Your Emergency Fund Temptations

**kork13** · 10-05-2013, 03:54 AM

To start things off with, I personally define "sufficient" as 6 months' expenses right now... But in spite of that, I am still often tempted to tap my EF, so my list is probably a bit extensive for a 27-y/o who supposedly manages his money well (also the reason this topic came up for me). Interestingly, most of them involve debt in some way.

- 4 years ago, I raided my EF (~$10k, then 3mo's expenses) to pay off the last $4k of my car loan. But I'd do it again, because it was a bad car loan I got while in college--something like 9% interest.

- In Dec'10, I dipped into my EF once again (then at $23k), in order to invest about $8k into my taxable account. I had just deployed for the first time, and felt that I had too large of an EF given my circumstances (4mo vs. 6mo expenses). Looking back, I'd say it's a wash. Not the smartest idea, but it wasn't entirely foolish either... and besides, it worked out (this time). But I will say that I've been having to build it back up from there over the last 2 years, and only this month got back to the same $23k level.

- Between Aug'11 & Jun'12, I started saving aggressively for my return to the states from an overseas assignment. I knew I would need to buy a car & a house (okay, there was some "want" involved here too). I knew I'd need a hefty downpayment for the house, so I (once again) pulled a total of $7k from my EF (taking it down to $10k, ~3 months' expenses at that time) to bolster my other cash savings & some investments I was selling for the purchases. I wanted to minimize both my car loan and my mortgage, so I was aggressive with using my available assets toward both of these items. This one was definitely a mistake. I should have kept the EF intact, especially considering my expenses would be rising with the home purchase. I did return $3k of that in Dec'12, but as I said above, I only just got back to a full 6mo EF this month.

- I'm a little ashamed to admit that I am once again considering a dive into my EF. I've been aggressive about paying off my car loan, so it currently has about $8k left on it. By March or April, it should be down to ~$3k-$4k, so I'm considering borrowing from my EF (again) to pay it off entirely…I'm looking at getting married next spring, and the idea of going into that with no debt except my mortgage is attractive to me. But at the same time, it's harder to justify--my car loan rate is only 1.9%, I would have it paid off in a few more months anyway, and I only just finally got my EF back to where it should be. So for now, I'm tabling the idea for later consideration. But man… It's tempting!

**TBH** · 10-05-2013, 07:12 AM

I tap my EF all the time. I know I shouldn't, but I do. Nearly every month there's some big irregular expense that comes up. I sort of use it as a sinking fund. It's part emergency fund, part savings for big expenses like house repairs, annual insurance premiums, etc. I'm happiest when the E fund is at $35K or even $40K, but I know it shouldn't get below, say $25K-30K, which is about 6 months' living expenses for us. If it starts to get that low I tighten the belt until the balance looks better. It's a way for me to relax a little about budgeting and also make sure we have a good reserve.

The only time we've drawn the E fund down significantly below our comfort level was when we bought our current house. It took a couple months for us to clear our money from the sale of our old house and fix up the new house. So we knew it was just a couple months, and then we'd be able to pay our E fund back and then some. I think we got down to about $15K in the E fund, and we also had a line of credit that we could have used if necessary. But both of us are extremely debt averse and uncomfortable using a line of credit as an E fund. That was scary. It worked out fine, but I wouldn't want to do that again.

We need a big emergency fund because we have health issues, an older house and car, and because our income fluctuates a lot.

On the other hand, we have so many income streams that it's extremely unlikely that we'd need to pay for ALL our expenses out of the emergency fund. It's more likely that one of our income streams will shrink or go away, and we'll be forced to pay for some of our monthly expenses out of our E fund until we find a way to replace the lost income. If my freelance income dried up, for example, I could increase hours at my part time job. That hours for that job are set semester by semester, so I'd have to wait til the next semester started to get additional hours. So I might need a few months of help from the emergency fund til I could increase my hours. My spouse, too, could add hours at his job, although he'd probably have to wait til the beginning of the fiscal year to do it. So I can imagine a scenario where we needed to pull, say, $1000 a month from the emergency fund until one of us could increase our hours to make up for the shortfall.

**LivingAlmostLarge** · 10-05-2013, 10:38 AM

Personally I've love to tap into our EF. I have this pseudo argument with my DH, see other post about stop saving. I don't know if I'll ever be able to pry some cash from him. LOL.

Our savings like many here is entwined with just savings. 6 months EF = $30k. We have right now in Captial one (former ing) $45k, $10k in sharebuilder (he just put part of our "ef" there) and I'm not allowed to touch it.

That is money I can tap occasionally but he makes me pay him back. Also our annually payments like car insurance, life, etc goes there monthly and I transfer it back when I make our annual payments.

Then we have taxable accounts of $75k (firstrade) and $90k (fidelity company stock ESPP and bonuses we are hanging on to so it turns to long term capital gains) or so. So that's our cash on hand. Now what would like to tap our EF for? I go back and forth about using it for stuff, but I know it's a better idea not to.

I think I need more float in my checking/savings, but truth is that I'd probably spend it. So perhaps it's better I just keep things separate.

**LuckyRobin** · 10-05-2013, 05:34 PM

The only thing tempting me to tap into my emergency fund is the fact that after I make my November payment, the amount of my EF will equal the amount left on my mortgage and I want to pay it off so badly. The temptation is extremely high. It's the only real temptation I've had to fight against.

**BuckyBadger** · 10-05-2013, 05:53 PM

Our EF is sort of co-mingled with our slush fund. Maybe a little like TBH?

Our budget is balanced, and that includes sending $1000 every other week into our savings account. I consider $20k to be our baseline 3 month EF, and we're comfortable with that amount. So everything on top of the $20k is our slush fund for things like larger than usual purchases and vacations. A chunk of that slowly growing money is also earmarked for January 1 Roth deposits and some amount of taxable investing.

So I suppose I could keep the $20k is a separate account and keep another once for slush funds and another one for future investments, money is fungible, so it's just as easy to keep it all in one place. And depending on when we make some big purchases, it's possible for that fund to dip below $20k, but as long as we're not raiding it for regular monthly expenses, I'm fine with how it works out.

**marvholly** · 10-06-2013, 01:13 AM

I just had to tap my EF. Refrigerator died. Half dead Tree in rear yard pushed into gutter & started scrapping the roof.

Total OOP >$2000. I do NOT keep that much 'extra' in my everyday account.
These 2 were on top of replacing a tv 2 weeks before, my a/c in May and my furnace last fall (ie why there was NO $ in my hse maintain account).

Right now the 2 are charged to a cc w/cashback and I will pay in full hen the bill comes.

**feh** · 10-06-2013, 04:23 PM

Originally posted by kork13 View Post

How have you been tempted in the past to tap into your emergency fund? Did you do it then? Would you make the same decision today, or do you regret those choices?

No, I'm really never tempted to spend money from our EF. It's just not my nature to spend money without a good reason.

**dojo** · 10-07-2013, 04:31 AM

There were various times in the past (not all too far), when having or not having that fund really made a difference. Even this month the budget I have set for us is too small for what we'll actually spend (50% more expenses than I thought 1 week ago and the month just started). Having the savings in place helps us not get into debt or too stressed (even if I keep on commenting that I planned something and we have to pay more). We'll be able to easily pay off all the stuff and still be able to save.

**Permanent Temp** · 10-07-2013, 10:01 AM

This time around the only time I dipped into my savings was for some last minute wedding expenses. But it was refunded the next paycheck. Other than that my EF was just used for emergencies and I'm still working to refund it at the moment.

**fruitbowlk** · 10-07-2013, 11:12 AM

I have lost my job twice and I tapped in to my EF to live. I regret it I wish I would have saved or been more wiser with my UnEmployment checks. I'm starting from Stratch and I wish I wasn't. I feel so naked without a custion. But I'm working hard to build it up and working harder not to touch it again.

**cypher1** · 10-07-2013, 03:08 PM

Originally posted by feh View Post

No, I'm really never tempted to spend money from our EF. It's just not my nature to spend money without a good reason.

I'm in the same boat with that mentality. It's not that I won't spend my money, but I haven't had to dip into my EF for a few years now *knock on wood*. I do keep 10k in a car fund, and 10k in house fund, with about over 12 months for dedicated EF.

**stoney508** · 10-07-2013, 04:45 PM

Well im in the process of getting everything together in my life and I had about 6k because of a gift from my grandparents. I used that to pay down my engagement ring(due to a complication with the bank and there transfer dates) which was around 2500 and then I used the rest to pay down my SL. In all I have paid down about 20k on my loans in the last 2 years probably closer to 18 months. I dont regret paying down my student loans becasue a monthly payment of 1150 was not to sustainable for me.

I wouldnt mind having it back though because its going to take until august of next year to save up 6 months expenses (havent done an evaluation of my budget yet but thinking 8k) and thats with saving an additional 5k for my wedding.

**snafu** · 10-08-2013, 03:19 AM

We've re-allocated savings. Our E Fund covers only bare bones expenses for 3 months while we actively, aggressively add to an account to fund our several annual expenses, home & auto maintenance, major projects [wish to install hardwood flooring], travel costs that are eventually, mostly reimbursed and weird or unanticipated outflows. [same money just a different name]

Ever since we adopted the 'new item in - old item out' policy, impulse purchases stopped. When we added '12 is enough,' we had even more money left over every pay in spite of the fact that utilities and food costs are ever higher. We mostly eat home cooked meals since restaurants are now using so much unpronounceable, chemical laden, pre packaged product.

**BMEPhDinCO** · 10-10-2013, 08:52 AM

I'm thinking pretty seriously about tapping it in May to pay off my LAST student loan (deferred until then). It would bring us down to 6 months... going into a summer with no serious paychecks for DH (we'll see if he can get side income, working on that now). But I'd still bring in just over half of the monthly expenses so we would still have >4 months left, even if DH had nothing. Right now it's at 9.5 months, including loan payments. As I'm still in school and turning 30 next month, being debt free at 30.5 years (except mortgage) would be very attractive to me. We also have Roths we could draw from if seriously needed - after tapping all the other savings accounts first (another 3 months in those). And we'd have family support. The reasons not to do it would be that I'd be graduating before the end of the year - possibly without a job and DH doesn't have anything guaranteed either. And the interest rate is around 3.25% so not super high. And it may take more than 6 months for me to find a job I want in my field, even with a PhD, it can take 7-9 months...

So it's in my mind to use it, but I don't need to decide until April.

@fruitbowl - you used an emergency fund for a job loss - that is a very valid reason and while I'm sure that was hard to see it go away, it was better than using credit cards or loans. You'll build it back up again!

Your Emergency Fund Temptations