got paid.

As I mentioned in my remarks earlier, I keep an extra month in the bank just in case despite having a locked-in salary.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: robartsd on December 10, 2019, 12:07:15 PM
As I mentioned in my remarks earlier, I keep an extra month in the bank just in case despite having a locked-in salary.
The extra month is handy. Even if you are confident that your income is secure, it's nice not to worry if receiving payment is delayed. Just this month my coworker was stressed about his payment. The account he had his direct deposit into had been changed due to suspicion of identity theft and the direct deposit got returned. Took the controller's office a day or two to confirm the returned money and reissue the pay as a paper check.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: TVRodriguez on December 10, 2019, 12:18:04 PM
I have doctor clients who keep enough in an e-fund to pay the retainer of a good malpractice defense attorney.  That can easily be $30-50,000.  (Our state does not require doctors to have liability insurance.)
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: harvestbook on December 11, 2019, 05:50:29 AM
Couple thousand in checking, $3,000 in money market, and couple thousand literally buried in the yard. With no debt, this would probably last us four or five months but in a true emergency situation we could stretch it eight or nine months. I can also pull from my business account if needed, but most of its excess goes directly to 401k. We also have about a year's worth in tax-exempt bonds that function both as a portion of our bond allocation and back-up emergency fund. I used to keep a lot of cash around, tens of thousands, because I didn't know what to do with it, but eventually realized the incomparably precious value of time.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: MTBmustachian on December 11, 2019, 09:09:42 AM
Thanks so much everybody for chiming in and sharing your opinions and numbers. This has proved super helpful!

Just wanted to update on my personal decision making on how much cash to keep on hand and moving a lump sum of cash into the market (I was lurking quite a bit on this thread on the topic: https://forum.mrmoneymustache.com/investor-alley/where-to-invest-my-cash-now/ )

Iíve personally decided to keep about $10,000-ish in fully-liquid cash kept in a money market account that currently pays 2.05%. Iíll probably also keep a couple grand in my checking account (also bears a little interest, but not much) as a buffer for expenses coming and going.

The rest of the lump sum Iím moving into the market, but since Iím dropping a huge amount in for my personal position in life (about 6x what I already had invested, about 1.5x my annual salary), Iím starting with a much higher bond allocation than is my target (about 40%). Iím using this to protect against a major market downturn in the near term, in case I really want or need to access some of my funds. (For example, if I change my mind and decide I want to buy a house sooner rather than later.) Then, Iíll use my regular ongoing investments to bring my asset allocation slowly back to where I want it to be, about 90/10.
 
This strategy was influenced in part my this article: https://ofdollarsanddata.com/the-cost-of-waiting/ and all of my other research on DCA vs lump sum investing.

So thatís where Iím at right now 🙂 May reduce the amount of emergency fund cash over time if Iím feeling comfortable with it.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: jb1 on December 13, 2019, 06:42:44 AM
I keep 15k-20k in my Goldman Sachs account (yields 1.7% now) not bad!

Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: pdxvandal on December 13, 2019, 11:06:38 AM
I used to have way too much cash in my 30s "waiting" to buy a house and for "safety". Since my MMM baptism, I've switched that thinking to having less than $10k.

After next week's mortgage payment, I'll have about $4k in the bank and $2k in an HSA. If $hit hits the fan, I have $60k in Roth contributions or $50k in a taxable brokerage I can tap into.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: BECABECA on December 13, 2019, 12:25:07 PM
...
The motivation of this question is that if there's a drop in the market and you have an emergency, you don't want to be selling shares in order to cover that emergency.

Then some people would say, "that's why you diversify into bonds." But as I just opened a taxable brokerage account for the first time and have been researching which assets I want to hold in that account, the clear wisdom is that it's better to hold your bonds in a tax-advantaged account and NOT a taxable account. But if I hold my bonds in my SEP IRA or ROTH IRA and not my brokerage account, that means I can't as easily sell off my bonds and access that capital.

Which brings me back full circle to keeping cash in a money market savings account in case something happens.

I have a mix of stocks and bonds and hold my bonds only in the tax advantaged account. I figured if the market significantly dropped but I needed to withdraw some emergency money from my stash Iíd sell stock in my taxable account and then immediately rebalance my tax advantaged account (selling the equivalent value of bonds and transferring it to the equivalent value of stock to exactly offset the value of stock I had to sell in the taxable account).

This essentially allows me a roundabout way to use the bonds for an emergency even though theyíre in my tax advantaged account. Is there something wrong with my thinking? I know there are frequent trading restriction rules about buying back VTSAX within 30 days of selling it, but if itís in a different tax structure account, does that restriction apply?
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: robartsd on December 13, 2019, 01:22:07 PM
This essentially allows me a roundabout way to use the bonds for an emergency even though theyíre in my tax advantaged account. Is there something wrong with my thinking? I know there are frequent trading restriction rules about buying back VTSAX within 30 days of selling it, but if itís in a different tax structure account, does that restriction apply?
I don't think it does. I'm pretty sure the trading restriction is per account, not per individual. You'd end up with a 30 day restriction on VTSAX purchase in your taxable account. If they bond fund has a trade restriction, that would apply to the tax advantaged account but not the taxable account.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: MTBmustachian on December 16, 2019, 01:01:28 PM
I figured if the market significantly dropped but I needed to withdraw some emergency money from my stash Iíd sell stock in my taxable account and then immediately rebalance my tax advantaged account (selling the equivalent value of bonds and transferring it to the equivalent value of stock to exactly offset the value of stock I had to sell in the taxable account).

Ah this makes sense! I guess I actually just did a similar re-balancing in the opposite direction. :)
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: chairman5 on December 16, 2019, 03:22:55 PM
I keep a two years worth of expenses, about 200k.  Its a lot, but keeps me from ever thinking of selling out of the market even with deep sell-offs.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Vashy on December 16, 2019, 11:33:24 PM
Cash cash, ie money in my wallet/lying around the house - about £50. This can go as "high" as £200.

Cash as in sitting in a savings account, about £5,000, ie 3-4 months' expenses; my partner has another £10,000 so between us we have about 12 months' worth of expenses.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: spartana on December 17, 2019, 12:53:37 AM
I keep a two years worth of expenses, about 200k.  Its a lot, but keeps me from ever thinking of selling out of the market even with deep sell-offs.
lol I keep 3 years worth of expenses in a money market savings - about $30k. I am a cheapskate ;-). I'm FIREd and I do think it makes a difference. When I was working a very secure job I had less in an EF.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Car Jack on December 17, 2019, 07:34:56 AM
I keep a two years worth of expenses, about 200k.  Its a lot, but keeps me from ever thinking of selling out of the market even with deep sell-offs.
lol I keep 3 years worth of expenses in a money market savings - about $30k. I am a cheapskate ;-). I'm FIREd and I do think it makes a difference. When I was working a very secure job I had less in an EF.

Consider buying some iBonds.  For a year, they're tied up, but after that, you can easily cash them.  The interest is always state tax free.  Get a little every year.  Pretty soon, you don't need any actual e fund cash.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: thesis on December 17, 2019, 08:50:54 AM
$20k is the sweet spot for me. I think I'm floating around $19k since I borrowed $1k as part of my buy-in to VTSAX in my taxable account, which I was excited to finally start. Very likely, though, I'll max out my Roth IRA on January 1 by using money from this account, then slowly rebuild it.

For some reason I've tended to fear lots of things happening at once. Job loss, major car issues, etc. In reality this rarely happens, and it hasn't happened to me. So what if it's a down market and you have to sell a few shares at a deflated price? I guess I just like having a huge lump of cash, but I'm very dedicated to not keeping more cash, as a way of combating my own fear. My stache is growing at the point that I'm realizing I don't have as much invested as I'd like. The real progress has to do with the invested amount, the cash cushion is a side project and is more about sanity than FI. I don't feel I can really include a non-invested emergency fund in my 4% calculations :( , so I'm drawing the line at $20k

(also, I have way more experience in my career now than I did during my last stint of unemployment. That, amazingly, only lasted a few months, so I really don't believe I need a huge emergency fund now, but whatevs)
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: spartana on December 17, 2019, 10:57:33 AM
I keep a two years worth of expenses, about 200k.  Its a lot, but keeps me from ever thinking of selling out of the market even with deep sell-offs.
lol I keep 3 years worth of expenses in a money market savings - about $30k. I am a cheapskate ;-). I'm FIREd and I do think it makes a difference. When I was working a very secure job I had less in an EF.

Consider buying some iBonds.  For a year, they're tied up, but after that, you can easily cash them.  The interest is always state tax free.  Get a little every year.  Pretty soon, you don't need any actual e fund cash.
I use to have I Bonds and liked them. But now my credit union MM pays more and I have immediate access. Plus my passive FIRE income is direct deposited into it monthly and I use it to pay my expenses. I don't budget or track any longer but just try to keep an even $30k in it. If it goes lower I spend less for awhile. If it goes higher it's time to buy more fun stuff (AKA hookers and blow)  ;-).
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: chairman5 on December 20, 2019, 01:27:09 PM
I keep a two years worth of expenses, about 200k.  Its a lot, but keeps me from ever thinking of selling out of the market even with deep sell-offs.

I have it in Vanguard Prime Monday Market - about 2%.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: freya on December 20, 2019, 03:15:01 PM
I have my taxable and Roth accounts in a Golden Butterfly portfolio (variant of the Permanent Portfolio), which calls for a 20% allocation to cash.  It's been great for peace of mind.   I completely agree with the poster who said that cash is more than about living expenses.  There are lots of expensive little surprises in life that are entirely unrelated to your annual spending.

I disagree with Mr. MM on the idea of substituting home equity for an emergency fund.  The bank can cancel a home equity line at any time - and that's most likely to happen just when you need it the most.
Title: Re: How much cash do you keep on hand for an emergency fund?
Post by: Roland of Gilead on December 20, 2019, 03:34:08 PM
I'd say we keep about 3 years cash on hand, the rest is in the stock market.