Poll

How much emergency fund do you have in your savings?

Less than a month of expenses
23 (9.1%)
One to two months of expenses
60 (23.7%)
Three to five months of expenses
74 (29.2%)
Six months to a year of expenses
62 (24.5%)
More than a year of expenses
34 (13.4%)

Total Members Voted: 239

Author Topic: Emergency Funds - what do you do?  (Read 24169 times)

pom

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Emergency Funds - what do you do?
« on: June 24, 2013, 05:28:04 AM »
This article got me thinking:

http://finance.yahoo.com/news/76-americans-living-paycheck-paycheck-045900956.html

How much did you set aside as an emergency fund?
« Last Edit: June 24, 2013, 05:36:54 AM by pom »

pom

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Re: Emergency Funds - what do you do
« Reply #1 on: June 24, 2013, 05:35:45 AM »
As for me, I personally keep very little in savings (1-2 months), I make sure that most of my money is working.

I consider that I don't need it because:

- I can cover half of my expenses from rent and dividends
- Even if I didn't, I could easily live on the unemployment income. Got to love keeping your spending low!
- My DW also works, it is unlikely that we will both be let go at the same time
- My credit card is paid every month so there is a lot of room there. If need be I can use the room and liquidate assets in an orderly fashion.

So, according to the article and if I was american, I would be in the 76% of people that live paycheck-to-paycheck.

Khan

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Re: Emergency Funds - what do you do?
« Reply #2 on: June 24, 2013, 06:07:31 AM »
I usually float about ~2 months of cash in my savings account. With current trends, and my CC headspace as well, I'd rather have my money working for me. When savings accounts aren't a complete wash, I'll retool to have more cash lying around. If my plans change with regards to employment and such(have been debating, and will continue to debate quitting my job for the next several years and go to college without any other commitments) then I would also load up a couple CD's on rotating maturity dates.

nawhite

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Re: Emergency Funds - what do you do?
« Reply #3 on: June 24, 2013, 06:22:55 AM »
I'm on the higher end of the spectrum right now mostly because I know my car is on its last legs and I want to be able to pay cash in a day for a new (to me) car. So I keep what I expect a used car to cost in the emergency fund in the short term. After the car konks out, I'll probably go down around ~6 months of expenses in the emergency fund because:

1. I don't have any post tax investments because I could tap because I'm paying off crazy interest student loans with my money instead.
2. I don't own a house with enough equity to take out a HELOC.

Once of those 2 is satisfied I'd probably drop down to around 2 months of expenses in the emergency fund.

swick

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Re: Emergency Funds - what do you do?
« Reply #4 on: June 24, 2013, 07:08:24 AM »
We are on the higher end as well. Having just bought our first home and being in an area where the local economy is (almost) completely resource drive, we like the security - at least for now.

It is frightening to see this post play out locally, I would guess that in our town - where people make decent money and have a lower cost of living the number is probably even higher.

Recently, when we needed some unexpected work done on the car the bill came to 400.00. The local garage asked us if we needed to pay in installments. Hubby responded that we budget for unplanned car expenses and it was not a problem to pay the bill. The mechanic, customer service rep and another customers jaw (almost) literally hit the floor. They could not comprehend.

We also purchased some high quality second hand furniture from an older couple who were moving south. She said to me "Dear, it is okay if you would like to post date the cheque" She too was shocked when I said this was a planned purchase and would't be a problem.

While we probably don't need as big an emergency fund as we do, it is a a security blanket while we are learning about how to make the money work best for us.

Insanity

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Re: Emergency Funds - what do you do?
« Reply #5 on: June 24, 2013, 07:37:08 AM »
While I guess technically I have 6 months, for the most part every dollar is accounted for in low interest loans/payments.  So while I could make it 6  months, if anything came up during that six months I'd be done.

aj_yooper

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Re: Emergency Funds - what do you do?
« Reply #6 on: June 24, 2013, 07:54:51 AM »
We do 1-2 months EF and budget for irregular but predictable expenses.  Our income is stable and, as backup, we have CC and HELOC for large(r) expenses. 

arebelspy

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Re: Emergency Funds - what do you do?
« Reply #7 on: June 24, 2013, 08:14:21 AM »
In an ideal world, I'd have $0, but I have idle cash from a rehab that just finished, so... Many years of expenses.  And we save ~5k/mo. cash flow from our jobs, so it's hard to continually get rid of that money.

Were I doing a more traditional investing route to FIRE, it'd be $0, simply due to the security of our jobs (teachers with tenure) and our savings rate.

(I do have reserves for my rental properties, but that is separate from a personal "emergency fund," IMO.)
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pachnik

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Re: Emergency Funds - what do you do?
« Reply #8 on: June 24, 2013, 09:01:10 AM »
I keep about 3-4 months minimum expenses in a TFSA in cash for my emergency fund.

 Right now I am between jobs (but starting a 2-3 month contract position in a week) so it is good to know the EF is there.  I didn't use to have one but I started reading Gail Vaz-Oxlade's blog about 4 years ago and she recommends having an EF so I saved up. 

I also don't like having alot of cash sitting in my accounts because I would rather have the money working for me.  However, with my employment situation (if I can't get a long-term contract in the fall, I will start looking for a permanent job) i'm not as fully invested as I would like to be.

SnackDog

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Re: Emergency Funds - what do you do?
« Reply #9 on: June 24, 2013, 09:06:08 AM »
Quite a bit until 2012 taxes are complete and I know if there is anything due!

matchewed

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Re: Emergency Funds - what do you do?
« Reply #10 on: June 24, 2013, 09:06:15 AM »
Mine is fairly large due to typical factors, the largest one being a single income stream. Within the next few years as my Roth IRA matures (I started it in '08) I'll be paring it down to a two month or less amount as I'll be able to use the Roth IRA as the e-fund.

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Re: Emergency Funds - what do you do?
« Reply #11 on: June 24, 2013, 09:29:42 AM »
Ours is high but variable since it doubles as our building fund. Since we got the go-ahead to move into the new house, we've kept it lower (used some of the excess to pay off the mortgage). What's left to be done to the house just won't cost as much as the heavy lifting expenses that are behind us.

Going forward, I do want to keep a couple of months, but probably no more with both of us working. We can (and do) live on less than one of our salaries.

rtrnow

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Re: Emergency Funds - what do you do?
« Reply #12 on: June 24, 2013, 09:35:25 AM »
I'm on the high side with more than a year. My reason is that I'm changing careers and plan to leave my job and be unemployed or make very little for a year or two as I train.

Is there a better option than simple savings for this? I do hate watching 30K earn .75%.

matchewed

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Re: Emergency Funds - what do you do?
« Reply #13 on: June 24, 2013, 09:44:16 AM »
I'm on the high side with more than a year. My reason is that I'm changing careers and plan to leave my job and be unemployed or make very little for a year or two as I train.

Is there a better option than simple savings for this? I do hate watching 30K earn .75%.

Not really.

Will

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Re: Emergency Funds - what do you do?
« Reply #14 on: June 24, 2013, 10:03:31 AM »
I'm on the high side with more than a year. My reason is that I'm changing careers and plan to leave my job and be unemployed or make very little for a year or two as I train.

Is there a better option than simple savings for this? I do hate watching 30K earn .75%.

There are accounts out there where you can earn anywhere from 2-3%.  You have to meet a few requirements each month (so many debit card uses, a few online billpays, etc.) but to go from .75 to 2.05% (which is what I am getting), I think it is worth it.  You just have to poke around some online and be prepared to do a lot of internet banking (although mine is a local CU).

arebelspy

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Re: Emergency Funds - what do you do?
« Reply #15 on: June 24, 2013, 10:07:33 AM »
I'm on the high side with more than a year. My reason is that I'm changing careers and plan to leave my job and be unemployed or make very little for a year or two as I train.

Is there a better option than simple savings for this? I do hate watching 30K earn .75%.

At least smartypig.com (online savings account) gives 1.00% right now.  Doesn't seem like much of a difference (0.25%) but it is 1/3 higher than .75...

Create some "goal" (I call mine "savings" and label it miscellaneous) and transfer in a lump sum, with no reoccuring transfers, and let it sit.

Unfortunately you can't pull out just part of it, you have to shut down the goal and transfer it all back.  So you could make several smaller goals (say 5 goals with 5k in each, and 5 with 1k each, so you can shut down a few to get whatever amount you need).

It does take about 3 days to transfer to your bank account after you shut down the goal, but most "emergencies" you don't need cash that day (i.e. car repair.. pay with credit card, transfer from smartypig to pay off bill).

But yeah, 1% still sucks, but is slightly better than .75%, and you don't have to do the 10 debit card transactions shenanigans and hassles like Will mentions.
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Lina

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Re: Emergency Funds - what do you do?
« Reply #16 on: June 24, 2013, 10:12:51 AM »
Less than a month of expenses due to a recent move across half of the country but I have a secure government job in the bottom and another government job now. If I would get unemployed I would get 80-90 % of my salary the first 6 months. Health expenses is paid by taxes. I also have low fixed expenses.

Will

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Re: Emergency Funds - what do you do?
« Reply #17 on: June 24, 2013, 10:15:09 AM »
I'm on the high side with more than a year. My reason is that I'm changing careers and plan to leave my job and be unemployed or make very little for a year or two as I train.

Is there a better option than simple savings for this? I do hate watching 30K earn .75%.

At least smartypig.com (online savings account) gives 1.00% right now.  Doesn't seem like much of a difference (0.25%) but it is 1/3 higher than .75...

Create some "goal" (I call mine "savings" and label it miscellaneous) and transfer in a lump sum, with no reoccuring transfers, and let it sit.

Unfortunately you can't pull out just part of it, you have to shut down the goal and transfer it all back.  So you could make several smaller goals (say 5 goals with 5k in each, and 5 with 1k each, so you can shut down a few to get whatever amount you need).

It does take about 3 days to transfer to your bank account after you shut down the goal, but most "emergencies" you don't need cash that day (i.e. car repair.. pay with credit card, transfer from smartypig to pay off bill).

But yeah, 1% still sucks, but is slightly better than .75%, and you don't have to do the 10 debit card transactions shenanigans and hassles like Will mentions.

I guess one needs to choose the shenanigans one wants to hassle with.  Common usage makes the debit transactions and bill pays rather easy to reach and can give you 2 or 3 times as much of a return.  Or you could make a bunch of bogus goals and shut them down as you need the cash (3 days later).

arebelspy

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Re: Emergency Funds - what do you do?
« Reply #18 on: June 24, 2013, 10:20:23 AM »
I guess one needs to choose the shenanigans one wants to hassle with.  Common usage makes the debit transactions and bill pays rather easy to reach and can give you 2 or 3 times as much of a return.  Or you could make a bunch of bogus goals and shut them down as you need the cash (3 days later).

Yeah, I don't do the bunch of goals thing, that was something I came up with while typing the post as an idea to withdraw just part at a time.

I usually transfer 50k in/out at a time (that's the limit for first time funding, though once it's funded you can add more to it).

I just don't do enough debit transactions, so I'd have to go buy packs of gum and stuff at the end of the month.  For people who do lots of transactions the hassle factor of those things requiring 10 transactions or whatever is obviously reduced.
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MsSindy

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Re: Emergency Funds - what do you do?
« Reply #19 on: June 24, 2013, 10:26:11 AM »
I don't really have anything for 'an emergency' per se.  I budget in long-term expenses and those that routinely come up (house maintenance, car repairs).  We are also fortunate enough to have 2 decent salaries, so things could easily get handled in any given month - just reduce how much goes to savings.  The only true emergency that I could see happening is that one of us loses our job, but then again it would just mean that we wouldn't save at the same level.

Now, just because I don't have an EF, doesn't mean that my funds are fully invested at all times....I do have some float between the time the money is earned and it is invested.

rtrnow

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Re: Emergency Funds - what do you do?
« Reply #20 on: June 24, 2013, 11:11:54 AM »
I'm on the high side with more than a year. My reason is that I'm changing careers and plan to leave my job and be unemployed or make very little for a year or two as I train.

Is there a better option than simple savings for this? I do hate watching 30K earn .75%.

At least smartypig.com (online savings account) gives 1.00% right now.  Doesn't seem like much of a difference (0.25%) but it is 1/3 higher than .75...

Create some "goal" (I call mine "savings" and label it miscellaneous) and transfer in a lump sum, with no reoccuring transfers, and let it sit.

Unfortunately you can't pull out just part of it, you have to shut down the goal and transfer it all back.  So you could make several smaller goals (say 5 goals with 5k in each, and 5 with 1k each, so you can shut down a few to get whatever amount you need).

It does take about 3 days to transfer to your bank account after you shut down the goal, but most "emergencies" you don't need cash that day (i.e. car repair.. pay with credit card, transfer from smartypig to pay off bill).

But yeah, 1% still sucks, but is slightly better than .75%, and you don't have to do the 10 debit card transactions shenanigans and hassles like Will mentions.

Thanks. I'll check that out. Even a little more is still more.

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Re: Emergency Funds - what do you do?
« Reply #21 on: June 24, 2013, 11:32:07 AM »
I am most comfortable with 6 mos-1 year of expenses for an emergency fund. It may not be the smartest thing because I have so much student loan debt, but part of the reason I want a larger EF is because of the debt. I take a broad view of what counts as an "emergency." I save for home maintenance and major (unexpected) car repairs, in addition to job loss (which is unlikely). As I get more comfortable financially, I will probably take chunks of the EF and throw them at my loans.

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Re: Emergency Funds - what do you do?
« Reply #22 on: June 24, 2013, 12:38:09 PM »
I don't really believe in having an Emergency Fund in the traditional sense.  I keep about one month's worth of expenses in cash.  That's it.  If there's a true emergency, I have a CC with a $17k limit.  If it's a long term emergency, I'll sell some stock.

Eric

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Re: Emergency Funds - what do you do?
« Reply #23 on: June 24, 2013, 03:20:14 PM »
As such, I feel a liquid emergency fund is prudent insurance against the unexpected.

While cash is the most liquid, I think an investment account (non-IRA version) is almost as liquid.  If I sell stock, I can have the money in my bank account in 5 minutes.  Worst case is you have to wait a day or two until the markets open.  That's pretty darn liquid, and even puts CDs and other savings vehicles to shame when comparing liquidity.  Gotta love the internet and instant transfers!

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Re: Emergency Funds - what do you do?
« Reply #24 on: June 24, 2013, 03:31:06 PM »
Ours is high but variable since it doubles as our building fund. Since we got the go-ahead to move into the new house, we've kept it lower (used some of the excess to pay off the mortgage). What's left to be done to the house just won't cost as much as the heavy lifting expenses that are behind us.

Going forward, I do want to keep a couple of months, but probably no more with both of us working. We can (and do) live on less than one of our salaries.

Same here.  We've got what some would probably consider an insane 1.5 year fund...  But we've got only one income and ours doubles as a building fund for finishing the upstairs.  (Although at the rate I move, this could easily be less near-line storage with higher interest.)

matchewed

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Re: Emergency Funds - what do you do?
« Reply #25 on: June 24, 2013, 03:33:32 PM »
As such, I feel a liquid emergency fund is prudent insurance against the unexpected.

While cash is the most liquid, I think an investment account (non-IRA version) is almost as liquid.  If I sell stock, I can have the money in my bank account in 5 minutes.  Worst case is you have to wait a day or two until the markets open.  That's pretty darn liquid, and even puts CDs and other savings vehicles to shame when comparing liquidity.  Gotta love the internet and instant transfers!

While liquid you then have to deal with risk. Having your emergency fund in a place that is vulnerable to risk kinda defeats the purpose.

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Re: Emergency Funds - what do you do?
« Reply #26 on: June 24, 2013, 03:58:18 PM »
While liquid you then have to deal with risk. Having your emergency fund in a place that is vulnerable to risk kinda defeats the purpose.

Why?  Maybe I don't understand the point of an emergency fund then.  Isn't it having money available that you can use in an emergency?  If so, then this fits the bill.  Just because there's some downside risk doesn't mean that there won't be money there if I need it. 

Plus I get the upside gains, so if I don't have an emergency for say 10 years, my next emergency could pay for itself.  So to me, it's worth the risk of potentially having to sell at a loss in order to have the chance of being able to have a future emergency paid for by market gains.  Plus, I still have the liquidity and the amounts to be able to quickly cover any emergency that could happen in the short term.
« Last Edit: June 24, 2013, 04:02:09 PM by Eric »

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Re: Emergency Funds - what do you do?
« Reply #27 on: June 24, 2013, 04:09:33 PM »
I'm on the high side with more than a year. My reason is that I'm changing careers and plan to leave my job and be unemployed or make very little for a year or two as I train.

Is there a better option than simple savings for this? I do hate watching 30K earn .75%.

You could look into www.kasasa.com. Basically you make X number debits/month to get a higher interest rate. I have an account but still prefer excess cash be put to work in the markets.

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Re: Emergency Funds - what do you do?
« Reply #28 on: June 24, 2013, 04:42:56 PM »
I ticked option 1 (less than 1 month), but I too would have the credit card option if ever the need arose.

Personally I don't see what sort of "likely" emergency could arise that would require a large wad of cash to solve immediately, unless you need to bribe your way out of being arrested by corrupt police in a third world country.

EK

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Re: Emergency Funds - what do you do?
« Reply #29 on: June 24, 2013, 04:51:48 PM »
Right now we have 3-ish months of expenses circulating through our checking account, but we're trying to grow it to probably about double for two reasons: 1) our car could die soon and we need cash available to replace it and 2) neither of us are in what we'd consider long-term jobs, so we need to have extra stashed away for the possibility of going back to school or taking a lower income at a job with better growth possibility.  If it weren't for those two, I don't see any great reason for keeping more than a month or two sitting in a checking account.

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Re: Emergency Funds - what do you do?
« Reply #30 on: June 24, 2013, 06:02:21 PM »
While liquid you then have to deal with risk. Having your emergency fund in a place that is vulnerable to risk kinda defeats the purpose.

Why?  Maybe I don't understand the point of an emergency fund then.  Isn't it having money available that you can use in an emergency?  If so, then this fits the bill.  Just because there's some downside risk doesn't mean that there won't be money there if I need it. 

Plus I get the upside gains, so if I don't have an emergency for say 10 years, my next emergency could pay for itself.  So to me, it's worth the risk of potentially having to sell at a loss in order to have the chance of being able to have a future emergency paid for by market gains.  Plus, I still have the liquidity and the amounts to be able to quickly cover any emergency that could happen in the short term.

Because if you lose your job at the same time the asset your emergency fund is tied to cuts your emergency fund in half you're pretty screwed. Now if you're just talking about being able to access investments in general and you have a large enough amount then I can see your point. But the whole idea behind an emergency fund is just as much about risk mitigation. Why trade one type of risk for a different type of risk? It's not as if massive market fluctuations have ever corresponded with massive layoffs... wait yes they have. But hey it's all about your own risk tolerance so mine is just a bit lower than yours.

arebelspy

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Re: Emergency Funds - what do you do?
« Reply #31 on: June 24, 2013, 06:12:39 PM »
I really like the concept of investing it and never having that cash sitting idle.

Even if you have to withdraw 5k from it in a down market... If you had had that 5k sitting idle all along, it'd be the same thing (only you wouldn't have had any gains from it).

Again, however, it's all tied to the stability of your job.  If you are likely to lose your job, you may want to go more conservative.
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Re: Emergency Funds - what do you do?
« Reply #32 on: June 24, 2013, 06:35:24 PM »
Because if you lose your job at the same time the asset your emergency fund is tied to cuts your emergency fund in half you're pretty screwed. Now if you're just talking about being able to access investments in general and you have a large enough amount then I can see your point. But the whole idea behind an emergency fund is just as much about risk mitigation. Why trade one type of risk for a different type of risk? It's not as if massive market fluctuations have ever corresponded with massive layoffs... wait yes they have. But hey it's all about your own risk tolerance so mine is just a bit lower than yours.

It's true that it's important to determine your own risk tolerance.  I personally would not view losing my job as an emergency.  Unemployment insurance alone would cover my current expenses, without even tapping my emergency fund.  My current view is that there aren't many things that are true emergencies, and of those, they're unlikely to happen to me (or anyone), so there's no point in actively planning for the absolute worst case.  If that absolute worst case happens, I'm sure the last thing I'll care about is that I lost 20% on the sale of some stocks.  YMMV.

travelbug

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Re: Emergency Funds - what do you do?
« Reply #33 on: June 24, 2013, 06:42:46 PM »
We also try not to have any cash that is not "working" for us.

It's either in an account to offset our mortgage interest (in Australia; banks offer this), or invested in shares etc.

We have a CC that we can use for emergencies and we can have large amounts of cash available to us within 2-3 days.

Will

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Re: Emergency Funds - what do you do?
« Reply #34 on: June 24, 2013, 07:01:45 PM »

Using credit as an emergency fund has risks though. One of them: your creditors can call in your debt at any time, change the terms of their lending agreement with you or deny your access to credit.


I see this brought up a lot, but I personally have never had a creditor call in any debt, change the terms, or deny me access to my credit.  To my knowledge, this hasn't happened to anybody I know either.  I wonder how great of a risk this really is?

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Re: Emergency Funds - what do you do?
« Reply #35 on: June 24, 2013, 07:30:09 PM »
the financial crisis taught me a bit of a lesson here.
Those credit cards you thought were your emergency fund might get cancelled. That Heloc on that well-in-the-black property might get closed in a housing collapse. Multiply this x10 if you are a margin'd landlord. That spouse with the job might lose hers. Those investments and savings you thought you had could be on sale for 50%+ off. Your awesome career/etc could be literally sent overseas--one must be ever vigilant on this one but sometimes there is nothing you can do.

So for these reasons, I am the retard with 12 months of expenses in an emergency fund. A combination of zero risk (I/EE bonds, aka CPI inflation paying I bonds or 3.56% APY paying EE if-held-for-20-years), high yield checking accounts [yea those 8-debits-a-month-things], normal money market for regular bills, and laddered FDIC insured CD's in the 5-7 year range. I am perfectly fine with it for others to label this as non-optimal. Indeed it probably is. My overall AA including this fund is still 70% equities (including REITs), so dont get too worried about me.

The last financial crisis was a bit of a mixed bag for my household. My job was fine, my spouses entire industry vanished overnight and it took her 6 months to get back into the game (and another couple years to exceed her prior salary). My salary alone was fine to pay the bills and hit my 401k+match limit but that was about it for our savings. Although I guess as others here will point out, I am a profligate hedonist. I had (3) trips to Hawaii that year, my spouse came on two of them. Yes while she was out of work. Heh.
« Last Edit: June 24, 2013, 07:35:09 PM by Joet »

mpbaker22

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Re: Emergency Funds - what do you do?
« Reply #36 on: June 24, 2013, 08:18:17 PM »
So for these reasons, I am the retard

Someone let renbutler know he/she has a new topic to post in.


Back on topic,
I keep a varying amount of expenses in cash.  When it gets to be about 4-5 months worth, I invest all but one months worth (to cover the upcoming months expenses).  In principle, I'd like to just keep one month in cash, but i stall for a few months till it becomes worth it to invest a few thousand at a time.
I'm just not detailed enough to have the exact amount needed at any given time.

mushroom

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Re: Emergency Funds - what do you do?
« Reply #37 on: June 24, 2013, 09:39:23 PM »

Unfortunately you can't pull out just part of it, you have to shut down the goal and transfer it all back.  So you could make several smaller goals (say 5 goals with 5k in each, and 5 with 1k each, so you can shut down a few to get whatever amount you need).

It does take about 3 days to transfer to your bank account after you shut down the goal, but most "emergencies" you don't need cash that day (i.e. car repair.. pay with credit card, transfer from smartypig to pay off bill).

Rebel, I always just keep two goals around. You can transfer freely between the two goals any amount. So if I need to withdraw $1000, I'll make whatever transfer I need to between goals for one goal to have $1000 and the rest of my cash in the other goal. Then I close the $1000 goal. Afterwards I create a new goal with $25 so I'll be back to having two goals for when I need to withdraw money in the future.

arebelspy

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Re: Emergency Funds - what do you do?
« Reply #38 on: June 24, 2013, 10:06:31 PM »

Unfortunately you can't pull out just part of it, you have to shut down the goal and transfer it all back.  So you could make several smaller goals (say 5 goals with 5k in each, and 5 with 1k each, so you can shut down a few to get whatever amount you need).

It does take about 3 days to transfer to your bank account after you shut down the goal, but most "emergencies" you don't need cash that day (i.e. car repair.. pay with credit card, transfer from smartypig to pay off bill).

Rebel, I always just keep two goals around. You can transfer freely between the two goals any amount. So if I need to withdraw $1000, I'll make whatever transfer I need to between goals for one goal to have $1000 and the rest of my cash in the other goal. Then I close the $1000 goal. Afterwards I create a new goal with $25 so I'll be back to having two goals for when I need to withdraw money in the future.

Oh that's a neat trick!  Didn't know you could transfer between two goals.  Thanks for the tip.
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Re: Emergency Funds - what do you do?
« Reply #39 on: June 24, 2013, 10:39:12 PM »
Using credit as an emergency fund has risks though. One of them: your creditors can call in your debt at any time, change the terms of their lending agreement with you or deny your access to credit.
I see this brought up a lot, but I personally have never had a creditor call in any debt, change the terms, or deny me access to my credit.  To my knowledge, this hasn't happened to anybody I know either.  I wonder how great of a risk this really is?
During the Great Recession I knew two people who had their HELOC frozen (at a lower limit), their credit cards also frozen at a lower limit (they'd made the "mistake" of paying them down), and one startup company that had its spare cash in short-term auction-rate CDs.  "Luckily" their broker let them borrow on margin.  "Unluckily" their broker was Lehman.

Oh, an emergency fund?  Well, we're FI.  We keep two year's expenses in cash (one year in a money market and the second year in CDs).  At the end of each year we replenish the cash back to two years.  If our portfolio is down that year then we hope to survive the second year on the rest of the cash stash.  Worked fine through both 2001-02 and 2008-09. 
« Last Edit: June 24, 2013, 10:41:05 PM by Nords »

ep114

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Re: Emergency Funds - what do you do?
« Reply #40 on: June 25, 2013, 12:56:52 AM »
I have a lot as well  and am hoping to get up the nerve to reduce. But my job is ridiculously unstable (and I would not be eligible for unemployment) and I have a rental that seems to be cursed so I always expect repair bills. I admire the steel will of those of you with very little sitting idle!  After my next job change I hope to do so as well.

Khan

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Re: Emergency Funds - what do you do?
« Reply #41 on: June 25, 2013, 04:01:33 AM »
I'm on the high side with more than a year. My reason is that I'm changing careers and plan to leave my job and be unemployed or make very little for a year or two as I train.

Is there a better option than simple savings for this? I do hate watching 30K earn .75%.

You could set up a couple of CD's with rotating maturity dates.

Half-Borg

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Re: Emergency Funds - what do you do?
« Reply #42 on: June 25, 2013, 05:09:18 AM »
I have about one month in expenses in cash right now, but that's just because I'm not sure which stock I should buy.

Unemployment is unlikely und coverd by unemployment insurance for one year anyway.
Health insurance is covering every expense too.
I don't actually NEED my car, so if it breaks down, whatever, I'll just repair it next month.
No mortage or any other kind of debt that needs to be covered.

I simple can't imagine any emergency, that cash would solve.

smalllife

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Re: Emergency Funds - what do you do?
« Reply #43 on: June 25, 2013, 05:41:23 AM »
I save for larger expenses in the budget (car repairs, vet bills, etc.) so among the various categories I have 2-3 months of spending without anything going wrong, although no technical "emergency fund".   I don't have idle money sitting around (all categories except car repair and vet bills will be used this year) but a high enough cash cushion to make me feel more secure.  I also have enough in my Roth IRA to use as a job loss fund (12k in contributions).

Villanelle

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Re: Emergency Funds - what do you do?
« Reply #44 on: June 25, 2013, 06:10:24 AM »
I guess it depends on what you call emergency savings.  Do my non-retirement investment accounts count?

I currently don't work, thanks to living overseas, and DH's job is extremely stable.  We also have amazing medical insurance so the chances of significant medical bills are slim.  So overall, I feel like we need less savings than most people.

In just super liquid accounts, we have about 3 months of bare bones expenses, and that's more than I'd like, but because many of our bills are in Euro and that complicates being able to budget and have the correct amounts in the account we use for paying Euro bills, it is necessary. If you add in non-retirement investments, CDs, etc., then we could go for several years, at least. 

jrhampt

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Re: Emergency Funds - what do you do?
« Reply #45 on: June 25, 2013, 10:51:21 AM »
I have about 7 months right now earning only .75%.  Part of that is because I would owe tuition reimbursement to my company if I left my job today, and I want to reserve the freedom to do so if needed.  I don't usually let the account go under $5k though, even though I do have a taxable investment account that I could access.  I figure that would let me get by for 2-3 months at least.

Also, in reference to some of the comments above, I did have a couple of credit cards notify me that they were closing my accounts during the recession.  These were inactive cards with no balances, but it was still interesting to note.

Herbert Derp

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Re: Emergency Funds - what do you do?
« Reply #46 on: June 26, 2013, 01:08:22 AM »
I've got around three months worth of cash right now, but that's mostly due to a minimum balance requirement on one of my checking accounts. I want to close that account but I'm torn on whether I should have an emergency fund or not.

On one hand, I am young, healthy, and own no house or car or anything that is likely to cause unexpected expenses. My pay is enough that I can always withhold up to seven months expenses as long as I have one month's notice, or if it is a real emergency I can sell some of my mutual fund shares and have cash in a couple of business days. Plus I have a bunch of credit cards, which combined have around a year and a half's worth of credit.

On the other hand, one month ago I did ask my dad to lend me some money when I moved because things did not go as planned, and I thought I might not have withheld enough from my paycheck to cover my moving expenses (which had to be paid in cash, no credit cards). Turned out it was a false alarm and I ended up sending the money back untouched. If that sort of thing happens to me again, I will definitely create a real emergency fund.
« Last Edit: June 26, 2013, 01:16:10 AM by Herbert Derp »

mikefixac

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Re: Emergency Funds - what do you do?
« Reply #47 on: June 26, 2013, 02:21:28 AM »
Okay, tell me the error of my ways. I just feel comfortable having ~$10K sitting in my checkbook.

I guess it's costing me ~$500/year by doing this, but like I say, this is my own personal comfort level.

arebelspy

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Re: Emergency Funds - what do you do?
« Reply #48 on: June 26, 2013, 10:17:33 AM »
Okay, tell me the error of my ways. I just feel comfortable having ~$10K sitting in my checkbook.

I guess it's costing me ~$500/year by doing this, but like I say, this is my own personal comfort level.

There's no error there.

It's mathematically suboptimal, but your comfort level trumps math.
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Sebastian

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Re: Emergency Funds - what do you do?
« Reply #49 on: June 26, 2013, 10:46:18 AM »
So I found out that I had to get my wisdom teeth removed pretty much ASAP. My insurance barely covers the cost so out of pocket I have to pay 2 grand. No problemo though. Thank goodness I have a emergency fund! :)