The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: VoteCthulu on March 07, 2017, 08:43:01 AM
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I keep an emergency fund of $5-10k, more so I don't have to worry about moving money around every month than because I'm worried about actual emergencies. This last year I was very glad to have that cash sitting there ready for me, though, since I had both a car and a computer that I needed to replace quickly.
Using my emergency fund, I was able to go get them right away without worrying about what to sell and waiting for an ACH transfer to complete (on some of my accounts process the same day, others can take 3-5 days). I'm sure I could have gotten a loan or worked out some other solution, but I'm happy to forego a bit of investment returns for reduced hassles (especially during a stressful emergency).
This made me curious about what others have had to use their emergency fund for, so please share your stories!
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For us, mostly car repairs and house repairs that came up suddenly and weren't planned for!
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* auto repairs... Transmission replacement was about $3k
* home repairs... new HVAC system was about $7k. Foundation repair was $20k.
* pet emergency... I spent probably $2k on a specialist and some intensive care (and the dog still didn't make it)
* family emergency... spent 6 weeks in a hotel out of town plus eating out (but eating out on the cheap) while Dad was in the hospital. I don't know that I have a total for this, but it was relatively expensive.
I'm sure there is more... I'm old.
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A new washer and dryer (within a week of eachother :/)
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My fathers funeral. He and mom were in a car crash, mom was incapacitated, no one had access to anything so we footed the funeral bill until everything was sorted out with insurance and accounts etc.
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Dental work just recently. I am self-employed and don't have dental insurance, and it is just about impossible to get decent dental when you are self-employed. It would have been a HUGE crisis if I didn't have the emergency fund.
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Nothing comes to mind offhand.
My goal is to keep a ~$5k cash buffer. Anything that I can't handle with cash on hand will go on a credit card and get paid off with subsequent paychecks before interest charges begin.
Anything larger than that, I'd probably find a 0% credit card and just pay it off. I prefer keeping money invested when possible and not in no/very low interest accounts.
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Big Hurricane in Houston, power out for a week straight across town. It was all cash everywhere.
Rest of the emergencies like HVAC, and a roof repair it was on CC's while I moved fund to cover the CC bill. The points made the cost abit less painful.
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Last year we used a big chunk when we re-financed our mortgage because the previous mortgage company screwed up our impound account (which we are required to keep because we had a VA loan). We got some "back" since we had a month without a mortgage, but it was really helpful to have the cash on hand to bring the impound current and move to a better lender with a lower interest rate.
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Nothing comes to mind offhand.
My goal is to keep a ~$5k cash buffer. Anything that I can't handle with cash on hand will go on a credit card and get paid off with subsequent paychecks before interest charges begin.
Anything larger than that, I'd probably find a 0% credit card and just pay it off. I prefer keeping money invested when possible and not in no/very low interest accounts.
This is us exactly. Thankfully, no layoffs, no cars being totaled, no houses burning up in a fire.... just general day-to-day stuff that you know will happen eventually like house repairs that we have in our budget. We don't have kids, so that helps to make life more predictable.
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This isn't really an emergency, but just a perk to keeping a cash buffer one hand.
Trip booking for a group. While planning for a trip I was booking AirBnB's, hostels, hotels for 6 people for 2 weeks. it was much easier to put it all onto one card then split it evenly vs each couple trying paying for different things then divvy it up later. The total cost was about 3k and I put it onto a credit card (for the points) then immediately paid off the card with my buffer.
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I've never touched mine.
It's more of an "in case of job loss" fund. Because of my savings rate and money management with credit cards, I could cash flow a pretty big expense. I'm thinking $5k at once would not have me rushing to my savings account. Thankfully, I haven't had to test that yet.
But, I'm single and no income due to a job loss would be a big hit. Before I had taxable investments, I kept $30k in "high yield" savings, so I could be covered for a year (probably more) of expenses while job searching. Now, I've convinced myself to be comfortable with $15k in savings, which got easier as my taxable investment account grew to several times that.
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My emergency fund is $65,000. I max the 401k and the two Roths but the money continues to accumulate.
As a result, my EF remains invested and isn't treated any different from the rest of my portfolio. Credit cars could handle any emergencies, and within a few days that $65K could be sold off and in my checking account if I needed it.
Some people say your EF should be in cash, and if $5K is all the cash lying around I don't see any problem with that. Having $50K lying around in cash is silly though (except I understand that aged retirees could have a decent amount of cash lying around to spend in the coming year might have it is something conservative)
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Car and housing expenses mostly.
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Unexpected sick leave and tax installment due in the same month.
I was so grateful to not have to worry about money while recovering.
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Thankfully I haven't needed to use it. I have set aside a little over 3 months of income just in case and keep it invested in a Vanguard account so that its at least working for me. I have two credit cards, I carry no balances (paid off per transaction) these both have higher limits and I could use them to cover sudden unexpected expenses while I work on taking the funds out of the Vanguard account.
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Those of you who keep an emergency fund in case of a job loss, how do you deal with health insurance? Do you just forgo insurance? Mainly aimed towards single people or anyone who can't get on a spouse's plan. That's my biggest concern, I think...
I guess I could go back on my parent's plan until I'm 26, since loss of coverage would allow me to join outside of open enrollment? I'd rather not mooch off though.
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Car and home repairs.
Spent some other money recently on a discretionary purchase, because things were looking OK, and then immediately after another item got pushed forward from August to February, meanign I needed 2K for that. As SOON as that money was committed, learned I'd have to get my chimney rebuilt NOW vs next fall, and needed 3K immediately to do that. Also have a large tax bill looming soon, so didn't' want to dip into that savings either. Will be dipping into our Emergency fund for the chimney repair.
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This made me curious about what others have had to use their emergency fund for, so please share your stories!
My emergency fund is a LOC. That sees pretty limited use. I can't think of a true emergency that it's been used for. I typically just pay for repairs or unexpected expenses by credit card and then pay off the cards by diverting savings. It's nice to have the extra buffer though since it's free if I don't use it.
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Those of you who keep an emergency fund in case of a job loss, how do you deal with health insurance? Do you just forgo insurance? Mainly aimed towards single people or anyone who can't get on a spouse's plan. That's my biggest concern, I think...
I guess I could go back on my parent's plan until I'm 26, since loss of coverage would allow me to join outside of open enrollment? I'd rather not mooch off though.
The emergency fund would be used to pay for health insurance.
Health insurance is such a mess that my plan is just to ignore it until I need to look for it... but, I know that COBRA will be an option right away (super expensive), and I suppose I'd look for something on the marketplace. I would not forgo health insurance - I'd want at least catastrophic coverage. I'd be fine paying for the small routine stuff OOP.
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Those of you who keep an emergency fund in case of a job loss, how do you deal with health insurance? Do you just forgo insurance? Mainly aimed towards single people or anyone who can't get on a spouse's plan. That's my biggest concern, I think...
I guess I could go back on my parent's plan until I'm 26, since loss of coverage would allow me to join outside of open enrollment? I'd rather not mooch off though.
The emergency fund would be used to pay for health insurance.
Health insurance is such a mess that my plan is just to ignore it until I need to look for it... but, I know that COBRA will be an option right away (super expensive), and I suppose I'd look for something on the marketplace. I would not forgo health insurance - I'd want at least catastrophic coverage. I'd be fine paying for the small routine stuff OOP.
Same here, the EF can pay for Cobra for a month until I can find a new plan or sell some investments. I would only forego health insurance if the premiums were completely absurd and I couldn't qualify for any assistance.
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My emergency fund came in handy recently when I had to do a 2500-mile move in a relatively short period of time. It's been a total lifesaver.
Now that we have no debt, though, I think I'm going to be more fluid with my money. I plan on having around $7k in slush, a short-term savings account for upcoming trips or other known expenses, a down payment fund, and Roth IRAs. Any of that money could hop pots depending on the need. I don't think I'll have a designated 5-figure emergency fund until I own another house.
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I've periodically used my emergency fund (about 50K in a blended whole life policy) to protect my margin balance in equities during market volatility.
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In the past several years, we've used ours for:
-plumbing energencies
-auto repair/replacement (after accident)
-payroll person messing up my paycheck
-emergency FMLA leave
-emergencies of friends/family
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$2k car repair
$2500 to cover rent on two places, security deposit, moving expenses for job relocation
I have $8k currently in my E fund & also a $5,000 line of credit.
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I've actually never needed to use my emergency fund. (Knock on wood). Hope I never will need it.
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Sewer break: $11,500. Just got back from a month in New Zealand and the first load of laundry backed up. Aargh! So glad I had my fund, though. It is so much easier to make decisions when "how am I going to pay for this?" is already covered.
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Never used. I have a line of credit instead of the typical EF. As a backup I have a partner that works, as do I, and we can each cover all the bills alone.
I did use the credit line to pay off my mortgage when rates were dropping, it was a long drawn out emergency, I was paying too much interest!
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Medical expenses. I caught bronchitis twice this last winter so that kind of hit it hard not having health insurance. Steroid inhalers are freakin expensive!!
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Buying another car before receiving a check for the previous one.
Moving expenses.
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Biggest use I've ever gotten out of mine was in 2008 when the bottom fell out. I was in the process of getting married when work handed me an extended furlough. One of those don't call us we'll call you when we need you deals. I knew it was going to be a rough storm so we circled the wagons and button downed the hatches. We sold a lot of crap that we didn't need. Paid for boat, truck, sports car ect... but luckily we weathered the storm and didn't lose nothing we didn't sell and kept our credit history perfect! The plus side to me keeping a large emergency fund on hand was I didn't have to sell any investments when the market went off the cliff. The downside was it took me a year and half before I my job called me back to work. Granted I was working but only making a 1/3 of what other job paid. My emergency fund took a 30k hit on this on!
FYI to this day my wife is still pissed off at me for selling the boat and the sports car. She wants me to go buy new ones, but I'm way to cheap for expensive toys now that I've gotten older lol.
I have had other issues pop up over the years that you just moan & groan and pay the bill. Not really sure if they are an emergency or not more of just life.
3k for an a/c unit that was 20 days out of the 5 year warranty.
1k for a hot water heater that was 2 months out of warranty.
They sure don't make things like they use to......
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My fathers funeral. He and mom were in a car crash, mom was incapacitated, no one had access to anything so we footed the funeral bill until everything was sorted out with insurance and accounts etc.
Mishmash: I'm so sorry to hear about the loss of your father. I hope your mother is better. What a blessing you could give your family to be able to pay for this and for folks not to have to add it to all their worries.
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As a graduate student I ended up having to have several root canals and caps (living in Nyc during 9/11 created a bad nighttime grinding habit, apparently). Fortunately, I had stashed enough cash to pay for over 6000 in bills, which was not an insignificant summfor me at the time. Really cemented for me the value of savings.
Also not an emergency, but my partner and I were able to complete almost 40,000 dollars of home repairs all while I was on leave and at half pay. That felt great!
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My fathers funeral. He and mom were in a car crash, mom was incapacitated, no one had access to anything so we footed the funeral bill until everything was sorted out with insurance and accounts etc.
Mishmash: I'm so sorry to hear about the loss of your father. I hope your mother is better. What a blessing you could give your family to be able to pay for this and for folks not to have to add it to all their worries.
Mishmash: Another round of condolences from me. What a gift to the rest of your family at such a sad time.
On topic: I do not have a category called "Emergency Fund". I have one called "Reserves". Pre-FIRE, I was in commission sales, so I was always trying to accrue as much as possible and stay a couple of months ahead. I am often swimming in cash. (FWIW, my MO is to accrue/sweep into investments/repeat.) I can't think of a single personal emergency, but that might be because when one has "Reserves", nothing's really an emergency, which is damn nice.
I can think of twice that it's helped family members out in a pinch:
1). I took my parents to look at model homes in a new retirement community. They found one they liked. The builder offered an extra $25k off if they put a deposit down that day. They didn't have that much on hand, so I wrote the $10k check. They paid me back a week later.
2). My brother was in escrow on a home when the deal fell apart on closing day, due to his lender's colossal fuck-up. He called me in a panic and I moved about $200k* into his account that day so he could pay cash for the house (we have the same bank). The house closed. The lender pulled its head out of its ass, funded his loan and I got my money back the same week.
*Hell, no, I don't normally keep that much cash on hand! I had just sold a house and was in escrow on a new one that was a short sale. Since that escrow lasted an agonizingly long eight months, I had plenty of time and cash to help my brother out.
Tl;dr: Springy debt, my ass.
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1,5 Year ago we moved to another house. This process of making our old house representative and making the new house as we wanted it cost quite a lot of money, even without overdoing it. Before selling the old house we had to pay for a photographer and a technical report. And some bunches of fresh flowers every week from the photo session until it was sold, 4 months later. Luckily it was summer most of the time and flowers were cheap.
The new house needed extra shelves in closets and some extra closets. We made many visits to Ikea. We had to buy ourselves into a co-owned snow removing machine, quite a high sum. I also had to take a mortgage on the old house for 3 months until it was sold. In total it cost a lot of money.
Our primary car had 4 repairs the last year that my DH couldn't figure out how to repair by himself.
Some years ago I needed a crown in my mouth. We pay privately for the dentist. Even though I went to a really cheap dentist, this still cost quite a lot of money.
I usually keep up to 40.000 NOK (Norwegian crowns) on my normal bank account. My husband also has an unknown sum in cash on the bank. The rest is invested in the house or in index funds. The latter can be retrieved within a few days.
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Our e-fund is basically our HELOC. We used it during a complicated series of moves (military) when there were all sorts of paperwork issues and we went months with the government owing us more than $10,000. We didn't actually end up needing it, but because we were moving, again, while it was happening and it was really hard to track everything and to know when reimbursements were coming it, it was worth the few dollars in interest to pad the checking account a bit. A few months later when we finally got that $10k, we paid it back. We continued our monthly investments and relied on the HELOC (at 2.8%) instead to get us over the hump.
We may be using it again soon. Long term tenant is moving out and the rental needs repair depending on the amount and the vacancy period during the work, we may make another withdraw. (Rough guess is between $5k or up to $10k if it needs all new carpet, plus a few weeks of vacancy--hopefully not more time than that!) For $5k and a short vacancy, no problem. For twice that and a longer vacancy, we'd choose HELOC money for a few months over halting investments. It would be paid down within a few months almost certainly, but it will be nice to be able to do that and continue living pretty much normally, and investing.
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I live in Sweden, which means that i do not really need an emergency fund.
* If i lose my job, unemployment kicks in at 80% of my salary for a period of a full year, with additional benefits available after this period is done.
* my living costs are low enough to be funded on 30-40% of unemployment, and about 8% of my current salary.
* Healthcare is free.
* Education is free.
The only need for an emergency fund would be, as Linda_norway points out, to fund repairs at a house. Unfortunately, i have not yet found my house/country home. I live in an apartment, which i own. Renovations here are not very costly, and unless they only concern my apartment, are paid for by the HOA. Another topic i guess could happen is car repair - but my car is under warranty for another 3 years, which makes this a non-issue at the moment.
i do have an emergency fund - but i only mantain it, at least for the time being, to maintain a cash fund the size of 2x my portfolio leverage. In the future i intend to resize this emergency fund to correspond to a full, annual income, but for the time being...i've never needed to use it on anything.
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Traveling interstate when my mum got global transient amnesia, when my grandma got sick with cancer, when my grandma passed away, when my mum cut the top off her foot with a ride on mower, when my brother in law passed away, and when my mum got cancer.
We live 2000 km away from the entire rest of our family. And we love it most of the time!
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I live in Sweden, which means that i do not really need an emergency fund.
* If i lose my job, unemployment kicks in at 80% of my salary for a period of a full year, with additional benefits available after this period is done.
* my living costs are low enough to be funded on 30-40% of unemployment, and about 8% of my current salary.
* Healthcare is free.
* Education is free.
The only need for an emergency fund would be, as Linda_norway points out, to fund repairs at a house. Unfortunately, i have not yet found my house/country home. I live in an apartment, which i own. Renovations here are not very costly, and unless they only concern my apartment, are paid for by the HOA. Another topic i guess could happen is car repair - but my car is under warranty for another 3 years, which makes this a non-issue at the moment.
i do have an emergency fund - but i only mantain it, at least for the time being, to maintain a cash fund the size of 2x my portfolio leverage. In the future i intend to resize this emergency fund to correspond to a full, annual income, but for the time being...i've never needed to use it on anything.
How much are your taxes?
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I had to get a root canal and crown, which wound up being close to $3K out of pocket (some costs were eventually reimbursed via dental insurance). Luckily I had about $5K in an e-fund.
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Paying for:
A car replacement.
Funeral travel expenses x3.
A funeral.
Roof repair x4.
HVAC replacement x2. (Soon x3.)
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I live in Sweden, which means that i do not really need an emergency fund.
* If i lose my job, unemployment kicks in at 80% of my salary for a period of a full year, with additional benefits available after this period is done.
* my living costs are low enough to be funded on 30-40% of unemployment, and about 8% of my current salary.
* Healthcare is free.
* Education is free.
The only need for an emergency fund would be, as Linda_norway points out, to fund repairs at a house. Unfortunately, i have not yet found my house/country home. I live in an apartment, which i own. Renovations here are not very costly, and unless they only concern my apartment, are paid for by the HOA. Another topic i guess could happen is car repair - but my car is under warranty for another 3 years, which makes this a non-issue at the moment.
i do have an emergency fund - but i only mantain it, at least for the time being, to maintain a cash fund the size of 2x my portfolio leverage. In the future i intend to resize this emergency fund to correspond to a full, annual income, but for the time being...i've never needed to use it on anything.
How much are your taxes?
I was wondering the same exact thing.
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Heat/air replacement $7K - If we did not have cash, we might have had to go with one of the predatory services that quoted almost 2x the price and offered 0% financing
Orthodontist $4K - discount for paying the whole bill at once and met the $3000/3 month spend on a credit card to get miles.
thankfully, that is all. ap
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Over the last 15 years or so...
1) Replaced the HVAC system ~6K
2) Replaced a roof on an older house ~7K
3) Replaced a leaking hot water heater ~950
4) Had to replace 2 vehicles (one due to an accident the other some major repairs needed and age.) ~ 15K-19K
FWIW...The major roof replacement happened in 2008- right at the worst possible time for the stock (and corp. bond market for that matter.)
and my job was in question. The DW had her hours cut and lost health insurance coverage.
We had an Emergency Fund, the cash to cover expenses for awhile if it got even worse. My BIL lost his house. (Cashed out his 401K.) Later divorce...We felt very fortunate that we had set aside an EF Fund and didn't have to touch our investments.
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I actually do not remember the last time we took money out of the EF. It's just sitting around in the credit union with a balance of about $20k.
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It's very possible I'll be pulling a few thousand out to help a friend in a couple weeks. That friend may or may not ever pay me back, and that's fine. I'm glad to be in a position to help.
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Had a bad storm roll through and damage the roof a week ago. The shingles are 20+ years old and I am just pulling the cash to do it myself. Material will only be $1200
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It has been 10 years since I had a big unplanned expense (transmission in early 20s) that I couldn't cash flow over a month. I don't really keep a dedicated emergency fund. I do keep 1 months worth of expenses in my checking account (at end of month have enough to pay next months expenses in HCOL area). This gives plenty of time to access investments or pay credit card through free cash flow (several thousand per month). Also have credit cards with 0% for 18 months with 4% upfront fee.
Edited to add that having good health, car, and rental insurance helps to really limit exposure to big expenses (>$3k). And, I would only recommend the cash flow approach to MMM type folks since it's pretty easy if you have a high income and live on 50% or less.
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My partner lost his job the week before Christmas. We were in a HCOL area, there was no other companies that could employ him in a similar role nearby. We had just moved there 4 month prior, and I was not employed.
We were able to continue paying expenses while he job hunted, he got a job fairly quick, but his first paycheck wasn't until mid February. To get the job we had to move long distance, travel there ourselves (we drove and had car trouble along the way), found a place to stay while we house hunted, paid a bond all out of our cash reserves.
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DW's car was hit by a bus. She was ok, but the car was too bent to be repaired and we had to replace it.
The salesman didn't believe that I was paying cash, even when I brought in the bank draft.
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The first part of my journal details the draining of our emergency fund to cover my hospitalization and miscarriage last fall. It was an awful experience, but would have been even more so without a solid financial cushion to absorb the costs.
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Both of our cars decided to die within 1 week of each other. When I mean "die" I mean 1 17 year old car that we bought for 2k 9 years ago with 212,000 miles on it needed a $1200 repair. Second car, 18 years old, bought 9 years ago for 3k, started to hemorrhage oil and power steering fluid. The car was worth maybe $500 if everything worked. Far from the truth.
We were able to replace both of them for 10k using our emergency fund.
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My daughter flushed down the toilet one of those things they teach women not to and it got lodged in the pipe. I tried for two days using a snake etc.. and it got beyond me and with 4 kids I needed to hire a plumber.
My garage door about a month ago the coil snapped so had to call on that but that wasnt to bad and the service was outstanding.
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Am I the only one who thinks emergency funds are stupid? To me the whole concept just reeks of "Well, given that my liquid net worth should *normally* hover around zero, I'm going to be responsible and set aside a 10k buffer in case shit happens", which sad to say is probably not too far from fact for the average North American.
If you're saving and investing a large % of your income as preached here to become FI, constantly growing, that sort of serves as a de facto emergency fund. More accurately, you're financially independent enough to cover anything big that comes up. What's the point of having a disparate "emergency fund" of 10k, when you have 200k of other highly liquid assets, some of which are in conservative places which you can basically access by initiating a trade online?
The whole premise of an "emergency fund" seems to revolve around your default financial state being precariously balanced on the point of a needle.
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Yowie-zowie, Seadog, judge much?
There's nothing wrong with being prepared. In fact, it's quite an admirable trait.
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Yowie-zowie, Seadog, judge much?
There's nothing wrong with being prepared. In fact, it's quite an admirable trait.
While he didn't say it in the nicest way, his points are valid. A major purpose of an emergency fund is to prevent going into debt when an unplanned event occurs. Most people that have been following the general approaches described on this blog are likely in or will soon be in a position where there are very few events that are both typical emergency fund items (nominally up to $5k) and costly enough to require taking on debt.
Now, if your asset allocation plan calls for 10% cash and you want to call it an emergency fund, fine. But it's likely that for many on here, it's a just an asset allocation and convenience decision not a way to prevent having to carry a CC balance because your car broke down.
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There's nothing wrong with being prepared. In fact, it's quite an admirable trait.
Apologies for the harshness, but I feel my point stands. People don't get into trouble for want of an emergency fund, but for want of liquid assets. I'd be curious to see how many people opted for 70% interest payday loans, because although they had a quarter million dollars invested, they had no marked "emergency fund" so had no other option.
This is simply an extension of foolish "bucket finance". That is you have a bucket of money for food, one for gas, one for emergencies etc. A far better way is to simply have one bucket, - your liquid assets, and try to conserve and grow it as much as possible. The problem is, is that if you save money for whatever reason on say food (good sales), then people are tempted to piss away the rest because that "bucket" has some left over. A far better way is to simply buy things at the best possible price - it costs what it costs - but you know you're getting the best reasonable deal, and consequently growing/conserving your net worth as effectively as possible.
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$3,000 to buy a used car because the old one broke down completely.
$800 for a plumbing repair emergency
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Dental work. I had to get a tooth pulled and the dentist was going to put in a fake tooth. Then they decided not to, and I got my $1,750 back.
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I only ever plan to use my emergency fund for job loss. Which is the only thing I've ever used it for. Large expenses are usually planned or covered from general savings, or I can put it on the credit card which buys me some time.
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There's nothing wrong with being prepared. In fact, it's quite an admirable trait.
This is simply an extension of foolish "bucket finance". That is you have a bucket of money for food, one for gas, one for emergencies etc. A far better way is to simply have one bucket, - your liquid assets, and try to conserve and grow it as much as possible. The problem is, is that if you save money for whatever reason on say food (good sales), then people are tempted to piss away the rest because that "bucket" has some left over. A far better way is to simply buy things at the best possible price - it costs what it costs - but you know you're getting the best reasonable deal, and consequently growing/conserving your net worth as effectively as possible.
I don't like this analogy. By design of the US tax code, my money has necessarily been put into buckets. Each bucket has different rules and costs associated with it. I choose to have something that I call an emergency fund, that amounts to a 4th option with no tax consequences. At the time of an emergency, I get to choose which bundle of money to liquidate. Maybe it's a quick transfer from savings, maybe I sell a taxable investment at a loss and get a tax benefit. I think most people here would do the same.
Just because someone has something they choose to call an EF doesn't mean they don't take their whole financial picture into account when making decisions.
My goal isn't to absolutely maximize my finances, but to give myself enough options so I can make the decisions that give me the most freedom.
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What do you mean by emergency fund?
Seriously. I thought I knew what this meant, but reading through the replies I get the impression that a number of you are talking past each other because you mean different things.
Is it cash? A savings account? Liquid assets?
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My wife and I used ours when she was terminated by her employer (ultimately won a suit against them). Even though she was quickly hired by another employer, we were net negative on savings for 2-3 months as she went through interviews and HR. I guess we could've withdrawn money from our taxable investment account but we did it the conventional way through the checking account. Contrary to what others may think, we aren't fools with our money.
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What do you mean by emergency fund?
Seriously. I thought I knew what this meant, but reading through the replies I get the impression that a number of you are talking past each other because you mean different things.
Is it cash? A savings account? Liquid assets?
The answer to this is as varied as it is when you ask what the perfect asset allocation is.
We don't have anything we specifically refer to as an emergency fund. We do have what is essentially slop in the checking account so we aren't having to constantly balance to the penny or worry if we both withdraw cash on the same day. Then we have our monthly investment amounts, which can be turned off if we have a larger expense, so that by the end of the month, that bill can easily be paid. For truly large expense, or just convenience, we also consider our large HELOC to be a source of emergency funds. (This has been argued repeatedly on here, but we feel very comfortable with it as it is nowhere near the total equity we have in our home and thus very unlikely to get canceled.) And as another line of defense, we have investments (taxable accounts, and retirement accounts if it ever got that far, which is difficult for me to imagine). Those could be liquidated.
For someone else, and EF might be $10,000 in a savings account.
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Dental work. I had to get a tooth pulled and the dentist was going to put in a fake tooth. Then they decided not to, and I got my $1,750 back.
Oh c'mon, the suspense is killing me! They didn't pull the tooth or they didn't put in a fake one?
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What do you mean by emergency fund?
Seriously. I thought I knew what this meant, but reading through the replies I get the impression that a number of you are talking past each other because you mean different things.
Is it cash? A savings account? Liquid assets?
Any of those could be your emergency fund, it's simply the money you pull from when an emergency that requires cash arises.
Most people do keep their emergency funds in a checking or savings account so they don't worry about needing to sell an investment during a dip, but others might keep it in a coffee can buried in the back yard.
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I just use credit for those cases, and pull money from index funds to cover them before % gets me.
But i have had the main water line break, i THOUGHT it was under my house, so paid a pro. Ended by up being just by the side, oh well, that was 3k down the drain, but then i just asked them replace everything with PEX so 5k gone.
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Am I the only one who thinks emergency funds are stupid? To me the whole concept just reeks of "Well, given that my liquid net worth should *normally* hover around zero, I'm going to be responsible and set aside a 10k buffer in case shit happens", which sad to say is probably not too far from fact for the average North American.
If you're saving and investing a large % of your income as preached here to become FI, constantly growing, that sort of serves as a de facto emergency fund. More accurately, you're financially independent enough to cover anything big that comes up. What's the point of having a disparate "emergency fund" of 10k, when you have 200k of other highly liquid assets, some of which are in conservative places which you can basically access by initiating a trade online?
The whole premise of an "emergency fund" seems to revolve around your default financial state being precariously balanced on the point of a needle.
You are assuming that a large percent of one's income, is always a large amount. For a lot of people, especially younger people starting out, or for people investing in less liquid assets (like real estate), or for those who just make less money, there isn't much left over to invest, after maxing out retirement. Having an invisible $10,000 buffer built into $100,000 in mutual funds allows a reasonable expectation that it will be there, even in a down market. Counting on access to at least $10,000 in a down market when you only have 20-30,000 in non-retirement investments (in a balanced market), and things get a little "gamble-y".
I am one of those who both doesn't make a large enough income to put anything significant aside (let alone max out retirement yet), plus I am currently investing in real estate and can't afford to make any headway in either venture if I were to also contribute large amounts in non RE investments. It's a goal of mine, but not a current goal of mine.
I think sometimes people forget around here that while yes, we may have similar goals....they are still just that for some people..goals; things that they are still working towards attaining. Yeah, I want several $100k in investments so that I won't need an efund. That would be GREAT. But it's not an option for me right now. A $10k efund, while not the best option for someone who fits your scenario, is the safest/best option for someone who fits mine.
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There's nothing wrong with being prepared. In fact, it's quite an admirable trait.
Apologies for the harshness, but I feel my point stands. People don't get into trouble for want of an emergency fund, but for want of liquid assets. I'd be curious to see how many people opted for 70% interest payday loans, because although they had a quarter million dollars invested, they had no marked "emergency fund" so had no other option.
This is simply an extension of foolish "bucket finance". That is you have a bucket of money for food, one for gas, one for emergencies etc. A far better way is to simply have one bucket, - your liquid assets, and try to conserve and grow it as much as possible. The problem is, is that if you save money for whatever reason on say food (good sales), then people are tempted to piss away the rest because that "bucket" has some left over. A far better way is to simply buy things at the best possible price - it costs what it costs - but you know you're getting the best reasonable deal, and consequently growing/conserving your net worth as effectively as possible.
I think this is a bit of a mental game. As it happens I have 7 savings accounts earmarked for different things. Yes, I know having one would have the same mathematical result but it has a different mental result. I do see your part that 'emergeny fund' is sort of silly if you have a high net worth but it works well for someone starting. Initially I had an emergency credit card with a $2k limit and no cash, then I had $2k cash, then $10k etc etc.
I used my emergency fund to replace the boiler while on maternity leave.
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Dental work. I had to get a tooth pulled and the dentist was going to put in a fake tooth. Then they decided not to, and I got my $1,750 back.
Oh c'mon, the suspense is killing me! They didn't pull the tooth or they didn't put in a fake one?
Hah, bad writing on my part. Sorry. They pulled the tooth, but didn't put in the implant. So now I am missing a tooth. It's in the back of my mouth so nobody can tell, and it doesn't hurt or anything. It just feels weird when I run my tongue along there and there's a hole. :/
I feel like I could turn this into a mighty saga that details the great and harrowing loss of one of my beloved chompers, but it's early and I've only had two cups of coffee so far today.
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Or it could turn into a frugal saga of how you got it fixed for a fraction of the cost by practicing a little dental tourism. Whatever happens, waiting too long could prove costly if your teeth start to shift, which they have been known to do.
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Dental work. I had to get a tooth pulled and the dentist was going to put in a fake tooth. Then they decided not to, and I got my $1,750 back.
Oh c'mon, the suspense is killing me! They didn't pull the tooth or they didn't put in a fake one?
Hah, bad writing on my part. Sorry. They pulled the tooth, but didn't put in the implant. So now I am missing a tooth. It's in the back of my mouth so nobody can tell, and it doesn't hurt or anything. It just feels weird when I run my tongue along there and there's a hole. :/
I feel like I could turn this into a mighty saga that details the great and harrowing loss of one of my beloved chompers, but it's early and I've only had two cups of coffee so far today.
I almost had a panic situation like this, but while still in school and only had $5000 or so to make it the whole year. They quoted me for $2000+ after insurance. Root canal, crown, redoing several fillings, etc. I ended up getting a second opinion and paid $40 just to get a filling on the one tooth, no root canal. I seriously was going to pull the tooth even though it could be saved because I couldn't afford the root canal.
Always get a second opinion if your dentist starts adding crazy things or tries to max out your insurance...
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My dentist (who was the only dentist in town who didn't regularly screw people over) didn't get the money! He showed me the x-ray of my tooth decaying from the inside out, then referred me to some sort of specialist. The specialist took the money, pulled the tooth, and was going to give me an implant. Prior to the implant going in, he did a 3D model of my jawline and noticed that no matter which angle he drilled, I would end up looking like a snaggle-toothed neanderthal down the road. So he refunded me the money (minus the cost of pulling the tooth).
I'm just doomed to live the remainder of my life with only 31 teeth. Whomp whomp.
After 5 years in braces, I take care of my teeth. So I was really grateful to have that money saved to be able to fix things. It was a little tight, but I was able to make it work.
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2008/9 financial meltdown led to a 1.25 year of unemployment. Zero income, two kids. During that 1.25 years, the EF was used to:
- buy food to eat
- pay mortgage to stave off homelessness
- pay medical bills not covered by govt insurance for the poor (zero income)
- Buy clothes for kids as they grew out of the old ones
- Pay utility bills to keep the lights on and the stove burners working to cook
etc...
Could I have maxed out my 25% interest credit cards? Sure. But my max credit limit would have been hit before I regained employment 1.25 years later, so still would have needed an EF even if maxing credit lines. But 30 days after each charge, the interest would have started accruing, that would have been one GIANT hole of interest and debt. Glad I DIDNT do that, but used my EF to survive (alonjg with radical reduction in expenses/savings.
HCOL area, so mortgage alone was a 200 ton weight around my neck for the 1.25 years with no income for a family of 4. Yes, MMM's springy debt article has some merit. But I will never rely solely on credit lines for my family's survival. You can choose your path, I've chosen mine.
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Mostly just peace of mind.
I ended up taking a new job that I enjoy more and also paid more money. However, it cost me about $3000 of my own money to relocate. We moved from Florida to Hawaii. Work paid for $3000, but the total bill was probably around $6000 if you include buying new furniture.
If I didn't have an emergency fund I would be stressed about the move. I would either not taken the job or put everything on a credit card and hope for the best.
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Motorbike died on the way home from work last December. Having the emergency fund allowed me to walk into a dealer the next day and buy my replacement bike immediately with cash.
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I have different levels of "emergency funds" that I'm not sure which one counts as what.
- I save my mortgage & maintenance payments a month in advance, so my 3/31 paycheck will cover the second half of my May mortgage and maintenance (first half was covered by my 3/15 paycheck).
- I keep $1000 in my savings account as a "slush" fund. This is my max deductible, so if I get in a car accident and need repairs, that money is available immediately. Same for other smaller emergencies.
- I have about $4k in cash at an online savings account that would take 2-3 days to transfer to my main. I also have ~$2500 in a CD ladder. That would take maybe a week? I'd only touch this after a job loss.
- All else fails, my Roth IRA (which is where all my extra cash is currently going). That would be a last resort after a job loss, after I depleted other, more liquid cash funds, and after I explored all other options.
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Hookers & blow.
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I've never had to use mine.
I keep a 3-5k buffer in checking
a 5k savings (emergency fund)
and everything else is invested.
My heathcare is a HDHP with 5K family out of pocket max.
So i have 5k taken out of my check every year and plan on not seeing any of that.
As a result, as long as I stay in network I'll never have to tap any of my budgeted $ for heath care.
Dental and vision are separate, but thankfully, we have not had large expenses there.
Unexpected bills over the past few years
12,000 New Roof
8,000 new AC and Furnace
1,000 auto repair bill
1,000 fence replacement
Several 200-500 charges
When an unexpected bill comes:
my first question is,
#1. Do I have enough in checking that I can take the hit and still be in my 3-5k buffer range? If so, I do that.
#2. is 0% financing an option? If so, I do that.
#3. will charging it on a credit card and giving my self 30 days of float allow me to pay it off without breaching my buffer? If so, I do that, and I always pay it off, even if it drives my buffer down a little lower than I like.
#4. Would be to tap the emergency fund, which I have yet to have to do.
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I prefer the term FUMoney to EF. As previous comments made clear at certain savings level the ability to float expenses that crop up unexpectedly means you don't really need to access an EF for those emergencies as you can just wait for next paycheck.
However, my cash FU Money is to make sure that I can say take this job and shove it - anytime the stress or bullshit get to be too much or in case of nonsensical reorg or job pivot. That I don't need to run the numbers or liquidate in a down market is incredibly an liberating benefit of being FI while continuing to work.
But to answer OP question- No. I've not used mine (*yet)
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The only time I've had to use my EF was after the "1000 year flood" a couple of years ago to replace my car. It pretty much wiped out my EF completely, but it allowed me to get a decent car at a decent price to replace my car-turned-submarine.
If you don't have a lot of assets outside of retirement accounts, an EF is a godsend to have.
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Medical expenses - 6K for lens implants that were not covered by insurance. Home and Vehicle expenses - incl a small remodel and a new/used car purchase.
In other words - I'm about to totally wipe out my EMF, except for 5K which will remain as an iron reserve. It is my security blanket so I can sleep at night and I'll sleep a lot better when it is back up to at least 10K again.
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3.5 months out of work, 5 days a week x 6 weeks in a city 3 hours from home for daily radiation and weekly chemotherapy treatments, transportation and food during my weekly stays in the city, 10k in medical bills after insurance covered the other $240,000...
I am very glad I didn't need to charge it all on a credit card with no income to pay it back. I'm more safety-conscious than ever now; my emergency fund is 3x larger than it was before cancer entered my life.
Nope, I don't consider my emergency fund "stupid". It provided security and reduced stress during a major shitstorm.
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I have trouble answering this question because I've had many situations that would have been emergencies if it weren't for my available funds. Where do you draw the line?
And because of this, I call my fund my life fund. Because life happens. Emergencies may happen.
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My DH was the picture of health - long distance runner - when he started feeling "weird". What followed was: an admit to the Emergency Room and 5 days in the hospital - and MRIs, EKG, Biopsy, etc., followed by travel to specialists across the country for 2nd opinions, 3 months of chemotherapy, travel to a center of excellence for an organ transplant, lodging for 2 months for the pre- and post-op recovery from the transplant, travel home again, endless medications (like 6 pills 5 times a day). At the same time, somewhere in there he went on long-term disability, so we started to receive only 66% of our household income for several months.
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My DH was the picture of health - long distance runner - when he started feeling "weird". What followed was: an admit to the Emergency Room and 5 days in the hospital - and MRIs, EKG, Biopsy, etc., followed by travel to specialists across the country for 2nd opinions, 3 months of chemotherapy, travel to a center of excellence for an organ transplant, lodging for 2 months for the pre- and post-op recovery from the transplant, travel home again, endless medications (like 6 pills 5 times a day). At the same time, somewhere in there he went on long-term disability, so we started to receive only 66% of our household income for several months.
Oh, and all this happened during the market downturn of 2008...with the transplant in October 2008
Oh, Better Late, I hope he is okay now! To you and to Dirt Diva: I, too, am a cancer victor. Having an emergency fund (and family) made all the difference. I'll never be without one (hopefully) because the serenity it provided in a difficult time was priceless.
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I haven't had to touch mine, but I'm only on my mid-20s, and life's been good to me so far. I keep $8k-10k (6ish months expenses) in cash (2% "high" interest account). Government job, so not too worried about job loss. I am keeping the E.F. amount in cash separate for a few reasons: (1) Parents get sick/die & I want to take extended leave, or (2) I get sick myself (especially the nearest proper hospital is a 12 hour drive away), or (3) Mental health causes me to take a bbreak from work as Insurance doesn't cover this. I don't own a car or a house which need repairs/replacements.
Reading people's replies to this thread make me a bit scared though. So many things could f up!
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Our (second hand) car was stolen once, right after we bought it. Luckily we had bought an all-risk insurance on it. But it takes a long time before the insurance pays out. As we were in a period of moving to another house, we needed a car and could buy one for a similar price with our last remains.
We had actually spent most of our money on financing 20% of our new house, but my parents in law had decided to give us a windfall for the new house occasion. That did cover the car and some other things.
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This post made me realize I've never used it, except when I was fresh out of college with no job and rent to pay. We have always been able to rely on CCs or the checking account balance. The worst that has ever happened for it is investing a few weeks late.
But I'm still keeping one 😉
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My DH was the picture of health - long distance runner - when he started feeling "weird". What followed was: an admit to the Emergency Room and 5 days in the hospital - and MRIs, EKG, Biopsy, etc., followed by travel to specialists across the country for 2nd opinions, 3 months of chemotherapy, travel to a center of excellence for an organ transplant, lodging for 2 months for the pre- and post-op recovery from the transplant, travel home again, endless medications (like 6 pills 5 times a day). At the same time, somewhere in there he went on long-term disability, so we started to receive only 66% of our household income for several months.
Oh, and all this happened during the market downturn of 2008...with the transplant in October 2008
Oh, Better Late, I hope he is okay now! To you and to Dirt Diva: I, too, am a cancer victor. Having an emergency fund (and family) made all the difference. I'll never be without one (hopefully) because the serenity it provided in a difficult time was priceless.
Dicey - yes, thank you! He's back 100%. And I'm glad to hear you and Dirt Diva are also doing well!
I wish we had had a specified "emergency fund" at the time; we blew through the cash we had on hand quickly. You do whatever it takes but whoa the medical bills are staggering.
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I wish we had had a specified "emergency fund" at the time; we blew through the cash we had on hand quickly. You do whatever it takes but whoa the medical bills are staggering.
Amen, sister! That shit adds up fast and worst of all, you're hemorrhaging money (even with insurance) on stuff that has ZERO fun quotient. Glad that he's recovered now. That was a scary story.
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I figure if people here want to "stress test" their emergency funds, they can run it through different scenarios based on some of our stories ;)
And thanks for the kindness, Dicey.
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Amen, sister! That shit adds up fast and worst of all, you're hemorrhaging money (even with insurance) on stuff that has ZERO fun quotient. Glad that he's recovered now. That was a scary story.
Negative fun quotient?
I understand the logic that an "emergency fund" is just a method of segregating funds in my mind. Money is fungible, and if I'm lucky I'll be able to spend it on traveling or something with a POSITIVE fun quotient.
I raise my glass: good health to us all. :)
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Amen, sister! That shit adds up fast and worst of all, you're hemorrhaging money (even with insurance) on stuff that has ZERO fun quotient. Glad that he's recovered now. That was a scary story.
Negative fun quotient?
I understand the logic that an "emergency fund" is just a method of segregating funds in my mind. Money is fungible, and if I'm lucky I'll be able to spend it on traveling or something with a POSITIVE fun quotient.
I raise my glass: good health to us all. :)
I'm smiling and feeling another great, big "Amen, sister!" coming on...
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A new roof - $5700. We had 65 MPH winds in Michigan a few weeks ago. My roof was already due for replacement, 19 years old and pretty shabby. The winds forced the issue and took off a few shingles. As much as it hurts to part with $5700 cash it is a nice feeling to have a new properly installed roof over my head.
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What is a good timeline for building a full safety net of 5-10k? Or do I just say hell with the timeline and keep saving what I can to go toward the safety net? And eventually I will get there.
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What is a good timeline for building a full safety net of 5-10k? Or do I just say hell with the timeline and keep saving what I can to go toward the safety net? And eventually I will get there.
Depends if you are making $30K/yr or $250K/yr....also depends if your savings rate is 10% or 75%.
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What is a good timeline for building a full safety net of 5-10k? Or do I just say hell with the timeline and keep saving what I can to go toward the safety net? And eventually I will get there.
Depends if you are making $30K/yr or $250K/yr....also depends if your savings rate is 10% or 75%.
I make just less than 40k before taxes and I'm single. Hopefully that will be up around 45-50 in the next 2-3 years.
For right now, I think I can probably put 30-35% of my total after tax earnings into savings/investments.. maybe less than that some months. (In August that 30% figure will change, due to rent that will kick in).
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What is a good timeline for building a full safety net of 5-10k? Or do I just say hell with the timeline and keep saving what I can to go toward the safety net? And eventually I will get there.
I don't understand this question at all. An EF is something you create to make your life easier. Why would you want to drag your feet, or be pushed by someone else's arbitrary date? Just do it as you can. What matters is that you have it if you need it, not how long it took you to accumulate it.
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DH (then boyfriend) and I used our EF when we were first living together. DH works for a small company (at that time, 3 people including him- now up to 6, haha). He gets paid monthly. When we had first moved out together, I quit my job and went back to school so he was supporting us. And some clients tried to stiff the company, so no one got paid for THREE MONTHS. Luckily, I've always been financially-minded enough to have an EF around. We lived off the fund for the 3 months until he got paid again (and what a paycheck that was, haha). At the time, we really had no other assets- I had $1640 in an IRA, I think that was pretty much it between the two of us. I wasn't even taking full time enough classes that I could have gotten good student loan rates to live off of.
To be fair, in some respects it is a "pride fund". If things had gotten bad enough, either set of parents or the one living grandparent would certainly have cash flowed us until things got better. So it's not like we would have starved. It just allowed us to not have to ask for help. Obviously, we are very lucky to have safety nets like that if we need them.