Emergency Funds?

[jIM_Ohio]

Where do you put a 15,000 EF? Would breaking it into 2 places be wise? I would like to put half into stock MF's. Need suggestions.

What is monthly expenses?

I would divide into 6ths.

1/6 in a 90 day CD
1/6 in a 90 day CD (maturing 30 days later)
1/6 in a 90 day CD (maturing 30 days later)

1/2 in another investment. A moderate allocation fund. I just opened PRPFX, which owns stocks, bonds, swiss francs, gold and silver. Quite moderate. a 40-60 fund like Vanguard Wellesley might also be prudent, or a 20-80 fund like T Rowe Spectrum Income would also make sense here.

If the 1/6 portion is NOT enough to cover 1 months expenses, then the 15k is not enough. Make sure each CD in the CD ladder has one months expenses in it.

In addition I would harvest the interest from the CDs each year and invest the interest into the moderate allocation fund.

The plan I showed above is very close to the plan I executed for myself. I am not at point where I have PRPFX balance equal to 3 months expenses yet.

[LivingAlmostLarge]

Is it a bad idea to use HELOCs for EF? And keep your EF invested and then see how things play out and pull as needed?

[maat55]

Adding this up, 2558.00 covers: Home & ins., auto ins. & gas, electric, gas, water, food, cells, landline & internet, cable and property taxes. Everything I think.

I have no payments and no credit card debt that isn't covered in the expenses. Wow, where's it all going.

[Ima saver]

I keep a lot of money in cash, mostly in cd's and money markets. We need that money to build a spec house when times get better.

[puck36]

I have my EF in an online savings account. It will take 3 business days to transfer the money so what I do is if I have a emergency that is $1000 or less then I use my bank credit card and than start the transfer. Once the transfer is complete then I transfer the money to pay off my credit card.

[maat55]

Back when I was living on the edge, my IRA was my EF, I thank Dave Ramsey for stopping that stupidity.

[disneysteve]

I have about 2 months of expenses in my online MMF. I have about another 1-1/2 months in a CD. The rest is spread around a number of places including small amounts in 2 other money market funds (one in my brokerage account and one in my insurance account) but otherwise invested in the market. We also have some Series I bonds, but I'm planning on cashing those in this summer to pay for our daughter's Bat Mitzvah expenses. And yes, we do keep physical cash on hand for immediate needs if the banking system is offline, like in a natural disaster.

One thing that I think people often forget is that you won't ever need your 6-months worth of expenses all at once. You'll need it gradually over a 6 month period. It doesn't all need to be instantly accessible. Plus, you can always use a credit card until you retrieve your money and then pay off the account.

Someone asked about using a HELOC for an EF. Here's my problem with that. You have some major emergency - a job loss, a serious illness, etc. If you have to borrow to cover expenses, how will you make the payments?

[Scanner]

I personally don't know how you guys live on less than 10K in cushion.

Last month. . .I had to pay our tax bill ($2300 for 1 quarter) and a credit card bill of $3500, representing our household expense and I put a quarterly payment of my car ins. on there.

So our account went from $13000 to about $8500 in one week (it's back up around 12K today).

I guess it depends. . .for some of you living in cheap COL areas, like Racoon Butt, Alabama. . .you won't need much more than 5K on hand.

That's not Scanner's World

[PrincessPerky]

I guess it depends. . .for some of you living in cheap COL areas. . .you won't need much more than 5K on hand.

That's not Scanner's World

I don't live in Scanners world..I don't spend 5K a month!

[maat55]

Some of us don't consider taxes, household expenses and insurance emergency's. Those are things we prepare for outside the EF.

[Scanner]

$1023 for mortgage
$350 for utilities
$120 for auto ins.
$700/month for property tax

That's just a start - we haven't even gotten into household expenses. The c/c bill was a little high - Christmas. . .but $2000-2500 is norm - that's groceries, gas, haircuts, clothes, etc.

I should post my c/c bill one month and have you guys hack at it

[maat55]

I can't believe the property tax some of you pay. Thank God I live in Oklahoma where the winds come sweeping down the plains. Sorry, couldn't stop myself.

[Spud]

Scanner - You seem to be in a similar situation as we are.

Maat55 - Although those expenses aren't necessarily emergencies, shouldn't you take them into account when building your emergency fund? Or do you transfer money around every time you need to make a large-ish payment?

[Scanner]

We could live more frugally - I am going to post my c/c bill and let you guys sock it to me/us.

Our consumption is definitely relective of a high stress lifestyle and although we pay it every month, we have shed tears at times on why we seem to live a zero sum game at times.

[disneysteve]

$1023 for mortgage
$350 for utilities
$120 for auto ins.
$700/month for property tax

That's just a start - we haven't even gotten into household expenses. The c/c bill was a little high - Christmas. . .but $2000-2500 is norm - that's groceries, gas, haircuts, clothes, etc.

And this coming from the guy who said a $40,000 income in retirement would be plenty.