How Big Is Your Emergency Reserve?

[Retired To Win]

I used to hold one year's baseline expenses in cash (checking and saving) as my emergency reserve. But recently (see my blog post link at upper right) I radically changed my thinking and cut my checking/banking reserve to 6 months of baseline expenses while adding a food stockpile, ready cash at home, silver coins and large credit card lines to my "emergency reserve portfolio."

How big is your emergency reserve in terms of your baseline budget? Do you include anything besides liquid bank balances in your emergency reserve?

[disneysteve]

How big is your emergency reserve in terms of your baseline budget? Do you include anything besides liquid bank balances in your emergency reserve?

When we were younger and poorer, I thought more in those terms. Now that we are older and more established, I don't really think, "Do I have 6 months of expenses?" Our total portfolio is around 6 times our annual gross income. Some is in cash and liquid accounts. Most is invested but accessible if needed. We have about 3 times income in non-retirement accounts so we can always get to it. Most of the rest is in Roths so we could always withdraw contributions penalty-free. The only money that would be harder to access is 401k and 403b accounts.

Of course, there are always things we could sell too if it really came down to that.

[cardtrick]

2 months in the bank account. I've just started putting some cash into I-Bonds. I'm doing this on a rolling basis because you can't take the money out within 1 year. I have 1 business day access to my investment account with plenty of cash in it. I have some gold but I don't consider this part of my emergency fund.

I would rather starve to death than eat that dehydrated emergency food. We don't really have canned food either. We don't really eat much processed stuff, so I guess if something really bad were to happen, we'd be screwed. But then again, I could get hit by a bolt of lightning as I'm typing this.

I have credit cards with a total limit of $100K+. If I really needed the money, I'd just use the cards. I don't see any reason to have anything more than a small buffer in "liquid" savings.

[jpham540]

I have about 1 year emergency reserve in my checking and high yield saving. I am also debating if I should cut back to 6 month and add the rest to my vanguard index fund. I am still bouncing that idea around though.

[kork13]

I go with the "standard" advice of 6 months' expenses. However, I only keep a small portion of that in a liquid cash account. 5 months' expenses in I-Bonds, 1 month in a cash savings account. Technically, I have other cash in savings accounts & all of my taxable investments if truly necessary... But I can't imagine such a need.

[Like2Plan]

We have about a year in bonds paying 4% interest (some of which are set to mature this year and will no longer pay any interest--still working on the plan with those). We have about 5 months liquid.

[97guns]

$0 emergency fund, if i need a new motor in my car i either sell some silver or find someone that will take it as payment, friend of mine paid the contractor for his fence around his property with 5oz. of gold

[figuringmoneyout]

Right now it's only 3 months! I really want to grow it to 12 months though since I'm now a freelancer and money isn't as stable.

[Retired To Win]

2... I would rather starve to death than eat that dehydrated emergency food. We don't really have canned food either. We don't really eat much processed stuff, so I guess if something really bad were to happen, we'd be screwed. But then again, I could get hit by a bolt of lightning as I'm typing this.

Cardtrick, there are other longterm storable foods besides dehydrated stuff. Our food reserve is heavy on vacuum-packed grains, rice, canned meats, powdered milk (but this stuff tastes awesome), pasta and so on.

[cardtrick]

Cardtrick, there are other longterm storable foods besides dehydrated stuff. Our food reserve is heavy on vacuum-packed grains, rice, canned meats, powdered milk (but this stuff tastes awesome), pasta and so on.

I don't eat meat (especially preserved meats) or milk products. We always have enough grains to last about a month or so. I can't imagine a world where we will have to go more than a month without being able to buy grains. Curious, how much did you spend on the long-term stored food?

[LivingAlmostLarge]

Almost a year. It just keeps growing. My DH has a major fetish for saving money and is very nervous being the sole breadwinner. I can't complain. He said 6 months then it just keeps growing. And yes we invest a good amount too so it's not growing as fast as it could.

[Retired To Win]

And if there's a long power outage?

I have about 1 year emergency reserve in my checking and high yield saving. I am also debating if I should cut back to 6 month and add the rest to my vanguard index fund. I am still bouncing that idea around though.

Jpham540 and Kork13...

Have you thought of what you would do if there were no electrical power (or no web access) for a while? I have personally lived through one-week periods during hurricanes when the only medium of commerce was actual cash money because the lack of power made credit card transactions and bank account withdrawals undoable.

[jpham540]

Retired to Win,
Yeah I went through Katrina so I can related, as far as my current situation probably don't need it at the moment. I am currently working in the Middle East right now so I will probably adjust after I know I will be home for sure.

[kork13]

Jpham540 and Kork13...

Have you thought of what you would do if there were no electrical power (or no web access) for a while? I have personally lived through one-week periods during hurricanes when the only medium of commerce was actual cash money because the lack of power made credit card transactions and bank account withdrawals undoable.

hahahahahaha ----- a whole week, huh? Nuts.

I grew up on a small Pacific island that was hit by typhoons anywhere from 6-10 times every year. Power & water outages were commonplace, and lasted anywhere from days to weeks. Sometimes, one storm would follow another so closely that they weren't even able to restore power & water during the days or weeks in between them, let alone the delay afterward. Trust me when I say that if you're faced with natural disasters, you have 2 very simple options: prepare & keep adequate emergency storage, or run away. Both work, but you need to choose one. Either keep plenty of essentials on hand, or be ready & able to evacuate on a moment's notice (either before or immediately something happens). In either case, cash, silver, or whatever else is not going to be useful to you. In the first 3-5 days after a natural disaster, either nothing is open, it's too dangerous to venture out, or there simply isn't anything available (regardless of how much money is in your pocket), because every other ill-prepared lunatic is just as desperate to get anything that happens to be on the shelves. Even in the US, I've been through blizzards that shut down a metro area for a week, and tornados that devastated an entire city for months. The tornados that obliterated Moore, OK last year? My house was a mile north of one, half a mile south of another. I got lucky.

Think about this as a risk analysis. Are you in an area subject to natural disasters? At worst, how long would it cripple your local infrastructure? This is how long you need to be ready for anything. You're right -- credit cards & ATM's won't work for you. Sorry, cash won't do it either. You need a plan -- either backpacks packed & ready to grab the car keys & hit the road, or suitable stores of food, water, fuel, clothes, medical supplies, etc. to get you through at least a week, potentially up to a month of living through whatever gets thrown at you. Sure, throw in $500-$1000 if that makes you feel better. I'm just telling you this from experience. We didn't have the "drive off" option on our island, so you hunkered down, collected & store water and other essentials, and waited for the city/state/federal government to get everything fixed to the point of being livable again. Cash? bah.... There's nothing on the shelves to use it on anyway. If money is your solution, just evacuate and do yourself & everyone else a favor. Money is for financial emergencies. Food & water are for physical ones. By the way, after rescuing those who are injured, trapped, or otherwise, restoring power, water, & communications is always a municipality's first priority. I think I'll be able to manage without my money for a week or two.

I'm sorry to rant, and I probably shouldn't be so condescending, but you sound simply terrified of what the Earth has been doing for millennia before we showed up -- we're just along for the ride. Be ready for it. Most Americans' general lack of any sense or preparation for natural disasters & other emergencies is absolutely appalling to me, and is constantly a pet peeve of mine.

[xclonexclonex]

hahahahahaha ----- a whole week, huh? Nuts.

I grew up on a small Pacific island that was hit by typhoons anywhere from 6-10 times every year. Power & water outages were commonplace, and lasted anywhere from days to weeks. Sometimes, one storm would follow another so closely that they weren't even able to restore power & water during the days or weeks in between them, let alone the delay afterward. Trust me when I say that if you're faced with natural disasters, you have 2 very simple options: prepare & keep adequate emergency storage, or run away. Both work, but you need to choose one. Either keep plenty of essentials on hand, or be ready & able to evacuate on a moment's notice (either before or immediately something happens). In either case, cash, silver, or whatever else is not going to be useful to you. In the first 3-5 days after a natural disaster, either nothing is open, it's too dangerous to venture out, or there simply isn't anything available (regardless of how much money is in your pocket), because every other ill-prepared lunatic is just as desperate to get anything that happens to be on the shelves. Even in the US, I've been through blizzards that shut down a metro area for a week, and tornados that devastated an entire city for months. The tornados that obliterated Moore, OK last year? My house was a mile north of one, half a mile south of another. I got lucky.

Think about this as a risk analysis. Are you in an area subject to natural disasters? At worst, how long would it cripple your local infrastructure? This is how long you need to be ready for anything. You're right -- credit cards & ATM's won't work for you. Sorry, cash won't do it either. You need a plan -- either backpacks packed & ready to grab the car keys & hit the road, or suitable stores of food, water, fuel, clothes, medical supplies, etc. to get you through at least a week, potentially up to a month of living through whatever gets thrown at you. Sure, throw in $500-$1000 if that makes you feel better. I'm just telling you this from experience. We didn't have the "drive off" option on our island, so you hunkered down, collected & store water and other essentials, and waited for the city/state/federal government to get everything fixed to the point of being livable again. Cash? bah.... There's nothing on the shelves to use it on anyway. If money is your solution, just evacuate and do yourself & everyone else a favor. Money is for financial emergencies. Food & water are for physical ones. By the way, after rescuing those who are injured, trapped, or otherwise, restoring power, water, & communications is always a municipality's first priority. I think I'll be able to manage without my money for a week or two.

I'm sorry to rant, and I probably shouldn't be so condescending, but you sound simply terrified of what the Earth has been doing for millennia before we showed up -- we're just along for the ride. Be ready for it. Most Americans' general lack of any sense or preparation for natural disasters & other emergencies is absolutely appalling to me, and is constantly a pet peeve of mine.

I can relate to this. I was a few miles south of Moore when the tornado hit. Man, no amount of cash/gold/silver would help you in that case. Even the emergency reserves wouldn't have done much good if you stored them in your house and the tornado uprooted it.

Basically, at a time like that, having your bags packed ready to take off when the warning went off if the only option. Good thing they still let you carry guns in OK.