How crazy is this EF idea?

[disneysteve]

Originally Posted by kork13

I kinda applied a broad-stroke approach without really considering my personal situation.

This is a very common planning flaw, and it shows up here in our discussions frequently. We are quick to spout rules of thumb, but those rules are just starting points. You need to take that rule of thumb and adjust it to your own situation.

Jim's examples point to how this works with the EF. Personally, I have a stable job with a very marketable profession. If my job suddenly ceased unexpectedly, I could easily find work within weeks if not days. In fact, there are numerous firms that do nothing but place physicians in short-term (and long-term) positions. Not a week goes by that I don't get e-mail and snail mail from these firms wanting me to contact them if I'm looking for work.

I also have top-notch disability insurance. If I get sick or injured and I'm unable to work for some extended period of time, I'm well covered.

Finally, my wife currently works only part-time, about 10-12 hours per week. If something happened to me, she could easily switch to a full-time position to bring in more money. It wouldn't come close to replacing my income but it would certainly help stretch our resources and ease the burden.

All of those factors reduce the potential demands on our EF. Also, our personal investments are substantial at this point in our lives, much more than they were 10 or 15 years ago. We have a much bigger cushion to fall back on if needed, so age and personal wealth plays into this also.

[Beppington]

Originally Posted by disneysteve

If inflation rises, as it has to since it is sitting at zero right now ...

Don't forget about poor ol' deflation.

[feh]

Originally Posted by disneysteve

In your case, I'd see nothing wrong with keeping perhaps 5K liquid, another 5K semi-liquid and invest the rest.

This is what we do. Our "official" EF (money kept in a checking/savings account) is quite a bit less than 6 months of living expenses. But, we have other monies in taxable investing accounts that we could access if necessary.

[disneysteve]

Originally Posted by feh

This is what we do. Our "official" EF (money kept in a checking/savings account) is quite a bit less than 6 months of living expenses. But, we have other monies in taxable investing accounts that we could access if necessary.

Same here. We do not maintain 6-months worth of expenses in liquid investments but we do have more than that when you add up checking, money markets, bonds, CDs, etc. We can get to some of it quickly but the rest would take a little time and some of it would incur a penalty if cashed in early.

[kork13]

Resurrecting this thread to ask a question about accrued interest for I-Bonds.....

So I'm buying savings bonds for both my house fund and my EF. The oldest one is from Dec '09. Isn't the monthly interest supposed to be added to the balance of the bond each month? When I look online, it shows the current value of the bonds as only the initial principle that I've put into them. Or am I mistaken?

The I-Bond FAQ reads:

I Bonds increase in value on the first day of each month, and interest is compounded semiannually based on each I Bond's issue date. An I Bond's issue date is the month and year in which an I Bond issuing agent receives the full issue price.

So am I missing something, or reading that the wrong way? Why doesn't the website show the accrued interest in the current bond value?

Or is this actually an issue and something I should contact the treasurydirect guys about?

[jIM_Ohio]

interest is compounded semiannually

you missed that
means you get interest 2X per year