emergency fund how much and what are you doing?

[LivingAlmostLarge]

lucky all of us on here talk money. But that is not for normal everyday consumption. Anyway i was contemplating that many people are without jobs and many more will join them. Right now no one has a clue how the economy will hold up and those of us who think we have a job may not. Has this affected your thoughts about emergency funds? DH and I have been thinking a lot. We've always had one. But when we were younger we invested it all. We always thought we needed the returns on every dollar and if we needed it we could take it out of the stock market.

Things are different and we are getting older. We're 40 and we have a bigger nest egg. But at the same time we have a lot bigger bills than 10 years ago. I noticed my DH is quickly getting more fiscally conservative. He's actually mentioned that maybe we should have 1-2 years of cash just in case. Before he was very aggressively into investing our money. Now he it seems that he doens't want to pull money out of the market. He has been very happy with an overly large EF. Right now we sit at about 2 years of expenses in cash.

But I would love to be ready to dump a year into the market. But how is everyone else looking at their EF? Are you increasing it? Investing it? Putting more away?

I don't know what to do or think. This is not something you talk to neighbors about because most don't save. But here I think people are pretty logical and reasoning. What are you guys doing?

[Fishindude77]

I'd keep emergency fund separate from my long term retirement investments. A CD ladder is a good option.

[disneysteve]

I haven't changed anything. We've always maintained a good EF and will continue to do so.

Maybe, just maybe, some people who haven't had an EF will finally get the message and start building one.

[Jluke]

I held a 40k EF for the last few years. That just sat at CapOne and I was working with about 5-7k on a rolling basis in my main credit union account for bills and extra cushion.

when my taxable investment account took a hit I didn’t feel comfortable with 40k EF.

fortunately I got a large “to me” (always good but never like this) bonus mid-March and was able to set aside additional money to the EF.

I am in a wait and see phase right now for what to do.

I still added some shares of VTI (20) and have 3k at vanguard with a limit order at 100/share. Which I really hope does not execute.

[MonkeyMama]

No changes here. We got hit very hard by 9/11 (still recovering, to some degree) and 2008 was hot on the heels of that. I've been dumbfounded by people's short memories, but maybe this will be a wake up call for many. Just as example I saw someone say (on another forum) that they made the "unpopular" opinion to pay off their house recently and were grateful. Things were definitely getting very bullish. I have always been criticized for having a healthy emergency fund but the "sleep well at night factor" means 1,000 times more to me than what other people think. This is Basic Finance 101. But it's human nature to get bullish, and having a proper emergency fund is always questioned when the market is flying high.

We have a very healthy emergency fund and our investments are well diversified. No plans for any changes.

[disneysteve]

I've been dumbfounded by people's short memories

Yep, both individuals and professionals. Everyone acts like this stuff can't/won't ever happen again, that stocks will only go up, that real estate values will only go up, that lending money to anyone with a pulse won't ever be a problem. It's maddening.

[kork13]

I noticed my DH is quickly getting more fiscally conservative. He's actually mentioned that maybe we should have 1-2 years of cash just in case. Before he was very aggressively into investing our money. Now he it seems that he doens't want to pull money out of the market. He has been very happy with an overly large EF. Right now we sit at about 2 years of expenses in cash.

I'd be one to understand the reasoning/root cause. If you can address that issue, then you should be able to talk him down from the massive EF. Did some specific event trigger this feeling of insecurity for him?

Personally, our EF has varied over time... It's moved around between a combination of savings accounts, I-Bonds, CDs, etc., and has grown/shrunk based on our life circumstances. But in concept, I keep a minimum of ~6mo's expenses in a series of tiered EF components. Currently, the first $5k (1 mo) is in an Ally savings account for liquidity purposes -- I figure that very few emergencies will exceed $5k, at least upfront. The remainder ($25k or 5mo) is in an Ally No-Penalty CD, but was previously in I-Bonds (which I may go back to at some point). Beyond that, in my view, if some highly unlikely emergency occurs that's larger than $30k, everything is on the table. I've got additional savings intended for various purposes that I can dip into, plus our brokerage account that I'll cash out in a heartbeat if needed, regardless of market conditions. But I'm not even sure what such an emergency might involve... There's insurance for medical issues, home/car destruction, my/DW's death, massive liability...what else could decimate our finances that badly? Even in a job loss, I strongly doubt that DW & I would have great difficulty in finding a job over the course of 6 months, even if only something to survive on. It also helps that I'm in the military & DW receives a disability/retirement pension, so fairly low chances of our income getting completely interrupted.

So bottom line: I'd recommend you sit down with him & discuss what the realistic scenarios (and their probabilities) of needing 2 years worth of cash might include. I expect that those risks are exceptionally low. You can keep some cash super-liquid in a savings account, and use some to earn a bit more in CDs/bonds, and beyond that, invest (perhaps conservatively, if that feels more comfortable) the remainder of what he's trying to hold on to for "emergencies." What is NOT healthy is to just give into amorphous, undefined fears and let that drive your lives. If there are legitimate concerns about your financial security, address them and set your EF accordingly. But if he's afraid of the financial bogeyman, call it what it is, and use that money more effectively.

[LivingAlmostLarge]

We were mostly hanging onto cash looking at investment properties. Nothing's popped on the radar. And now I'm thinking we need to wait for the foreclosures to hit. I'd like to scale back to 6 months cash. I have my secret EF in i bonds right now. $60k I dumped in a long time ago. That could probably be our EF.

I think he's worried being single income that if he loses a job then what? Forced to take another? What if he can't? We both like MM have been through dot.com bust and 2008. And we remember our friends looking for over a year. Having to look that long now with kids is a lot scarier than being 22 and living so lean and having nothing. Now it feels like we have so much more to risk. I know that's how he's feeling. What if he can't find a job for a year? What if it's longer?

[kork13]

But is that fear rational?
What's your husband's career field? Is it truly so narrow that there aren't comparable jobs around? Is his company giving indications that they're going to be making layoffs?

Unless his position is legitimately at risk & he has no expectation of being capable of getting a new job within 6 months (your friend's case could easily/likely be an exception -- perhaps he helps out for exactly the "perfect" job vs. taking something that would have suited to get income flowing again), there's no reason for holding 2 years' cash as an emergency fund. MAYBE 1 year if you're expecting layoffs or have a very narrowly-applicable skill set, but otherwise, I expect that 60k would serve as a healthy EF for you.

That said, holding cash for buying an investment property makes sense, especially if you're going to buy as soon as you find something you like. If that's the case, and some of this 2 yrs of cash is planned for the investment house, that's fine.

[~bs]

Probably not the smartest thing, but I've been expanding the EF and investing during this crisis. I've said it in previous threads that I maintain a larger than advisable cash position in case opportunities arose. In hindsight, this may have been a good move. We shall see if opportunities come up as the crisis deepens. It's still early.

[TexasHusker]

I am actually looking to pay cash for a business that someone needs out of. I have no idea what kind of business, I'm just keeping my eyes and ears open. It could be pretty much anything, and I'm not opposed to even taking a controlling interest in company and having a general partner run the thing. Picking up some good farm land might not be bad if it was the right price.

[disneysteve]

I am actually looking to pay cash for a business that someone needs out of. I have no idea what kind of business, I'm just keeping my eyes and ears open. It could be pretty much anything, and I'm not opposed to even taking a controlling interest in company and having a general partner run the thing. Picking up some good farm land might not be bad if it was the right price.

There will be a lot of great business opportunities arising for folks who have the resources to take advantage of them.

[Drake3287]

No changes with me either plus I won't be looking at my investments until the first of the month like I do every month anyway, fully expect a big drop. I've always been overly conservative with my money, almost to the point that most financial "experts" comment on me having to much cash in CD's. This happened just a week prior to this virus situation happening, I guess if nothing else I got the last laugh.

As for emergency funds, everyone needs to have one for situations like what we're all in. I follow a few different vehicle groups on Facebook and it's interesting at how many people are already talking about having to sell or return their nice new trucks or trailers to the dealers. How can people go out and buy $50,000+ new pickups or $40,000+ RV's and not have a backup in place just for times like this. In one sense I feel sorry for them but on the other hand it's their own fault.

Prior to this pandemic I was getting ready to buy one of these nice new expensive trucks, only reason I'm holding off now is because it'll be much harder to sell my current used one. I'm lucky I can just wait it out.

[disneysteve]

I follow a few different vehicle groups on Facebook and it's interesting at how many people are already talking about having to sell or return their nice new trucks or trailers to the dealers.

There will be some great used car deals when this is over. Lots of people selling cars they can no longer afford and breaking leases. I'm probably going to be in the market soon so it's perfect timing for me.

[greenskeeper]

have not had to tap my emergency fund as I am at about 150% employment since the quarantine began.