What EF do I REALLY need?

[LivingAlmostLarge]

Can you do 0% financing for 1 year? Maybe take the EF down to $12k (6 months), put $4k to the remodel and finance $8k at 0% for 1 year. Using a 0% CC you could probably pay that off in 6 months.

I also like Scanners idea. Plus investing in the house is a good idea because you'll cook more at home once it's done right?

[MonkeyMama]

Say ... This sounds like an excellent question for Suze Orman's "Can I Afford It?" segment.

https://www.suzeorman.com/igsbase/igstemplate.cfm?SRC=SP&SRCN=sos_inquiryform&GnavID=19&SnavID=18

Fizgig, if you go ahead with the remodel, be sure to include some $ in your budget for eating out more than you normally would while the kitchen is gutted.

I can tell you Suze would say no because she wants you all to have crazy efunds. I cringe when she tells people with oodles of money they don't have enough efund to cover their lost wages (big wages). Yeah I don't have a ton in my efund because we spend less than we make, which is probably why a lot of these people have huge retirements and stuff. But I can't believe how often she says no because people don't have 6 months income in their efund. (Forget they are 30 and have a $1 million in retirement and $30k in the efund.) Just don't get her logic sometimes.

For the most part I don't think it sounds so bad. I would keep a minimum $6k in the efund myself. (3 months expenses if times were tight) and certainly shoot to build it back up a bit more.

The only thing I don't understand is if it is so easy for you to save the cash in less than a year, why you don't wait until you have the cash to pay for it and keep a really decent efund? Then again you'll probably be okay. I don't think it's a huge deal. I would just find waiting the much safer thing to do. & doesn't sound like too much to ask.

[Fizgig]

*** Old thread resurrected for an update! ***

To summarize a long forthcoming post, I have NOT done the kitchen and I'm really glad I haven't!

I'm resurrecting this old thread because over the last year I've learned a LOT of lessons about the importance of a big pile of cash in the bank. I was thinking about the EF as just a job-loss issue, but there are a lot of other events that can smack you upside the head, like other people here warned me about.

I was all set to start the kitchen remodel in Nov '07. I had lined up the contractors and picked out the materials. One month before work was going to start, a hit and run accident totaled my nice paid off car. I got $4000 from insurance because it was an older model, and for a replacement my heart was set on a Mini Cooper. I put 50% down and that brought my EF from $16000 to about $7000.

Over the next year, I restocked the EF to about $15000, owed about $8000 on the car, and was holding off on the kitchen until it was paid off. Then in Sept '08, Hurricane Ike put 2 feet of water in my ground floor! My flood insurance is limited because the house is technically on stilts, so I got $2000 for $8000 worth of damage. The evacuation itself cost another grand. I also lost the rental income because that was the area that flooded.

If I had blown my EF on a kitchen remodel a year ago, these events would have really knocked me over. So, I have learned my lesson loud and clear. Perceived job security has no bearing whatsoever on the need for a solid pile of cash in the bank.

I'll get to the kitchen eventually, but ONLY when the car is paid off, and I can pay in cash without touching my 6 month fund.

[ktmarvels]

Wow, thank you for sharing this! A good reminder that you can't predict the future, and that buying stuff with money you already have is better than paying for it with money you "will get".

[disneysteve]

I'm resurrecting this old thread because over the last year I've learned a LOT of lessons about the importance of a big pile of cash in the bank. I was thinking about the EF as just a job-loss issue, but there are a lot of other events that can smack you upside the head, like other people here warned me about.

Thanks for the update. This is SO true. On so many EF threads, people just talk about job loss. Honestly, that's the least of my worries. I'm more concerned with having to replace a car (as you did), having some major home repair (as you did) or a big medical bill. Sure, I could lose my job, but I'm confident I could find work quickly. There are numerous temp firms that place physicians in short-term positions, even if it means being away from home for a time, I could certainly do it. It is all the other stuff that makes me keep an EF.

[My English Castle]

So, I wonder how much we really do need then? Depends on our insurance, health, etc? I aim for about $25,000 but that's knowing we have money in a UK bank if push comes to shove.

[Fizgig]

I'm still comfortable with 6 months of living expenses as a goal. That'll cover you for job loss and 90% of life's little surprises.

[LivingAlmostLarge]

True, but if you had remodeled the kitchen the dream car wouldn't have happened!

[maat55]

I personally think that EF's should not be compromised just on principle. If you are willing to use it for one nonessential use, you may start a bad habit.

I'm glad to see that using prudence worked out for the best.

[Ima saver]

Since my husband is a builder and building has really slowed down, I try and keep a few years worth of cash in my emergency fund.

[maclover]

*** Old thread resurrected for an update! ***

I was all set to start the kitchen remodel in Nov '07. I had lined up the contractors and picked out the materials. One month before work was going to start, a hit and run accident totaled my nice paid off car. I got $4000 from insurance because it was an older model, and for a replacement my heart was set on a Mini Cooper. I put 50% down and that brought my EF from $16000 to about $7000.

My heart is set on a MINI cooper too. Still debating on whether to get it this year or not...

[Tree0164]

Thanks for the update.

My security gland needs a bigger EF these days.


Hubby and I are upping the EF from 6 months of expenses to 8 months of expenses and maybe even more. They laid off 72 people at his job yesterday. His job is supposedly safe but you never know.

[red92s]

I can certainly appreciate the "job loss is not the only emergency" theme that this thread more or less proves, and love to see updates on older threads, but . . .

To me, at least, it sort of sounds like you just bought a Mini instead of a kitchen (?). Instead of a large chunk of your emergency fund going towards a purchase with a high return on investment (kitchen), it went to a purchase with a much lower return on investment (car).

I am in no way criticizing what you chose to spend the money on. If you wanted the car more than the kitchen, you made the right choice, but it seems like you could have the kitchen and a less expensive vehicle if that was what you really wanted.

[Fizgig]

Yes, you are absolutely right that the high dollar car purchase was a "goal trade-off" kind of thing, and that raiding my EF for a $12k down payment on at $25k car violated the spirit of what an EF is really for.

My general philosophy on purchases is not to buy anything unless I really have to, but to buy exactly what I want once my hand is forced. (Within reason) Very rarely do I really really really want something, and this was one of those times. I bent the rules a bit. (blush) I didn't *have* to remodel my kitchen, but I *had* to buy a car and I chose to get the one I wanted.

Although I do not consider a car an asset, on the plus side, Minis have amazing resale value and if I were in trouble, I could sell it for very nearly what I paid.

Your point is very well taken and I agree with you.

[GREENBACK]

My general philosophy on purchases is not to buy anything unless I really have to, but to buy exactly what I want once my hand is forced. (Within reason) Very rarely do I really really really want something, and this was one of those times. I bent the rules a bit.

I did a similar thing with the purchase of a boat a few years ago after thinking it through for quite a while. No regrets.