Author Topic: How much cash do you keep on hand for an emergency fund?  (Read 7493 times)

DadJokes

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #50 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.

Travis

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #51 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.
« Last Edit: December 10, 2019, 06:05:00 AM by Travis »

robartsd

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #52 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.

TVRodriguez

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #53 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.)

harvestbook

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #54 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.
« Last Edit: December 11, 2019, 05:53:22 AM by harvestbook »

MTBmustachian

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #55 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.

jb1

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #56 on: December 13, 2019, 06:42:44 AM »
I keep 15k-20k in my Goldman Sachs account (yields 1.7% now) not bad!


pdxvandal

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #57 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.

BECABECA

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #58 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?

robartsd

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #59 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.

MTBmustachian

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #60 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. :)

chairman5

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #61 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.

Vashy

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #62 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.

spartana

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #63 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.

Car Jack

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #64 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.

thesis

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #65 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)
« Last Edit: December 17, 2019, 08:53:45 AM by thesis »

spartana

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #66 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)  ;-).

chairman5

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #67 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%.

freya

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #68 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.

Roland of Gilead

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Re: How much cash do you keep on hand for an emergency fund?
« Reply #69 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.