The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: Ron Scott on November 11, 2021, 03:39:25 AM
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I do. The only asset I exclude is residential real estate, since I don’t consider where I live an investment
I am also ignoring the trending advice of the personal-finance cognoscenti, to “invest“ your emergency fund in stocks and bonds. I do checking/MM/CD.
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I don’t have an emergency fund at all, just my portfolio, plus about 3 years salary in credit through HELOC and credit cards.
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I don’t, but it is (thankfully) pretty small relative to entire balance, so it would not have much of an impact if I did.
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No actual emergency fund. EVERYTHING is stash.
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We call it a cash flow buffer, but yes, it is included in our AA. It is a pretty steady number, while the portfolio itself keeps growing, so at this point it tends to be less than 2% of the total. We just lump it in with bonds when figuring out whether/how to rebalance.
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I'll say yes and no. I don't have a dedicated emergency fund (so, no) and, instead, consider all of my investments fair game if the emergency is large enough (so, yes).
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No and yes. Like others the stash covers it all. Buuuutttt....then I have separate account (sinking fund) for car repair/replacement, home repairs/improvements, vacations, HSA none of which I include in my AA or stash as I view them as already spent. Problem is they have gotten so big that they are now like 10% of my stash. In reality, these funds could cover the next 5-10 years of these type of expenses (or one year if we buy an expensive car, do a home addition, take a massive multiple week luxury vacation, and rack up a large amount of medical bills....haha)
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I only keep $5k in checking as my cash-buffer / emergency fund. Also have a CC limit that is > 100% of annual spending.
I do consider it part of my AA as Treasuries/Cash, but I do not include it in my 4% goal calculation.
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I only keep $5k in checking as my cash-buffer / emergency fund. Also have a CC limit that is > 100% of annual spending.
I do consider it part of my AA as Treasuries/Cash, but I do not include it in my 4% goal calculation.
Same. The opportunity cost is just too much to have any more of an emergency fund.
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I have about a year's expenses in a high yield savings. Losing out on the opportunity cost does grind my gears, but I've had hard times and tenuous employment situations that have made me very, very risk averse.
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I have an emergency fund, but I don't count it as part of my asset allocation. In my opinion, only invested assets count toward FI cash flow, so although the emergency fund is part of my net worth, I don't include it when calculating how much my stache is technically affording me each month.
I can understand when people don't have an emergency fund when they have huge amounts of assets, but I've always liked having it around. I'm also saving up to take a year off work, and all of that money is currently in cash.
As for the emergency fund itself, it doesn't bother me too much that it isn't growing. I'm swimming in so much money compared to the average person, I just don't think it's worth complaining about a relatively small chunk not being part of the GAINS or whatever. But that's just me. I'm not much of an optimizer when it comes to these things. I even treat my HSA as an account for health stuff (gasp!)
EDIT: For what it's worth, my investments are 90/10 in stocks/bonds. I kind of think of cash as really crappy bonds. The goal isn't so much to see growth as it is to act as a buffer against the gyrations of the market. By isolating some money from wild swings, it helps me care less about the present state of the economy. It does erode with inflation, but I've just stopped caring too much about these things. It works for me.
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I have an emergency fund, but I don't count it as part of my asset allocation. In my opinion, only invested assets count toward FI cash flow, so although the emergency fund is part of my net worth, I don't include it when calculating how much my stache is technically affording me each month.
I can understand when people don't have an emergency fund when they have huge amounts of assets, but I've always liked having it around. I'm also saving up to take a year off work, and all of that money is currently in cash.
As for the emergency fund itself, it doesn't bother me too much that it isn't growing. I'm swimming in so much money compared to the average person, I just don't think it's worth complaining about a relatively small chunk not being part of the GAINS or whatever. But that's just me. I'm not much of an optimizer when it comes to these things. I even treat my HSA as an account for health stuff (gasp!)
EDIT: For what it's worth, my investments are 90/10 in stocks/bonds. I kind of think of cash as really crappy bonds. The goal isn't so much to see growth as it is to act as a buffer against the gyrations of the market. By isolating some money from wild swings, it helps me care less about the present state of the economy. It does erode with inflation, but I've just stopped caring too much about these things. It works for me.
This sums up our position pretty well. We flip houses when the numbers make sense. They haven't for a while now, but we still have a big pile of dry powder. Because of this, we try to keep other cash to an absolute minimum.
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No, I don't keep much of an emergency fund. Our situation doesn't really need it.
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¯\_(ツ)_/¯
I don't spend a lot of time worrying about my asset allocation. I have an emergency fund that I typically use for bank bonus churning, a house that I live in, and equities for the rest.
The difference between 100% equities and 98% equities 2% cash is minor enough that I don't bother with it.
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I don't get the emergency fund concept. Figure you have at least 25x expenses to retire, that is your emergency fund.
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I don't get the emergency fund concept. Figure you have at least 25x expenses to retire, that is your emergency fund.
I'm pretty sure a sizeable e-fund is more for people in the accumulation stage where cash flow might be tighter, and dipping into early investments during a down market time could have a significant negative impact long term.
E-fund necessity really depends on the person's situation.
I had a substantial e-fund when I was up to my eyeballs in debt with no savings and a highly variable income. It would have been insane not to.
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Yes, I keep 5% of my AA as cash.
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There is no emergency fund. There are only assets.
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I have $10k in EF but do not personally count it in my asset allocation (which is 100% equities).
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I dont have an "E-Fund" per sae but I do keep cash on hand in couple different interest earning accounts with quick access. I count everything in my AA/NW except my home, 529's, and materialistic things like Cars, furniture etc..
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It's an asset. Why wouldn't you consider emergency funds in your asset allocation?
Do you lie to yourself and pretend you don't really have it? What am I missing?
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It's an asset. Why wouldn't you consider emergency funds in your asset allocation?
Do you lie to yourself and pretend you don't really have it? What am I missing?
Uh, yeah.
I ignore it because my e-fund doesn't need rebalancing, I don't grow my e-fund in proportion to my investments, so it makes no sense to maintain it as a percentage of my asset allocation. That would just pointlessly complicate the very simple math of 80/20.
My investment values aren't static, my e-fund value is.
Why, do you complicate your AA rebalancing math just to include your e-fund?
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My emergency fund (in a money market account) is a 6 month expense target, and I include it in my net worth calculations but not my investment calculations. And all of my FI calculations are based on the investments.
To each their own.
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No dedicated emergency funds for me, just working the plan so I guess you could say it is included in my asset allocation. I run a net-zero household where I expect my checking account to be near zero at all times and don't really keep anything in a saving account. I have a good-sized signature credit line that can be drawn anytime in the case of an "emergency", which gives me time to move money around at my leisure to cover any shortage as necessary. Usually have to do a shortage transfer and maneuver funds from 'non-household' accounts about once or twice per year.
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Yes - ~$25-30k in size
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Yes but it doesn't have much impact. There is about 10 to 12k in a money market. I have a second tier e fund with about 20k in a brokerage in a muni bond fund just in case. That has only been earning 2 to 3 percent maybe but it still beats the cash holdings.
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I have an emergency fund that started as 10k in cash, but I add 20 dollars to it every pay day. I have too much cash in other checking and savings currently. Some of it is earmarked for 2022 Roth IRA (max buy on 1/1/2022) and some (~10k) is set aside for a potential vehicle purchase or a small renovation project. I can't really justify the remaining cash other than to cover regular expenses. I do not include a cash amount in my investment asset allocation calculation. My bond percentage varies between 10 and 20 percent of my investment asset allocation in a 3 fund lazy portfolio strategy. I also have a pension with a cash value that I have considered treating as my bond allocation and going all in on stocks in my investment strategy.
I have a brokerage account that is mostly in stocks that is worth more than 1 year gross income, so I have thought about eliminating my cash emergency fund and just move more of my bond buys to this taxable brokerage account.
I also feel like I am in an enviable position financially and try not to stress about this ~3.5% of my total net worth not growing.
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I don't really understand the question. Part of my net worth is allocated to the "emergency fund " category, so yes, I guess.
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I guess I am at the point where we no longer have a emergency fund really. We just pay for what we need.
At the start of this we did.
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Our E.F. is included in our NW.
Our E.F. is NOT included in our F.I. bucket.
When initially accumulating, we did not have a separate E.F. and this did mean some bumps were hit.
Once Coast F.I. was obtained and living expenses optimized to a comfortable low, then the cash savings buckets went into place (E.F. [health, full job outage, natural disaster], Auto Repair F., Major House Repair F., Etc).
The E.F. provides some insurance for peace of mind that the Coast F.I. bucket can grow untouched while the foot is off the accelerator so that we can focus on family, health, and entertaining work paths that aligns with our interests and values.
In addition to the 6-9 months’ worth of E.F. we have a few zero balance Credit Cards that can carry about 2 years’ worth of living.
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What impact does this classification have on any financial decisions you might be making? Excluding it I would say is distorting your true asset allocation, but it may not be material enough to matter.
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Hm, as an EF is per definition an asset (as long as it's cash,gold,equities,crypto,whatever) it should be part of the asset allocation of any person that has an EF, right? It may not be part of a subgroup of assets though - e.g. investable assets.
The same goes for real estate I think. It is part of one's assets, but one may choose not to include it in a subgroup of assets (e.g. `all assets except my primary residence/RE`/'all liquid assets', etc.).
So basically in the same line of thinking as Morning Glory.
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We have a chunk of 'liquid savings' (i.e. not-so-high yield savings accounts). No longer really earmark it as 'emergency' per se.
But yeah, I keep wondering just how much is too much for the insurance of being liquid in a 'hit the fan' scenario. Living through 2008 has ruined my ability to feel like we have 'enough' on hand.