EF too big

[littleroc02us]

OK, since I don't agree with the EF method, all I could help you with is what to do with the extra cash. If you have no debt and your investing around 15% of your income, then why not apply it towards the mortgage?

[BuckyBadger]

As long as you are aware, there isn't any reason that your EF can't sit in the same savings account as other money. The money doesn't know what you've named the account.

Why have one account with $20,000 EF, one with $10,000 savings for a car, and one with $2,000 savings for a vacation when you can have one account with $32,000 in it?

If you aren't responsible enough to not accidentally buy a $30,000 car rather than the $10,000 you planned just because you looked and saw that you had $30,000? Well, then, you have bigger problems than separate accounts can fix.

littleroc, you definitely have very strict rules for how you think an EF should be handled, but I think a lot of people are capable of keeping their ER money mixed in with other money. Money is money -- and as long as your liquid balance doesn't drop below what you would need in an emergency you'll do just fine.

[disneysteve]

So, you keep an ING fund that includes an EF fund, a car fund and hobby account? I can see why it would grow, IMO seperate them.

I see nothing wrong with combining them as long as you know that a certain amount is your EF and you don't dip into that for non-emergencies. What's the difference if I have $20,000 in an account for my EF and $10,000 in an account for a car or I have $30,000 in one account and spend $10,000 of it for a car, leaving $20,000 remaining? Ultimately, it is the same thing.

Many people don't have the discipline to do this, but for those who do, I see nothing wrong with it.

[littleroc02us]

Why have one account with $20,000 EF, one with $10,000 savings for a car, and one with $2,000 savings for a vacation when you can have one account with $32,000 in it?

Pure organizational!


littleroc, you definitely have very strict rules for how you think an EF should be handled, but I think a lot of people are capable of keeping their ER money mixed in with other money. Money is money -- and as long as your liquid balance doesn't drop below what you would need in an emergency you'll do just fine.

I think a lot of people borrow from their EF and pay it back, kind of like lending services or something. For me, it helps to organize accounts by need. At my bank I have the following.

1. Daily spending account
2. EF fund
3. Mortgage account
4. Big ticket savings account
5. Credit Union Dividend account

*For me being detailed=Success!

[BuckyBadger]

Steve -- we must be in tune today. We even picked the same hypothetical values for our hypothetical EF and hypothetical car accounts!

[littleroc02us]

I see nothing wrong with combining them as long as you know that a certain amount is your EF and you don't dip into that for non-emergencies. What's the difference if I have $20,000 in an account for my EF and $10,000 in an account for a car or I have $30,000 in one account and spend $10,000 of it for a car, leaving $20,000 remaining? Ultimately, it is the same thing.

Many people don't have the discipline to do this, but for those who do, I see nothing wrong with it.

Again this is just my opinion (IMO) everyone can do what they want, I just like the be organized in detail. When I run a business for example, I wouldn't lump in my personal money in an account with my business income and use the same account to pay both personal and business liabilities. That's just me..

[cypher1]

I'm really not bothered by merging those funds since I never take from them (*knock on wood*). My car fund is only 6k, so its really not difficult to keep track for a balance minus EF. My error was contributing more cash here, than somewhere else.

[disneysteve]

When I run a business for example, I wouldn't lump in my personal money in an account with my business income and use the same account to pay both personal and business liabilities. That's just me..

That's totally different and I completely agree. You should always keep business and personal finances separate or you can cause all kinds of tax and accounting and potential liability headaches. But we're talking about strictly personal money.

I don't compartmentalize everything into separate accounts. I see no need to make things that complex or have that many accounts. But I'm able to keep it all straight in my head.

[MonkeyMama]

I'd think it would be wiser to lump your savings accounts together so that you can chase higher interest rates.

(These days may be kind of moot, but historically is more what I have done - when rates are higher).

[littleroc02us]

I'd think it would be wiser to lump your savings accounts together so that you can chase higher interest rates.

(These days may be kind of moot, but historically is more what I have done - when rates are higher).

My EF fund isn't for the purpose of making an investment off of it, it's there for emergencies only. I don't care if it makes any money, an ING account making 1.1% won't make me rich. My savings are for large purchases and it comes and goes based on purchases. All of our money is tied up in our house and investments, we don't keep a large savings account sitting around because what would we do with it?

[BuckyBadger]

My EF fund isn't for the purpose of making an investment off of it, it's there for emergencies only.

But if it could do both, wouldn't that be even better?

[fruitbowlk]

Are you debt free? If not you can place some cash towards that. If you haven't started a ROth IRA you can contribute to one.

[littleroc02us]

But if it could do both, wouldn't that be even better?

Yes, if it didn't involve risk. EF's aren't meant to be risked, that would be like an Oxymoron!

[jpg7n16]

So, you keep an ING fund that includes an EF fund, a car fund and hobby account? I can see why it would grow, IMO seperate them.

Some banks have instituted a monthly fee for having too many accounts without direct deposit. So separating accounts would be detrimental, as the fees would cost more than earnings.

I personally have 1 checking account. I don't separate out anything.

[GREENBACK]

Tough to do much to stay on track with inflation now. Interest rates are very flat and inflation is uncertain right now. I think this all sounds a bit like a right brain/left brain argument. Left brainers(me) tend towards keeping the figures in their head as far as where all the savings are going and right brainers tend to compartmentalize all their savings(very unprofessional opinion).

My EF is also in an ING account and exceeds what I would need for a true EF. I know what I anticipate needing short term and long term. It's pretty difficult to speculate on how much you'll actually need for a short term minor emergency or a long term major emergency. Emergencies don't usually come with an itemized breakdown of expenses.

I do like the idea of having a little more liquidity than I anticipate needing. But that's an individual thing. I also keep a bit of cold hard cash around as part of my emergency plan. Most who have had major emergencies will never say they saved too much for it or had too much money laying around.

I'm more than willing to change my view of things if interest rates and inflation change significantly.