Building a 6 month emergency fund, and expenses are going down...

[Permanent Temp]

I have a question for you all. More of a curiosity than a what should I do sort of thing. If everything works out I will be able to pay off my car with my next two paychecks. Then as long as I am gainfully employed I will be putting the car payment in an account for a new car/car repair savings account.

However, I have been saving x amount in my 6 month emergency fund based on expenses that include my monthly car payment. I plan on saving the same amount of money into the account even though my expenses are going down because at some point I will want a house and currently our rent goes up each year. So while my savings may last more than 6 months now I don't see a reason to decrease my savings rate.

What did you all do when this happened to you? Did you save the same amount into your emergency fund or decrease and put the extra money elsewhere?

[lorraineb]

I usually keep it all in my emergency fund, but I note that a certain amount of that emergency fund is for a specific purpose. Not very high-tech, but it works for me.

[LivingAlmostLarge]

throw it all together in our MM and just allocate it on the spreadsheet. we know we have about a year cash, and pay ourselves $400/month car payment though we still have car payments. We need to be done taking out car loans even small ones.

[Eagle]

I have a question for you all. More of a curiosity than a what should I do sort of thing. If everything works out I will be able to pay off my car with my next two paychecks. Then as long as I am gainfully employed I will be putting the car payment in an account for a new car/car repair savings account.

However, I have been saving x amount in my 6 month emergency fund based on expenses that include my monthly car payment. I plan on saving the same amount of money into the account even though my expenses are going down because at some point I will want a house and currently our rent goes up each year. So while my savings may last more than 6 months now I don't see a reason to decrease my savings rate.

What did you all do when this happened to you? Did you save the same amount into your emergency fund or decrease and put the extra money elsewhere?

When we got to the point of having 6 mo + in our e-fund we started saving for a down payment towards a house. By then we'd paid off the car and we were debt free.

Bought the van cash and paid 20% down on the house. So yeah, consider what you want to do next. Perhaps put more towards your 401k (403b) or Roth IRA? Or consider investing in a mutual fund...

[humandraydel]

What did you all do when this happened to you? Did you save the same amount into your emergency fund or decrease and put the extra money elsewhere?

Add it to retirement.

[Permanent Temp]

That's a decent idea. I don't have a 401k though. I work mostly as a temp with no benefits. I could get a 401k through my part time job but I'd have to put in 1000 hours in a year That's about 20 hours a week average. I can't do that right now. If my assignment goes back to just writing I'd consider putting in more hours though just to try to reach that benchmark.

Maxing out my Roth doesn't sound bad. That was my original plan. To pay off the car max out my Roth and then start paying on my student loans. Also thinking up some side business ideas so I could start one of those self-employeed retirement funds.

All a work in progress.

[snafu]

Everyone needs to do what's easiest for them to keep them sticking to their plan. Small spends like bank charges add up over the year. Now it's just a couple of computer clicks to transfer money between accounts and even CU to primary bank. LAL keeps it easy with one account but a spread sheet to track her various categories.

We found it really helpful to write out goals, somewhat like a road map, 5 years into the future. They get reviewed every year sometimes with adjustments but it's so odd that when it's written down, there seems to be a commitment to make it happen. I've talked to others who write out plans and they've had the same experience.

I've based our Emergency Fund on past experience combined with the view that it would pay unavoidable [basic] expenses for 3 months if we were both unemployed beyond the 1 year UI entitlement of benefits. Having been Chair of UI Appeals in the past, I know how important it is to know entitlement to benefits and pay-out sums while still employed.

We feel considerably more confident because we've been able to fully fund the newer TFSA [ROTH-like] program since inception. You also need to consider your Risk tolerance. I can't imagine leaving $ 25,000. languishing in a .09% savings account when I know I could cash out of an Index Fund in 2 business days...but that's me.

[Eagle]

Maxing out my Roth doesn't sound bad. That was my original plan. To pay off the car max out my Roth and then start paying on my student loans. Also thinking up some side business ideas so I could start one of those self-employeed retirement funds.

All a work in progress.

Roth would be a good idea.

What side business are you thinking of starting? That's a good idea. Here's some suggestions to make extra money and get the creative juices flowing.

Can you make something unique (crafts, sowing, knitting, photos, poems, short stories, etc.) or offer some service (babysitting, mowing, painting, cleaning, etc.) to people?

[chenelltull]

What did you all do when this happened to you? Did you save the same amount into your emergency fund or decrease and put the extra money elsewhere?

Put it towards retirement. I'm not sure of your exact situation but if you are young this will go a long way. And if you are getting closer to retirement every penny will help. If you are already putting 15% into a 401k/403b then open a roth IRA and fund that with the extra money.

Keeping additional money just sitting around will not earn you as much as a low cost retirement account would. Great job on the savings by the way!

[TBH]

I agree it sounds like retirement is the best place to put the extra savings.

I know the freelance/permatemp life well, and you are AWESOME for paying off your car and building up an emergency fund.

If you've got your 6 month emergency fund in place, I like the order you listed things:
* pay off car
* max Roth
* pay off student loans
* save up house downpayment

[LivingAlmostLarge]

We used to invest our entire EF, don't ask and always never worried about cashing it out. I don't know what changed. Now we keep close to a year in cash expenses. Maybe having kids? Age? I don't know what the difference is now.

[Nika]

I invest our EF. Yes, there are some risks to it, but I can't take seeing that amount of money not making interest and erode through inflation.

So we invest it, and try to continue building it. That way, even if market went down, we would still have recommended 6-8 months. So when the market is going down, it forces us to put aside more, and invest on the decline (which is a great, but emotionally uncomfortable idea).

But... both of us have very stable jobs, and losing both of them at the same time is unlikely.