Emergency Fund Questions

[Reggie]

How do you all manage your emergency cash? I just keep mine in a MMA at the same bank with my savings and checking. Is this a non-touch account or is it ok to use money from it and then put it back? I have been using it to pay things and then I transfer the money back when I get paid.

I keep it at $25k and I find myself pulling 1000 or so and then putting it back.

Just curious at what others are doing.

[NetSkyBlue]

I think that's fine, as long as the money's going back. I see EFs in 2 ways - one, money that you would need to live off of for an extended period of time if something happened to your job, or ability to work.

And two, money set aside for unexpected expenses, (legitimate expenses), so you don't have to put those things on a credit card. This is things like paying the deductible on your car insurance in the event of an accident or hail damage, repairing/replacing a necessary appliance that just went on the fritz, paying for unexpected veterinary care. The kinds of things that might take a few paychecks worth of savings to cover, but that you hadn't planned for/saved for specifically.

Whether you want to keep these two versions of EF separate, or pooled together, is really up to you. Just so long as you feel you have it all covered.

[disneysteve]

I think it depends on what types of things you are dipping into it to cover. If you are covering a tire that blew on your car, that's fine. If you are pulling money for a last minute dinner out with friends or a great sale at the mall, that's not okay.

[snafu]

Reggie, would you be happier keeping a $ 1K for unexpected expenses in a saving account linked to your chequing account if you are finding it necessary to pull from your MMA nearly every month?

[Reggie]

Yea, maybe I just bump the checking or something. My additional expenses have been primarily loaning money to family members. It's a fairly common expense, maybe I should add it in the budget even. Idk

[disneysteve]

My additional expenses have been primarily loaning money to family members. It's a fairly common expense

My advice would be to JUST SAY NO. Stop lending money. Let them know that you're sorry if they're having a tough time but you won't be able to help anymore.

I'm curious if they always pay back what they borrow.

You have to realize that you are just enabling bad behavior by doing this. You aren't actually helping them. You are allowing them to live beyond their means.

[Reggie]

Trust me, I know!! It's my mother and she will never ever ever ever learn. I have no idea what she does with her money. At this point, I just consider the loans gifts. Sometimes she pays back, most times she doesn't. It's just the way it is. I have done everything in my power to try and change her, educate her, help her...all for naught. I will not allow her heat to be turned off, I just won't do it.

I just suck it up. It's better than it has ever been since she lost her home to foreclosure. I had at least 20,000 in that home, never again! I'm pretty sure I was the only one paying the mortgage for awhile. Now I just give her a little here and there.

[disneysteve]

she will never ever ever ever learn.

Nope, because she knows you will keep bailing her out. Until you put your foot down and say NO, she won't be forced to fend for herself.

So you put 20K into her house and lost it all. How many more thousands of dollars are you going to throw away? Sit down, tell her you love you her and don't want to see bad things happen but you simply can't continue to pour money into her situation. let her come for dinner if she's hungry or bring her some groceries, but don't keep handing her cash. She's either spending it on crap or doing something worse (gambling, drugs, etc.). You don't need to be funding her bad behavior.

[Reggie]

So you put 20K into her house and lost it all. How many more thousands of dollars are you going to throw away? .

Probably 6k a year until she dies. I cut her off for 18 months before. She lost her home, moved in with friends and ended up in the hospital.

I understand what you are saying that its my fault for allowing it, but some people just don't want to get better even if it means going hungry and freezing to death.

[Reggie]

Some people choose to spend their money on their children or their spouses, I help my mother.

I have a good income and I won't allow my mother to go without.

[disneysteve]

Probably 6k a year until she dies. I cut her off for 18 months before. She lost her home, moved in with friends and ended up in the hospital.

I understand what you are saying that its my fault for allowing it, but some people just don't want to get better even if it means going hungry and freezing to death.

Tough situation.

If you are committed to continue giving her money then it should become part of your budget. And I would let her know exactly how much she can expect - and not a penny more. If that is $500/month, then give her that on the 1st of each month and make it clear that that's all you can afford. If she asks for more during the month, then you say no to those requests and remind her that you will continue the $500/month.

[disneysteve]

I have no idea what she does with her money.

Another approach is to sit down and tell her that you're happy to help her and one way to do that is to help her figure out her finances. I would gladly give my mother money too but I would want to know why she needed it. Maybe your mom simply isn't earning enough to pay her bills, or maybe there are things you can help her do to reduce her expenses. If her necessities are too high, that's one thing. If she is watching too much Home Shopping Network, that's a whole different issue.

[Reggie]

I can't even fully explain how much I have tried to help her. At one point, I took over her money completely and gave her an allowance. Within months, she screwed that up. We did the envelope system, I made her read a Dave Ramsey book, I set everything up online and with an idiot proof spreadsheet. She does great for a few months a d then reverts to old behaviors. She has no debt anymore after the bankruptcy a few years ago. She doesn't own a credit card. She has no loans. She makes 60k a year and lives in a very cheap (650 a month) apartment. She even has a roommate that pays for the food and cell phones. She still gets behind.

It's a lost cause. Some months are great ( when she works 55 hours and brings home overtime pay). Some are bad (40 hour pay checks).

I've tried for years and its easier on my just to send in a check to the utilities or to the landlord every now and then. I can no longer try to help her, because I cared FAR more than she ever did or ever will.

[QuarterMillionMan]

Interesting thread indeed. For the sake of comparison your mom and I both generate the same income of approx. $60,000 a year. And she and I both pay the exact same amount in rent of $650 a month. Yet we are worlds apart in how we fare financially. I don't mean to sound conceited but I keep over 12 months of EF in savings, max'd out my 457 plan of $17,500 (2013), and max'd out my roth IRA of $5500 (2013 & 2014). And yet your mom still needs to rely on bailouts from her offspring. She really needs to get her act together.

[agarlits]

How do you all manage your emergency cash? I just keep mine in a MMA at the same bank with my savings and checking. Is this a non-touch account or is it ok to use money from it and then put it back? I have been using it to pay things and then I transfer the money back when I get paid.

I keep it at $25k and I find myself pulling 1000 or so and then putting it back.

Just curious at what others are doing.

My personal opinion is that you should probably set up a separate account to pull from for bills so you dont get into the habit of pulling from your EF when there is not a legitimate emergency. You want to remain in the mindset that the EF is a do not touch account so you don't have to worry about draining it unintentionally on things that could have been bought payed for through other means.