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General Discussion => Share Your Badassity => Topic started by: Jaguar Paw on July 30, 2016, 01:30:19 PM

Title: Took MMM advice and slashed emergency fund!
Post by: Jaguar Paw on July 30, 2016, 01:30:19 PM
I was involved in a thread on here not too long ago talking about how silly it is to have too large of an emergency fund, especially with a super secure job. I took the plunge on Friday and took out 20K from emergency fund and put it in some "moderately aggressive" Vanguard funds. Sweet! 10 years from now me thanks everyone that participated in that discussion.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: gggggg on July 30, 2016, 09:06:39 PM
I also cut mine down some, due to the same or a similar thread. It's hard to decide what to do with large expense savings though (car, roof, ac), I have trouble with those. I don't want to be pulling out dollars from an investment account for a new roof, if the market is down, for example. Maybe someone with math skills will chime in.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Jaguar Paw on July 30, 2016, 09:22:48 PM
we are moderately lucky (kind of?) A tornado tore apart our roof 3 months ago and we paid $250 for a brand new roof! That being said, we still chose to leave 15 k in emergency fund which for many people in here is still too much but it emotionally makes us feel good, which is cool.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: COEE on July 31, 2016, 05:10:31 AM
I've always kept a pretty small emergency fund.  Something happened last week to convince me to increase this pretty significantly.

I work for small business (~50 employees).  Just last week one of the engineers that had been with the company for 6 years was booted because he was no longer a good fit for the company.  We were told that he was given 2 months notice to help him find a new job and finish up his work.  He also didn't tell a soul around the office (pretty classy if you ask me).  So the announcement of his immediate departure took the rest of the employees in the company by surprise.  Well this scared the SHIT out of me after working in corporate america all of my prior life; where nobody got fired or laid off.  I've been stashing an emergency fund like mad since that happened.  I have about 4 months right now.  Will be at 6 months in a few months.  With unemployment checks, hopefully a two month notice, and the way I do my finances (always living on last months income), I think this will stretch to about 9-12 months if I ever get the boot.  It took me about 2.5 years to find my last job (but I had a job so I could afford to be picky).

Overkill?  Maybe.  Nowadays it's a small percentage of my NW.  But most of my NW is wrapped up in investments and housing that I don't have liquid access to.

IDK.  At least I sleep at night.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: mathjak107 on July 31, 2016, 05:15:14 AM
we always maintained a healthy emergency fund and raising a family we were glad we did . there were always emergency spending situations and unexpected expenses .

in the scheme of things our investments ran with the ball and the relatively small amount in cash amounted to us giving up very little but the access and comfort was worth it .
today we are retired and maintain 2 years living expenses ready to go in cash .

one year we spend currently and the other is held in reserve . it amounts to less then 8% of our total portfolio . even at zero we couldn't really care less  about that part . it is all part of the plan .
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Travis on July 31, 2016, 10:00:17 AM
I also cut mine down some, due to the same or a similar thread. It's hard to decide what to do with large expense savings though (car, roof, ac), I have trouble with those. I don't want to be pulling out dollars from an investment account for a new roof, if the market is down, for example. Maybe someone with math skills will chime in.

It's a matter of your risk tolerance, job security, and what you might be on the hook for in an emergency.  I have an extremely secure job, paid-for medical, and don't own a home so my emergency fund is mainly for expensive vehicle maintenance or a big shopping expense.  If you have recurring medical issues or a house to maintain it would be a good idea to keep enough to cover a significant expense if you can't immediately float it on credit.  While I keep $1000 set aside for "emergencies," I also live on YNAB's "live on last month's income" rule so in a way I have a full month of expenses plus $1000 sitting in checking.  I've heard homeowners here discuss keeping 1-2% of your home's value in cash in order to cover maintenance.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Jaguar Paw on July 31, 2016, 02:46:59 PM
We still keep around 3 -4 months of expenses in savings so it's ready to go whenever. This is probably too much as my wife and I would literally have to commit criminal acts in order to lose our jobs and the cost of being in prison for the person in prison is pretty non existent :).  Once again, it's just a weird "helps me sleep at night" number.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: William Cannon on July 31, 2016, 05:55:10 PM
Could someone please share what the recommendation is for emergency fund?

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Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on July 31, 2016, 06:26:22 PM
Could someone please share what the recommendation is for emergency fund?

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It varies wildly. We personally don't have a typical efund. All my money I don't need to live is invested in retirement and taxable accounts. I can't imagine keeping all those dollars in cash or bonds not working for me making money.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: markstache on July 31, 2016, 06:44:09 PM
[Disclaimer: I recently (post MMM interview) started using You Need A Budget; I display all the ferver of a recent convert.]

I think the problem with e-funds is not that you hold cash but that you don't know WHY you have it.

My current strategy is to budget 3 months out of basic expenditures, 2  months of sinking funds/long term commitments, and 1 month of discretionary spending (all with dollars I have in my bank account right now). Everything else goes into retirement funds. If something comes up, I know i can pull back on future commitments with current dollars to say one month or two months.

[As I said, I'm new at this, but it makes sense. Previously,  had savings fund and it always covered my issues, but I never knew when enough was enough]
Title: Re: Took MMM advice and slashed emergency fund!
Post by: BeautifulDay on July 31, 2016, 06:46:53 PM
I would much rather keep all of my money invested and working for me.  I don't have children or own my home or have any medical issues.  I do have enough cash in my HSA to cover deductibles.  Right now that's my only cash savings.  I do have a couple months expenses in after tax investments that could be liquidated. 

But I am going to start building up my cash savings.  There is a chance that we may want to buy a house in the next couple years.  So I'd like to set aside $15k -$20k for a down payment.  It will be the first time I've ever keep this kind of cash savings. 
Title: Re: Took MMM advice and slashed emergency fund!
Post by: tightwaddy on July 31, 2016, 08:01:28 PM
We have $30K in our emergency fund. This number makes us comfortable and we have three different Kasasa credit union checking accounts that pay 3.1% interest on up to $10K balance (.02 % after that--so not much point in going higher).  The one downside is we need to make 12 debit card purchases on each to get the 3.1%, but that includes 50-cent gift card reloads to Amazon.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: SeaEhm on July 31, 2016, 08:12:44 PM
Congrats! 

Great thread! I am always wavering on how much should I have in a bank account that is accessible within a day.   $15k seems like it would cover about 97.3% of the possible unexpected expenses that may pop up.

Title: Re: Took MMM advice and slashed emergency fund!
Post by: CarrieWillard on August 01, 2016, 04:21:55 AM
I have been reading threads about emergency funds and not one person has mentioned temporary disability due to a car wreck or other unforeseeable event (back injury, sudden pregnancy complications etc).

I think that for my particular family situation, having a 3 to 6 month emergency fund is wise. I realize that this is a sacred cow here. But since my husband is the person who earns 90% of the income in the family and if he were to become disabled for some reason I would not be able to pay the bills on my income, it seems foolish not to have money in the bank to take care of a large family.

Do a lot of people on this forum take out short-term disability insurance? We have life insurance in case my husband dies so that the children and I would be fine, but short-term disability as a much more common outcome.

Title: Re: Took MMM advice and slashed emergency fund!
Post by: Tjat on August 01, 2016, 05:43:33 AM
Could someone please share what the recommendation is for emergency fund?

http://www.mrmoneymustache.com/2011/04/22/springy-debt-instead-of-a-cash-cushion/

MMM has at least one article on this, but his philosophy is that you always wants as many of your dollars as possible "working" for you in investments. Rather than having an e-fund of cash losing value to inflation, he advocates

1) Keep a HELOC on your home and only draw on it for emergencies
2) Sell investments in the event of a true emergency (philosophy that emergencies are so infrequent that even if you sell in a slump, you'll make out ahead long-term)

Another option non-MMM endorsed that I have used is:
3) Credit cards - For Short-term cash needs that outpace my cash flow, I would use a credit card to take advantage of the ~29 day float before interest kicks in. That way I'm able to stretch my liquidity until the next pay check comes in and have 0% interest charges.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: William Cannon on August 01, 2016, 06:21:47 AM



Do a lot of people on this forum take out short-term disability insurance? We have life insurance in case my husband dies so that the children and I would be fine, but short-term disability as a much more common outcome.

Yes, we have a short term disability policy but it is cheap through my employer.  If you couldnt pay bills if your hubby were  to get hurt, i recommend looking into one.

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Title: Re: Took MMM advice and slashed emergency fund!
Post by: William Cannon on August 01, 2016, 06:24:45 AM
Thanks everyone for the advice on the emergency fund.  I need to do some thinking on this.  In the next four years, we will need to replace our family car.   I am adverse to car payments so I would want to start saving for it so we can pay cash.  With the line of thought similar to the emergency fund,  I guess I should invest it.  Any advice there, knowing that in about 4 years I would need to cash out?

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Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 01, 2016, 06:40:13 AM
Thanks everyone for the advice on the emergency fund.  I need to do some thinking on this.  In the next four years, we will need to replace our family car.   I am adverse to car payments so I would want to start saving for it so we can pay cash.  With the line of thought similar to the emergency fund,  I guess I should invest it.  Any advice there, knowing that in about 4 years I would need to cash out?

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i'd invest but as stated above i invest everything. 
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Duchess of Stratosphear on August 01, 2016, 08:14:41 AM
I sort of consider my Roth IRA (my contributions) to be an emergency fund but one to be accessed only in the most dire need. I depleted my cash EF earlier this year thanks to car repairs, and it makes me quite nervous not have much in there anymore because I don't want to have to access my Roth. But thinking of a Roth as an EF seems like a way to have it both ways--you have access to your money if you really need it, but it's also working for you in a better investment vehicle than just a savings account. I suppose the issue is that it would take a few days to access Roth money, but if I were going to do that, I would probably just use a credit card to cover the emergency and then pay that off when I was able to get the cash from the Roth. Does this make sense? I would prefer to have a more liquid EF with 3-5K in it, even if that money wasn't making much in interest, but the Roth plan sort of helps me sleep better.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Jaguar Paw on August 01, 2016, 08:58:33 AM
I have been reading threads about emergency funds and not one person has mentioned temporary disability due to a car wreck or other unforeseeable event (back injury, sudden pregnancy complications etc).

I think that for my particular family situation, having a 3 to 6 month emergency fund is wise. I realize that this is a sacred cow here. But since my husband is the person who earns 90% of the income in the family and if he were to become disabled for some reason I would not be able to pay the bills on my income, it seems foolish not to have money in the bank to take care of a large family.

Do a lot of people on this forum take out short-term disability insurance? We have life insurance in case my husband dies so that the children and I would be fine, but short-term disability as a much more common outcome.

Answering this question personally, I have 9 months paid vacation time saved and my wife has 6 months (it was 9 but she took off 4 for our newborn). If we were to have any type of emergency, we would continue getting paid for some time. In addition to this we also have some fairly minimal free life insurance through our employer. Without paying, if one of us dies, the other will get one year salary.

Also, with money in a Vanguard fund, it can be accessed in a few days should an emergency come about, the risk being an emergency happening during a time like 2008.

The more I write about this the less I realize I should have sitting in my bank account doing nothing.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 01, 2016, 09:02:26 AM
I have been reading threads about emergency funds and not one person has mentioned temporary disability due to a car wreck or other unforeseeable event (back injury, sudden pregnancy complications etc).

I think that for my particular family situation, having a 3 to 6 month emergency fund is wise. I realize that this is a sacred cow here. But since my husband is the person who earns 90% of the income in the family and if he were to become disabled for some reason I would not be able to pay the bills on my income, it seems foolish not to have money in the bank to take care of a large family.

Do a lot of people on this forum take out short-term disability insurance? We have life insurance in case my husband dies so that the children and I would be fine, but short-term disability as a much more common outcome.

Answering this question personally, I have 9 months paid vacation time saved and my wife has 6 months (it was 9 but she took off 4 for our newborn). If we were to have any type of emergency, we would continue getting paid for some time. In addition to this we also have some fairly minimal free life insurance through our employer. Without paying, if one of us dies, the other will get one year salary.

Also, with money in a Vanguard fund, it can be accessed in a few days should an emergency come about, the risk being an emergency happening during a time like 2008.

The more I write about this the less I realize I should have sitting in my bank account doing nothing.

off topic but how much PTO do you acrue annually 9 months saved holy cow!!
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Jaguar Paw on August 01, 2016, 09:14:24 AM
I have been reading threads about emergency funds and not one person has mentioned temporary disability due to a car wreck or other unforeseeable event (back injury, sudden pregnancy complications etc).

I think that for my particular family situation, having a 3 to 6 month emergency fund is wise. I realize that this is a sacred cow here. But since my husband is the person who earns 90% of the income in the family and if he were to become disabled for some reason I would not be able to pay the bills on my income, it seems foolish not to have money in the bank to take care of a large family.

Do a lot of people on this forum take out short-term disability insurance? We have life insurance in case my husband dies so that the children and I would be fine, but short-term disability as a much more common outcome.

Answering this question personally, I have 9 months paid vacation time saved and my wife has 6 months (it was 9 but she took off 4 for our newborn). If we were to have any type of emergency, we would continue getting paid for some time. In addition to this we also have some fairly minimal free life insurance through our employer. Without paying, if one of us dies, the other will get one year salary.

Also, with money in a Vanguard fund, it can be accessed in a few days should an emergency come about, the risk being an emergency happening during a time like 2008.

The more I write about this the less I realize I should have sitting in my bank account doing nothing.

off topic but how much PTO do you acrue annually 9 months saved holy cow!!

A lot... My wife and I both work for the same employer. we get 4 weeks every year that we have to use or we lose it (so we obviously use it). In addition to that we get around 5 weeks off per year (it goes up every year with time with employer) that can accrue indefinitely. Neither of us have touched much of that in 8 years me, 7 years her. In addition to that, sometimes we can work overtime for time off in the future instead of pay. This time bank has a maximum of over 400 hours. I have around 250 in here after just taking 4 weeks off for my baby.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: bittheory on August 01, 2016, 09:31:20 AM
Mine sits at exactly 6 months living expenses. This is also to cover any major medical and/or repairs and replacements on my primary home and rental home.

The argument to place the majority of that fund in the market is strong, but I personally like the psychological security of having cash on hand.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 01, 2016, 12:04:53 PM
I have been reading threads about emergency funds and not one person has mentioned temporary disability due to a car wreck or other unforeseeable event (back injury, sudden pregnancy complications etc).

I think that for my particular family situation, having a 3 to 6 month emergency fund is wise. I realize that this is a sacred cow here. But since my husband is the person who earns 90% of the income in the family and if he were to become disabled for some reason I would not be able to pay the bills on my income, it seems foolish not to have money in the bank to take care of a large family.

Do a lot of people on this forum take out short-term disability insurance? We have life insurance in case my husband dies so that the children and I would be fine, but short-term disability as a much more common outcome.

Answering this question personally, I have 9 months paid vacation time saved and my wife has 6 months (it was 9 but she took off 4 for our newborn). If we were to have any type of emergency, we would continue getting paid for some time. In addition to this we also have some fairly minimal free life insurance through our employer. Without paying, if one of us dies, the other will get one year salary.

Also, with money in a Vanguard fund, it can be accessed in a few days should an emergency come about, the risk being an emergency happening during a time like 2008.

The more I write about this the less I realize I should have sitting in my bank account doing nothing.

off topic but how much PTO do you acrue annually 9 months saved holy cow!!

A lot... My wife and I both work for the same employer. we get 4 weeks every year that we have to use or we lose it (so we obviously use it). In addition to that we get around 5 weeks off per year (it goes up every year with time with employer) that can accrue indefinitely. Neither of us have touched much of that in 8 years me, 7 years her. In addition to that, sometimes we can work overtime for time off in the future instead of pay. This time bank has a maximum of over 400 hours. I have around 250 in here after just taking 4 weeks off for my baby.

holy hell i'd take a 15% pay cut for that extra time.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Jaguar Paw on August 01, 2016, 06:36:42 PM
I have been reading threads about emergency funds and not one person has mentioned temporary disability due to a car wreck or other unforeseeable event (back injury, sudden pregnancy complications etc).

I think that for my particular family situation, having a 3 to 6 month emergency fund is wise. I realize that this is a sacred cow here. But since my husband is the person who earns 90% of the income in the family and if he were to become disabled for some reason I would not be able to pay the bills on my income, it seems foolish not to have money in the bank to take care of a large family.

Do a lot of people on this forum take out short-term disability insurance? We have life insurance in case my husband dies so that the children and I would be fine, but short-term disability as a much more common outcome.

Answering this question personally, I have 9 months paid vacation time saved and my wife has 6 months (it was 9 but she took off 4 for our newborn). If we were to have any type of emergency, we would continue getting paid for some time. In addition to this we also have some fairly minimal free life insurance through our employer. Without paying, if one of us dies, the other will get one year salary.

Also, with money in a Vanguard fund, it can be accessed in a few days should an emergency come about, the risk being an emergency happening during a time like 2008.

The more I write about this the less I realize I should have sitting in my bank account doing nothing.

off topic but how much PTO do you acrue annually 9 months saved holy cow!!

A lot... My wife and I both work for the same employer. we get 4 weeks every year that we have to use or we lose it (so we obviously use it). In addition to that we get around 5 weeks off per year (it goes up every year with time with employer) that can accrue indefinitely. Neither of us have touched much of that in 8 years me, 7 years her. In addition to that, sometimes we can work overtime for time off in the future instead of pay. This time bank has a maximum of over 400 hours. I have around 250 in here after just taking 4 weeks off for my baby.

holy hell i'd take a 15% pay cut for that extra time.

Continuing to digress, but it's cool because it's my thread, right? We absolutely love all our paid time off, it allows us to visit Colorado a few times a year, head up to New England once and normally throw another state in there as well. It's pretty sweet!
Title: Re: Took MMM advice and slashed emergency fund!
Post by: gggggg on August 01, 2016, 06:37:08 PM
I mentioned this above, in an earlier post. So what do you guys do for large expense savings? Things like future vehicle, roof, hvac. It's not really an emergency item, because you know it's a predictable cost that's coming up at some point. I'm not sure I want my stable value emergency fund to be so large as to cover these AND a emergency; but I also am not real keen to put this future expense savings in the stock market, because you will need it much sooner than what you would the rest of your "standard" investments. I have my emergency fund and my retirement figured out; I just don't know where to put these in-between, large expense savings.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 01, 2016, 07:50:12 PM
Large expenses get invested. Not a single one of those expenses you listed should be replacedore than every 15-20 years. In which case stocks win. But even if it was 5-10 years I'd take the same stance bc in the long run investing will come out ahead
Title: Re: Took MMM advice and slashed emergency fund!
Post by: BeautifulDay on August 01, 2016, 10:07:31 PM
I have been reading threads about emergency funds and not one person has mentioned temporary disability due to a car wreck or other unforeseeable event (back injury, sudden pregnancy complications etc).

I think that for my particular family situation, having a 3 to 6 month emergency fund is wise. I realize that this is a sacred cow here. But since my husband is the person who earns 90% of the income in the family and if he were to become disabled for some reason I would not be able to pay the bills on my income, it seems foolish not to have money in the bank to take care of a large family.

Do a lot of people on this forum take out short-term disability insurance? We have life insurance in case my husband dies so that the children and I would be fine, but short-term disability as a much more common outcome.

My company provides sick days that can only be used with a doctor's approval or maternity leave and to use it you must be out more than 3 days.  So it is only used for short term medical type situations. They also provide long term disability insurance. I have 6 months of sick days saved and those would provide until the long term disability kicks in. 

My higher risk is that I couldn't work for other reasons. (Like Needing to assist aging parents).  In that case I'd liquidate my investments. It's a last resort fund.  But I'll risk having that money invested rather than having money sitting around not doing anything. 
Title: Re: Took MMM advice and slashed emergency fund!
Post by: FrenchStache on August 02, 2016, 05:42:47 PM
I have a long term disability insurance policy.  We also have 4-6 months (depending on spending levels) emergency fund invested conservatively (40% stock and 60% bonds) in Betterment.  Otherwise we keep a solid month worth of expenses in our checking account that absorbs any little unforeseen expenses.  Didn't think of it that way, but like someone above mentioned we also have some money in HSA account for medical emergencies.  Hope this helps.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: CarrieWillard on August 03, 2016, 05:55:20 AM
"Answering this question personally, I have 9 months paid vacation time saved and my wife has 6 months (it was 9 but she took off 4 for our newborn). If we were to have any type of emergency, we would continue getting paid for some time. "

See... hubby and I are both self-employed, therefore I'm pretty convinced that having 3-6 months of cash in a crappy savings account IS the wise choice for us (7 kids, mostly one income - his). That, and I'm looking into short-term disability insurance pronto. If my hubby fell off a ladder, got in a bad car wreck, etc - we'd be screwed otherwise.

Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 03, 2016, 06:03:56 AM
"Answering this question personally, I have 9 months paid vacation time saved and my wife has 6 months (it was 9 but she took off 4 for our newborn). If we were to have any type of emergency, we would continue getting paid for some time. "

See... hubby and I are both self-employed, therefore I'm pretty convinced that having 3-6 months of cash in a crappy savings account IS the wise choice for us (7 kids, mostly one income - his). That, and I'm looking into short-term disability insurance pronto. If my hubby fell off a ladder, got in a bad car wreck, etc - we'd be screwed otherwise.

thats why everyone is unique but you're at one extreme end of a spectrum around here... self employed and 7 kids isnt the norm
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Jaguar Paw on August 03, 2016, 12:38:49 PM
"Answering this question personally, I have 9 months paid vacation time saved and my wife has 6 months (it was 9 but she took off 4 for our newborn). If we were to have any type of emergency, we would continue getting paid for some time. "

See... hubby and I are both self-employed, therefore I'm pretty convinced that having 3-6 months of cash in a crappy savings account IS the wise choice for us (7 kids, mostly one income - his). That, and I'm looking into short-term disability insurance pronto. If my hubby fell off a ladder, got in a bad car wreck, etc - we'd be screwed otherwise.

thats why everyone is unique but you're at one extreme end of a spectrum around here... self employed and 7 kids isnt the norm

plus 1
Title: Re: Took MMM advice and slashed emergency fund!
Post by: CarrieWillard on August 03, 2016, 01:19:58 PM
"thats why everyone is unique but you're at one extreme end of a spectrum around here... self employed and 7 kids isnt the norm"

It isn't? Teehee, I had no idea. :-)


Title: Re: Took MMM advice and slashed emergency fund!
Post by: Glenstache on August 04, 2016, 10:50:04 AM
I also cut mine down some, due to the same or a similar thread. It's hard to decide what to do with large expense savings though (car, roof, ac), I have trouble with those. I don't want to be pulling out dollars from an investment account for a new roof, if the market is down, for example. Maybe someone with math skills will chime in.

My personal strategy is that the invested portion should be 30% greater than the equivalent cash amount to allow for a bad market downturn and maintain the desired emergency amount. For example: If I want a 20k reserve and decide I want to have 10k of my emergency reserve invested, then I want to have a minimum of $13k in the accessible investment account to maintain that 20k target on top of the 10k still in cash. This does result in some over-saving, but that is really in a ledger sense only. Those extra 3k are still working for you.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Drifterrider on August 04, 2016, 12:48:54 PM
Could someone please share what the recommendation is for emergency fund?

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Suze Ormond used to say 3 months.  Since the meltdown of 2008 I think she now recommends 6 months.  I have one year's take home in my EF.  It does make interest.  I could probably get more interest but I'd then be taking risk I'm not willing to take.  My EF is my security blanket. 
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Drifterrider on August 04, 2016, 12:50:56 PM
We have life insurance in case my husband dies so that the children and I would be fine, but short-term disability as a much more common outcome.

Do you have life insurance on YOU?
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Hotstreak on August 04, 2016, 02:21:06 PM
I think it's useful to think of your emergency fund in two ways.  One, how many months of regular expenses could I cover (emergency: job loss).  Two, do I have enough money to pay for an unlikely significant event (emergency: major car trouble, major health situation, major legal expense).  Since I started thinking this way I have been building my e-fund up, I want enough in there to cover a new car + 3 months bare bones budget, which would be close to $10k.  At some point I will need a new car and that will go down to $3-5k, which I would still be comfortable with.  I also have a $10k credit line I can draw cash off of at about 10% interest, if I needed to.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: William Cannon on August 04, 2016, 03:20:18 PM
Could someone please share what the recommendation is for emergency fund?

Sent from my SAMSUNG-SM-G920A using Tapatalk

Suze Ormond used to say 3 months.  Since the meltdown of 2008 I think she now recommends 6 months.  I have one year's take home in my EF.  It does make interest.  I could probably get more interest but I'd then be taking risk I'm not willing to take.  My EF is my security blanket.
Where do you keep your EF?  I'm yielding about 1% in mine.

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Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 04, 2016, 03:50:53 PM
Could someone please share what the recommendation is for emergency fund?

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Suze Ormond used to say 3 months.  Since the meltdown of 2008 I think she now recommends 6 months.  I have one year's take home in my EF.  It does make interest.  I could probably get more interest but I'd then be taking risk I'm not willing to take.  My EF is my security blanket.
Where do you keep your EF?  I'm yielding about 1% in mine.

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You mean -2% I think. Should talk in real returns.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Bicycle_B on August 04, 2016, 04:40:58 PM
I've always kept a pretty small emergency fund.  Something happened last week to convince me to increase this pretty significantly.

I work for small business (~50 employees).  Just last week one of the engineers that had been with the company for 6 years was booted because he was no longer a good fit for the company.  We were told that he was given 2 months notice to help him find a new job and finish up his work.  He also didn't tell a soul around the office (pretty classy if you ask me).  So the announcement of his immediate departure took the rest of the employees in the company by surprise.  Well this scared the SHIT out of me after working in corporate america all of my prior life; where nobody got fired or laid off.  I've been stashing an emergency fund like mad since that happened.  I have about 4 months right now.  Will be at 6 months in a few months.  With unemployment checks, hopefully a two month notice, and the way I do my finances (always living on last months income), I think this will stretch to about 9-12 months if I ever get the boot.  It took me about 2.5 years to find my last job (but I had a job so I could afford to be picky).

Overkill?  Maybe.  Nowadays it's a small percentage of my NW.  But most of my NW is wrapped up in investments and housing that I don't have liquid access to.

IDK.  At least I sleep at night.

If you have home equity, check into a HELOC (home equity line of credit) if you haven't done that.  It can be a way to give yourself great liquidity at little or no cost.  I believe MMM has one himself.

Just yesterday my bank (a very large American bank) explained that they are currently waiving closing costs for setting up a new HELOC, a savings of several thousand dollars, and that they actually lower the interest rate on a 30 year line by .1% for every $10,000 in credit line up to $100,000; this reduced the rate to 3.3%.  This bank requires you to borrow the $100,000 for the first three months, so essentially there is a .825% fee ($825 for $100K line; $990 for $120K line), though getting interest elsewhere for three months would reduce the effective fee.  I did not decide to do it but if I was illiquid and worried about it, would have done it - cheap insurance.  Once income disappears, it's harder to set up, I suspect.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Bicycle_B on August 04, 2016, 05:00:55 PM
I mentioned this above, in an earlier post. So what do you guys do for large expense savings? Things like future vehicle, roof, hvac. It's not really an emergency item, because you know it's a predictable cost that's coming up at some point. I'm not sure I want my stable value emergency fund to be so large as to cover these AND a emergency; but I also am not real keen to put this future expense savings in the stock market, because you will need it much sooner than what you would the rest of your "standard" investments. I have my emergency fund and my retirement figured out; I just don't know where to put these in-between, large expense savings.

I like Glenstache's 30% approach. 

Another way to invest the money while reducing risk is to use a more diverse portfolio.  The idea is that by having several investment types in your mix, volatility is lower.  This isn't strictly an MMM recommendation, but MMM's reasoning behind the usual stock portfolio is simplicity and long term returns; for your short term purpose, diversification could be helpful.  There's a member of this forum who created an awesome set of calculators showing the historical results of many portfolios besides just a stock or stock-and-bond strategy. Just about all of them historically vary less than stocks.  https://portfoliocharts.com/portfolios/

A third option is that you can use is i-bonds (Series I Federal Savings bonds), issued by the US Treasury.  Their interest rates are low right now, but they include an inflation protection guarantee as well as federal payment guarantee.  They have no fees and can be redeemed at will after being held one year.  You can buy $10,000 per year if you like.

https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm
http://www.pbs.org/newshour/rundown/americas-best-kept-financial-secret-i-bonds/
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Bicycle_B on August 04, 2016, 05:02:16 PM
deleted accidental re-post
Title: Re: Took MMM advice and slashed emergency fund!
Post by: William Cannon on August 04, 2016, 08:14:20 PM
Could someone please share what the recommendation is for emergency fund?

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Suze Ormond used to say 3 months.  Since the meltdown of 2008 I think she now recommends 6 months.  I have one year's take home in my EF.  It does make interest.  I could probably get more interest but I'd then be taking risk I'm not willing to take.  My EF is my security blanket.
Where do you keep your EF?  I'm yielding about 1% in mine.

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You mean -2% I think. Should talk in real returns.
Yes.  This is why I posted.  My situation: i work in a highly volitile industry so i have 11 months EF.  That is in addition to about another $8k that I accumulate for regularly occuring large spend items like kids' private tuition, car repairs and maintenance, annual insurance payments, etc.  Next year I plan to start saving for the next car which will be due for replacement in 4 years so I avoid car payments.



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Title: Re: Took MMM advice and slashed emergency fund!
Post by: Drifterrider on August 05, 2016, 04:58:44 AM
Could someone please share what the recommendation is for emergency fund?

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Suze Ormond used to say 3 months.  Since the meltdown of 2008 I think she now recommends 6 months.  I have one year's take home in my EF.  It does make interest.  I could probably get more interest but I'd then be taking risk I'm not willing to take.  My EF is my security blanket.
Where do you keep your EF?  I'm yielding about 1% in mine.

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Bank.  Not much interest but Sooooooooooo much warm fuzzies knowing it is there.  Plus, I'm looking for my second rental house and I like to have a nice savings account for when I find it.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: talltexan on August 05, 2016, 06:45:20 AM
I've set aside $17,000-ish in dividend paying stocks, then used short-term 0% interest cash advances to meet emergencies. I probably have $11,000 balance on the loans...if I really get into a bind, I can sell the stocks to pay them off, but the way interest rates are going, the dividends should more than cover the interest and fees for a while still.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Slee_stack on August 05, 2016, 01:31:34 PM
I minimize EFs and have a similar view to Boarder.

It takes a couple extra days at most to sell funds vs moving funds from an online savings.  Sure there's risk of selling low.  There's also a bit of 'risk' of selling high too!

Is the sky falling inside those extra 24-48 hrs?  How many true EMERGENCIES are folks here having every year?

If emergencies are a regular event, you have bigger issues to tackle than your e-fund.  There's probably other actions/improvements you can take to position yourself better to weather them.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 06, 2016, 04:00:38 AM
I've set aside $17,000-ish in dividend paying stocks, then used short-term 0% interest cash advances to meet emergencies. I probably have $11,000 balance on the loans...if I really get into a bind, I can sell the stocks to pay them off, but the way interest rates are going, the dividends should more than cover the interest and fees for a while still.

You do realize this approach is inherently risky than just putting it in vtsax and selling some in the event of an emergency right?
Title: Re: Took MMM advice and slashed emergency fund!
Post by: mathjak107 on August 06, 2016, 04:03:03 AM
 i would never use a credit line to replace cash .  just imagine losing a job in 2008-2009 and now having to start paying a loan back as well as living expenses  from a beaten up portfolio .  no thanks!

there is a point where putting the carrot on the stick with to much of your money  money  reaches a tipping point . to me , that is it . if you have to create debt to handle an emergency or unexpected large expense and then risk losing money on the asset you will pay the debt with that is a risk that exceeds the reward in my opinion .

you are using long term investments for potential short term money . never a good idea .

we see the same thing over and over with folks so called trying to self insure their long term care .

the money is left in the regular portfolio , used to base an income draw off off and then when they need it the stay at home spouse has to take a massive income cut as the money is spent down and the assets creating the income dwindle down towards impoverishment .

Title: Re: Took MMM advice and slashed emergency fund!
Post by: mathjak107 on August 06, 2016, 04:30:58 AM
we are retired . our cash held for the current years expenses and 1 year in reserve is over 200k .

it  is only   a small part of our portfolio  but it is an important part of our withdrawal strategy . if it gets 1% great , if not , it is irrelevant .

a better functioning portfolio with a better tax plan can surpass anything cash will give up . never mix long term investments with short term money needs  . that usually never ends well .

let me add one more thing . do not tie up all your cash in an on line bank either . make sure you keep some local at a brick and mortar bank .

we just had our main cash account that we pay bills from and have any direct deposit income go to shut down .

it is now a week and things are being re-set up by them and no money movement can happen .  luckily we have money locally too .

they have their  own team of internet hackers if you want to call them that . they monitor the underground criminal sites that sell info and credit card data . they found my wife's log in info up there .

she has not logged on in months under her log in so where it came from is anyone's guess .

they required us to have the computer professionally cleaned and now they are setting up all new accounts . nothing major was found  in the scans .

if any money is taken an investigation can be required under certain circumstances . there is no legal time frame as far as when you can see your money again  or the account livened
Title: Re: Took MMM advice and slashed emergency fund!
Post by: CarrieWillard on August 07, 2016, 05:50:10 AM
We have life insurance in case my husband dies so that the children and I would be fine, but short-term disability as a much more common outcome.

Do you have life insurance on YOU?

Nope. Life insurance is to replace the income. Since my income isn't required for our lifestyle, it isn't necessary.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Physicsteacher on August 07, 2016, 08:23:37 AM
We have life insurance in case my husband dies so that the children and I would be fine, but short-term disability as a much more common outcome.

Do you have life insurance on YOU?

Nope. Life insurance is to replace the income. Since my income isn't required for our lifestyle, it isn't necessary.

Your income may be negligible, but your labor in service to your family certainly isn't. If you were no longer alive, would household expenses increase, for example if your husband had to hire someone to do child care, or might your husband's income decline as a result of being less able to devote time to his business due to the demands of parenting without a partner to share the load?
Title: Re: Took MMM advice and slashed emergency fund!
Post by: mathjak107 on August 07, 2016, 08:36:53 AM
sometimes just the fact the surviving spouse has to file single  tax wise can be quite painful . especially in retirement later on , when you have rmd's as well as the loss of an ss check all converging at the same time .
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Nederstash on August 10, 2016, 02:24:16 PM
This is from a Dutch perspective, sorry if it's not really relevant to the rest of you... I wanted to write it out for myself.

E-Fund:
2 months of expenses in a directly accessible savings account, yielding 0.5%
4 months of expenses in a different savings account, yielding 0.9%. This account takes 1-2 days for transfers to come through
The rest is in investments.

Big ticket items: hadn't really thought much about it... my car probably needs replacing in the next year, I'll shore up on investments for a bit and put some extra money aside in my second savings account. Thanks, everyone in the thread, for reminding me.

Security blankets: thanks to Dutch social welfare, I do feel like there are safety nets should anything happen. I don't need to have insurance for the following, they are there by law:
Involuntary job loss (ie laid off, contract terminated/not renewed): I would get 70% of my last income for 13 months (length depends on how many years you've been working). Of course you don't get this if you quit or get kicked out for theft or something.
Sickness/disability: depending on how much you can still work, up to 70% of income for as long as the disability/sickness lasts (really short version, there's tons variations).
'Bijstand' ('help'): if none of the above apply, you get 70% of minimum wage, so that comes to 977 euro (~$1000) a month. You are required to liquidate and use up your assets first - including a house. You do get extra government help up to 420 euro a month for rent and healthcare.

I hope to God I never need any of these! But it's good to know they're there and I don't need to put any thought and money towards it. Since I have a 40% savings rate now, 70% of my income would still let me save 10% even if I was jobless. It's a nice thought.

Of course, a 42% tax rate is the trade-off here... On the other hand, mortgage interest is also deductible at 42% :)
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Landlady on August 10, 2016, 04:40:15 PM
I tend to work for startups and have amassed a huge cushion in emergency funds to account for that job risk, which in retrospect is unreasonable. But now I'm going to spend a huge chunk on building a house and my plan is to deplete those emergency funds to a more reasonable level of about 3-4 months of emergency funds. You guys give me confidence to do this. I haven't had just 3-4 months stash since post-college, yet I've not had trouble finding work since post-college either. It's time to make my risk tolerance match reality.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Telecaster on August 10, 2016, 05:24:21 PM
Thanks everyone for the advice on the emergency fund.  I need to do some thinking on this.  In the next four years, we will need to replace our family car.   I am adverse to car payments so I would want to start saving for it so we can pay cash.  With the line of thought similar to the emergency fund,  I guess I should invest it.  Any advice there, knowing that in about 4 years I would need to cash out?

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A little different thinking applies, because you're talking about a future planned expense, which is completely different than an emergency. 

Four years is kind of tricky because it is a short enough time frame that if invest in the stock market you can't really be assured that the money will be there when you want it.  I'm definitely of the "no cash emergency fund" school, but if it were me I'd put it in short term bonds, CDs, etc.  so it will be there when you are planning on using it. 

Title: Re: Took MMM advice and slashed emergency fund!
Post by: kenaces on August 10, 2016, 06:35:38 PM
I am changing my approach to emergency funds. Reading MMM, and some material on betterment.com got me thinking - https://www.betterment.com/resources/personal-finance/safety-net-funds-why-traditional-advice-is-wrong/

I have been working on getting my act together so I can progress to FIRE in ~10 years so I am also thinking a lot about maximizing.  I have kept a pretty big E-fund/poker bankroll for years, but I am always unsure exactly how much liquidity I need and how much I should invest. 

I decided to put ~25k in my brokerage account to work.  I plan to add $500/mo to this multi-purpose account.  It is hard to put my money into buckets.  This money is part E-fund, part poker bankroll(less than ~5% chance for this), part retirement fund.  I have also been reading tons on financial planning and investing.  I invested the these funds into a slightly more conservative version of the "Larry Portfolio" which is explained in his book Reducing the Risk of Black Swans, and on this site -https://portfoliocharts.com/portfolio/swedroe-min-fat-tails/

I set it up with 13% US SCV, 12% EM, 75% 5-year AA+MUNI so it might look something like this -https://www.portfoliovisualizer.com/backtest-asset-class-allocation#analysisResults
Title: Re: Took MMM advice and slashed emergency fund!
Post by: mathjak107 on August 11, 2016, 03:11:28 AM
one of the sad parts of life is things tend to happen at the worst possible times .  just look at 2008 when job loss and pay cuts were happening left and right . it can suck selling off long term money at a 40% loss to fill short term needs .

nothing is ever a problem until it's a problem .

personally my opinion is  an emergency fund should not be dependent on credit or long term invested assets . murphy was an optimist when it comes to this stuff happening

putting the carrot on the stick with  money that really should be held in reserve is really not a great idea . 

i am a big believer in matching the money to the investments  based on the time frame that money may be needed . i would never match long term investments to money that  could have short term needs .

folks do this all the time , then they blame markets for burning them when they have to sell when markets are down . or they use credit cards as an emergency fund and then have to make loan payments when money is tight and they are running off the loan .

trouble happens when your plan tries to rule out  bad events from happening  instead of  allowing  for them and planning for them .

4-6 months of expense money is always what i like to see  today at a min . one of the big three eventually gets all of us . illness-divorce-job loss .

the better you plan to withstand life's negative  events the better the outcome may be.

Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 11, 2016, 01:28:03 PM
one of the sad parts of life is things tend to happen at the worst possible times .  just look at 2008 when job loss and pay cuts were happening left and right . it can suck selling off long term money at a 40% loss to fill short term needs .



4-6 months of expense money is always what i like to see  today at a min . one of the big three eventually gets all of us . illness-divorce-job loss .

the better you plan to withstand life's negative  events the better the outcome may be.

pretty pessimistic look on life right there.  but if you live long enough i guess illness will hit you.  if you're into FIRE jobloss is hardly a question.  divorce is its own beast. 

i would still say "planning for the worst" can just snowball til you have money in your mattress.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: mathjak107 on August 11, 2016, 01:33:34 PM
there is a difference between ruling out uncertainty from a plan vs allowing for it in the plan . i was always as an aggressive investor as you can get but i made sure i always had 9 to 12 months in cash without upsetting any of our portfolio's or worrying about selling things at poor times .

lost my job in 2010 so i was glad i allowed for it .
Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 11, 2016, 02:02:43 PM
i guess if i was looking at a 30+ year working career i would be more concerned about job loss.  i keep less than a month in cash and am some times leveraged out more than that depending on where i'm at CC churning at the time.  but we're DINKs so if i lose my job we have another income and vice versa.  both incomes can support our lifestyle standing alone. based on what you spend you're talking about keeping around 50-100k in cash over 30 years.  which at 6% on the 50k is a cost of over 230,000 dollars!!! that would keep me up at night. even if you had to withdraw in 2008 during the crash that close to the end of your career you'd still be ahead. having invested it.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Jaguar Paw on August 11, 2016, 05:16:45 PM
i guess if i was looking at a 30+ year working career i would be more concerned about job loss.  i keep less than a month in cash and am some times leveraged out more than that depending on where i'm at CC churning at the time.  but we're DINKs so if i lose my job we have another income and vice versa.  both incomes can support our lifestyle standing alone. based on what you spend you're talking about keeping around 50-100k in cash over 30 years.  which at 6% on the 50k is a cost of over 230,000 dollars!!! that would keep me up at night. even if you had to withdraw in 2008 during the crash that close to the end of your career you'd still be ahead. having invested it.

What's a DINK. And also, I agree with everything you're saying which is why I did what I did! Hooray for two peas in a pod or something like that.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Full Beard on August 11, 2016, 05:31:03 PM
DINK = Dual Income No Kids
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Jaguar Paw on August 11, 2016, 05:38:34 PM
DINK = Dual Income No Kids

ahha! makes perfect sense.. I'm DIOI. Dual Income One Infant?
Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 11, 2016, 05:49:29 PM
DINK = Dual Income No Kids

ahha! makes perfect sense.. I'm DIOI. Dual Income One Infant?

In a year or 2 well be in your shoes then in 3-4 we'll be DICKs. Dual income couple kids.

Title: Re: Took MMM advice and slashed emergency fund!
Post by: ASquared on August 15, 2016, 12:15:53 AM
We "invested" our emergency $ into Betterment after reading quite a bit here. Very happy we did. It's been almost 3 years. The continued growth is amazing, and realistically we can wait the 7 days or so to cash out some of it if we truly need to. It's never been touched.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: icemodeled on August 21, 2016, 10:18:26 PM
I need to make this a priority to.. We have $30k in our efund. Sitting in an account earning .01%! I'm not sure why I'm being such a worry wart about letting it go into a better fund. Even Ally would be better. Great you made the move though!
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Dicey on August 21, 2016, 11:26:55 PM
I sort of consider my Roth IRA (my contributions) to be an emergency fund but one to be accessed only in the most dire need. I depleted my cash EF earlier this year thanks to car repairs, and it makes me quite nervous not have much in there anymore because I don't want to have to access my Roth. But thinking of a Roth as an EF seems like a way to have it both ways--you have access to your money if you really need it, but it's also working for you in a better investment vehicle than just a savings account. I suppose the issue is that it would take a few days to access Roth money, but if I were going to do that, I would probably just use a credit card to cover the emergency and then pay that off when I was able to get the cash from the Roth. Does this make sense? I would prefer to have a more liquid EF with 3-5K in it, even if that money wasn't making much in interest, but the Roth plan sort of helps me sleep better.
The oops in this plan is that once you take the money out of the Roth, you can't put it back. Those lovely tax benefits are gone forever. That blows enough that I would never seriously consider using the Roth as an EF. I'd rather just have cash on hand, the old fashioned way.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Trudie on August 24, 2016, 01:22:26 PM
I also count my HSA balances as part of my emergency fund.  Right now we have 14K in cash and another 7K in our HSA.  Plus access to a HELOC of $70K.   

I've slowly been DCA out of the money market (cash account) to fund my Roth for the year.

I would say I'm most comfortable with having $20K liquid (cash and HSA) plus the HELOC.  I also save receipts from small medical expenses that I don't reimburse myself so that in a pinch I could liquidate a large chunk of the HSA, but for now it can grow tax free.  I have the HSA invested in Vanguard index funds.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: mathjak107 on August 25, 2016, 04:21:17 AM
what is the plan if the hsa money is down 40% and you lost a job or need it for a big medical expense . we went through 20k in just dental this year for the two of us  .nothing sucks more than paying a heloc loan while out of work  or liquidating an index fund down 40% ..

just something to think about for folks following this path whether it apply's to the above post or not . it is a popular way of thinking , and of course as we know ,  nothing is a problem until it's a problem .
Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 25, 2016, 05:25:54 AM
what is the plan if the hsa money is down 40% and you lost a job or need it for a big medical expense . we went through 20k in just dental this year for the two of us  .nothing sucks more than paying a heloc loan while out of work  or liquidating an index fund down 40% ..

just something to think about for folks following this path whether it apply's to the above post or not . it is a popular way of thinking , and of course as we know ,  nothing is a problem until it's a problem .

why are you so doom and gloom and cynical.  at this point i'd expect you to have all your money in cash under your mattress just incase.  i mean you never know when the banks will collapse like 1929 and you're gonna need it.  do you also have a bomb shelter completely stocked with guns ammo and food in case of apocolypse ... where does the what if situation end with you?  you're old we get it you've been around the block you retired at normal retirement age on an incredibly high annual spending.  what if the earth had been struck by an asteroid while you were toiling away at your job in your 50s.  what if what if what if.  cmon ... you can what if yourself into ridiculousness.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: mathjak107 on August 25, 2016, 06:36:06 AM
i didn't get to where i am being cynical  nor financially as successful . but i have been a round long enough to know murphy was an optimist when you plan long term things . you don't succeed by ruling out uncertainty or bad things happening . rather you allow and plan for them happening . if they don't than you are a head of the game . it is when you try to rule them out that you end up getting burned .

putting the carrot on the stick and just endlessly chasing it with every cent you can in my opinion is not a well thought out plan . counting on debt for emergency money is a no go in my book . lost my job in 2010 so it happens .
Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 25, 2016, 07:53:02 AM
i didn't get to where i am being cynical  nor financially as successful . but i have been a round long enough to know murphy was an optimist when you plan long term things . you don't succeed by ruling out uncertainty or bad things happening . rather you allow and plan for them happening . if they don't than you are a head of the game . it is when you try to rule them out that you end up getting burned .

putting the carrot on the stick and just endlessly chasing it with every cent you can in my opinion is not a well thought out plan . counting on debt for emergency money is a no go in my book . lost my job in 2010 so it happens .

90% of this forum wouldnt have had an issue with that b/c they plan to be retired well before the age you were in 2010.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 25, 2016, 08:34:44 AM
simple risk can be looked at from multiple angles.  once you are saving in taxable accounts. you have an HSA and a HELOC etc. the risk of not having that money invested and earning greater than inflation out weighs the risk of having to pull money out from a catastrophic emergency in a down market.  the opportunity cost of holding money in cash is huge compared to the chance a perfect storm hits and you have to draw down taxable accounts.  also financial independence eliminates the concern for job loss late in life where it is harder to find one.  every 20-30s something here if they lost their job should likely be able to go find one relatively quickly to cover their cost of living. add into that dual income households where one income more than supports the lifestyle and you've further reduced risk.  most of you posts seem to ere on the side of catastrophic life failure ... where in my opinion catastrophic life failure would be not saving and investing enough while i was young to be financially independent by 40 and being so afraid of bad life events i let it affect my earning potential on my money.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Jaguar Paw on August 25, 2016, 10:29:18 AM
Boarder,

What if a Trex came down with laser beams, vaporized my vanguard funds, and then I needed 25K to pay a ransom to get my family back from Central American Cartels? Or if a sharknado did the same thing to my funds.

Thanks in advance.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 25, 2016, 11:11:59 AM
Having had extensive experience with both of these events in my life I'd say the T-Rex is the harder of the 2 issues.  I'd give then both a probability of 75%. Which means you have a 56.3% chance both will happen in your lifetime. Based on this striking evidence I would say you should probably keep half your efund invested frontend loaded Edward Jones accounts that return 1.6% guaranteed annually while your agent rotates these annually for you so you can keep that loading up.  The other half should be kept in funding a small military force bc you never know when you're going to need to invade another country where the cartel owns the govt to rescue your family.  Using Edward Jones you will gain that personal relationship with an advisor who will guide you past the sure fire lazer beams of the T-Rex.  And fielding a small army is really cost effective. Bc while your family may not always be kidnapped they come in handy for making sure all your bullets get put to good use from your stockpile in the event of anarchy.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: DoubleNickels on August 25, 2016, 12:14:35 PM
There has to be a happy medium between Mathjak and Boarder.  Both have good points.  Yes if you are otherwise FI, a 40% downturn in the stock market won't bother you. But, there are likely many non-FI people that are reading this Forum, would read the advice that says "it's a low probability" and could be in a bind, WHEN that day comes.  Maybe not 40%, but there will be another major stock market downturn of 20-25-30-etc % at some time. And no one, I can guarantee you, no one knows when that will occur.  We know that it will recover, but if you are forced to liquidate during the downturn, you will miss the recovery.

   

Title: Re: Took MMM advice and slashed emergency fund!
Post by: boarder42 on August 25, 2016, 02:47:12 PM
There has to be a happy medium between Mathjak and Boarder.  Both have good points.  Yes if you are otherwise FI, a 40% downturn in the stock market won't bother you. But, there are likely many non-FI people that are reading this Forum, would read the advice that says "it's a low probability" and could be in a bind, WHEN that day comes.  Maybe not 40%, but there will be another major stock market downturn of 20-25-30-etc % at some time. And no one, I can guarantee you, no one knows when that will occur.  We know that it will recover, but if you are forced to liquidate during the downturn, you will miss the recovery.

 

and in all likelihood the cash you have been hoarding to help you in a down turn wont have dropped by as much as it gained over the time you were worried about that down turn. just an FYI mathjak is the guy who reached FI at 62 and retired.  who is screaming conservativism.  i'm a 30 year old who is 7 years from FIRE screaming invest.   if you dont have dual large incomes that either could support your lifestyle or large taxable savings, or a rock steady job or etc. then yeah maybe you should have one
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Jaguar Paw on August 26, 2016, 09:05:35 AM
Having had extensive experience with both of these events in my life I'd say the T-Rex is the harder of the 2 issues.  I'd give then both a probability of 75%. Which means you have a 56.3% chance both will happen in your lifetime. Based on this striking evidence I would say you should probably keep half your efund invested frontend loaded Edward Jones accounts that return 1.6% guaranteed annually while your agent rotates these annually for you so you can keep that loading up.  The other half should be kept in funding a small military force bc you never know when you're going to need to invade another country where the cartel owns the govt to rescue your family.  Using Edward Jones you will gain that personal relationship with an advisor who will guide you past the sure fire lazer beams of the T-Rex.  And fielding a small army is really cost effective. Bc while your family may not always be kidnapped they come in handy for making sure all your bullets get put to good use from your stockpile in the event of anarchy.

I agree with everything you're saying but I think that your math is a bit off. Also, in the event of anarchy, would my small army still be faithful to me? Just some thoughts.
Title: Re: Took MMM advice and slashed emergency fund!
Post by: Jaguar Paw on August 26, 2016, 09:11:08 AM
There has to be a happy medium between Mathjak and Boarder.  Both have good points.  Yes if you are otherwise FI, a 40% downturn in the stock market won't bother you. But, there are likely many non-FI people that are reading this Forum, would read the advice that says "it's a low probability" and could be in a bind, WHEN that day comes.  Maybe not 40%, but there will be another major stock market downturn of 20-25-30-etc % at some time. And no one, I can guarantee you, no one knows when that will occur.  We know that it will recover, but if you are forced to liquidate during the downturn, you will miss the recovery.

 

and in all likelihood the cash you have been hoarding to help you in a down turn wont have dropped by as much as it gained over the time you were worried about that down turn. just an FYI mathjak is the guy who reached FI at 62 and retired.  who is screaming conservativism.  i'm a 30 year old who is 7 years from FIRE screaming invest.   if you dont have dual large incomes that either could support your lifestyle or large taxable savings, or a rock steady job or etc. then yeah maybe you should have one

OP here, I'm wayyyyy more on the side with boarder. Maybe I'm just na´ve but I can't come up with a situation in my mind where someone demands 35K tomorrow, in cash... Unless it's a ransom as described above. The largest money question mark for us is having a 2 month old.. Even if any of us had large medical expenses (the largest money thing I can think of popping up out of the blue) we could still put it on a credit card then pay it off before the interest gets added.  I understand the fear and uneasiness of having a small amount of money in the bank, but from a financial standpoint it's illogical. That being said, if someone says "it makes me feel at ease to see 25K in my bank for no reason",  I can accept that as an appropriate answer and move on. It is when people try to justify it in other ways that makes no sense.

That being said.. After putting the 20K in my Vanguard, I still left 15K in savings because it makes me sleep better at night.