Emergency Fund Question

[corn18]

I have found that as I add more to my taxable investments (non 401k, IRA, etc...), that I get more and more comfortable with the amount I have in my EF. My taxable will never replace my EF, but I know it's there and that helps with the psychological aspect of "do I have enough".

[sv2007]

I have found that as I add more to my taxable investments (non 401k, IRA, etc...), that I get more and more comfortable with the amount I have in my EF. My taxable will never replace my EF, but I know it's there and that helps with the psychological aspect of "do I have enough".

I think this is the difference between people worrying about EF and ones that don't. Those with significant $ in liquid investments to weather market flux can feel safe with less in EF than ones without such a cushion.

BTW, I only recommend the above if with a 50% loss of investments, you can still easily supplement your EF. But once you have it, then your money can work harder for you. (50% is something I feel is the minimum based on my experience over the years)

[sv2007]

The purpose of an EF is not to make a bunch of money but to be prepared with readily accessible funds in the event of an emergency.

Right, I totally agree.
But another desire is to maximize return safely.

For example, even for cash; there's different risks (and in turn, reward) for holding it.
It's all about how much one feels comfortable (maybe based on personal experience or recommendations of most experienced people).

[docstudent]

What about other safeguard options? AFLAC...disability insurance.

I keep a minimum of 20K in my emergency account and I will only use it if I lose my job. As far as sickness is concerned, I have a policy with AFLAC, which will cover me for 12 months if I'm out of work due to an illness. The amount would cover my mortgage, car, student loan repayment and all other monthly necessities. Though, I would probably dump some of my luxuries (gym, vacation fund, etc) until my situation improved. The insurance gives you an added buffer and peace of mind.

[Nutria]

My emergency fund is for emergencies (mostly job loss insurance). Nothing else. It has 7 months of expenses in it. I also have separate funds for vacation, new car, planned home improvements, planned medical procedures, etc... I also keep my checking account balance at 1-2 months of expenses and can cash flow any small "emergencies". All of this results in a cash available fund (EF + all other funds) of 17 months of current expenses (no cuts at all). I feel comfortable with that because if I lost my job, then I may decide not to take a vacation that year or hold off on buying a new car. Then I could live for 17 months without any income. This approach helps me sleep very well at night.

This needs to be emphasized (mainly because I agree with it and do the exact same thing, showing how intelligent @tomhole is, except for having so much in the checking acct -- so easy to xfer to CapitalOne360 for the interest and then back if needed).

Spreadsheets make this so easy.

[corn18]

This needs to be emphasized (mainly because I agree with it and do the exact same thing, showing how intelligent @tomhole is, except for having so much in the checking acct -- so easy to xfer to CapitalOne360 for the interest and then back if needed).

Spreadsheets make this so easy.

Thanks! I used to have all my cash funds spread all over the place earning more than the .2% interest I get right now @ USAA. But then I had a heart attack and went through all the finances and made things REALLY simple for my wife if the worst happens. All money is @ USAA. There is enough cash for her to live for a year without changing anything. All my non-401k investments are with USAA. I felt the simplicity was worth more than the $900 / year I am giving up in interest.

[Nutria]

Thanks! I used to have all my cash funds spread all over the place earning more than the .2% interest I get right now @ USAA.

That's better than what my "checking account bank" pays, but CapitalOne360 pays 0.75% so that's where the bulk of our excess cash goes at EOM.

We have three accounts now:

• Checking acct: starts and ends the month at $600.
• Savings acct at same bank: "working capital" for non-monthly expenses.
• CapitalOne 360 savings acct: extra monthly cash gets dumped here. Occasionally -- when semi-annual auto insurance premium or children's tuitions are due -- there's a reverse transfer.

[jasminecox]

What is it about?

[Leo]

They say it should be 3-6 months of expenses. We have 15k in our emergency fund which can cover 4-5 months of expenses. It is on a savings account where I can access anywhere, anytime.

I don't worry about it because in case me or my wife lose a job, household will not stop earning (wife job or my job + unemployment insurance), plus in our industry, I am confident that we can get a job within 1-2 months (lost a job couple years ago and got a new job after 2 weeks).

I can also sell my paid off car (current value 15k) and can live with taking the public transportation. We also have good medical insurance with low max out of pocket. I shouldn't say this but worst case, I can use credit card and be in debt which I doubt will happen or I can also get some from my ROTH IRA. Again, the last statement is just the very last option before bankruptcy.