What are you all doing for emergency funds?

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investor.was.here
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What are you all doing for emergency funds?

Post by investor.was.here »

For us, checking is about 2mo of living expenses and emergency funds about 6mo of expenses. Given that we spend $10-$15k/mo, that's quite a bit of money! Currently, it's split between checking and Ally, basically paying nothing.

With inflation running at 5%/yr and expected to stay there for 3yrs, it's quite expensive to stick to this strategy. I'm curious what you all are doing about this problem?

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Last edited by investor.was.here on Fri Sep 17, 2021 3:43 pm, edited 1 time in total.
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Re: What are you all doing for emergency funds?

Post by RXfiles »

investor.was.here wrote: Fri Sep 17, 2021 3:39 pm For us, checking is about 2mo of living expenses and emergency funds about 6mo of expenses. Given that we spend $10-$15k/mo, that's quite a bit of money! Currently, it's split between checking and Ally, basically paying nothing.

With inflation running at 5%/yr and expected to stay there for 3yrs, it's quite expensive to stick to this strategy. I'm curious what you all are doing about this problem?

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I bonds but you can't use it for a year so keep your Efund in cash and add to I bonds then you can decrease your cash when you have held the I bonds for at least 1 year
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Re: What are you all doing for emergency funds?

Post by eye.surgeon »

My EF is my taxable brokerage account, I have stocks and some bonds in there and sufficient amount to live for years if needed. Actionable only if you have reached that point in your investing.
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Re: What are you all doing for emergency funds?

Post by investor.was.here »

RXfiles wrote: Fri Sep 17, 2021 3:41 pm I bonds but you can't use it for a year so keep your Efund in cash and add to I bonds then you can decrease your cash when you have held the I bonds for at least 1 year
I considered this. Looks like they're paying 3.5%/yr currently? I guess my wife and I can buy $20k/yr so it'd take a few years to ramp that up. Less if we're willing to deal with paper bond hassles. Liquidity is poor for i-bonds.
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Re: What are you all doing for emergency funds?

Post by investor.was.here »

eye.surgeon wrote: Fri Sep 17, 2021 3:44 pm My EF is my taxable brokerage account, I have stocks and some bonds in there and sufficient amount to live for years if needed. Actionable only if you have reached that point in your investing.
I've considered this in the past as well and I've seen that argument used here before. Mainly, reserves for us are kept in a balanced fund and the argument goes, you don't need a dedicated emergency fund if you have sufficient assets. The opportunity cost of keeping emergency funds exceeds the cost of withdrawing during drawdowns over time. It's a strong argument and I like it. One downside is that liquidity is poor for anything invested, due to tax implications. Other is that invested assets aren't insured. Now that I think about it, we don't have SIPC insured assets to fall back on. Would only apply to cash in the brokerage.

Another option I was considering was a hybrid approach. 66% in NTSX and 33% in Anchor. This strategy would only be used for emergency funds, not long term savings goals (ie reserves).
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Re: What are you all doing for emergency funds?

Post by RXfiles »

investor.was.here wrote: Fri Sep 17, 2021 3:46 pm
RXfiles wrote: Fri Sep 17, 2021 3:41 pm I bonds but you can't use it for a year so keep your Efund in cash and add to I bonds then you can decrease your cash when you have held the I bonds for at least 1 year
I considered this. Looks like they're paying 3.5%/yr currently? I guess my wife and I can buy $20k/yr so it'd take a few years to ramp that up. Less if we're willing to deal with paper bond hassles. Liquidity is poor for i-bonds.
I can't think of an emergency that you cant float the money for the 2 days it takes to get it from treasury direct. Maybe a ransom?? You don't have to have 100% of your e fund in it. Maybe 50-75%. Rest in cash. You can always pull from taxable too like the other person mentioned.
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Re: What are you all doing for emergency funds?

Post by investor.was.here »

RXfiles wrote: Fri Sep 17, 2021 3:55 pm I can't think of an emergency that you cant float the money for the 2 days it takes to get it from treasury direct. Maybe a ransom?? You don't have to have 100% of your e fund in it. Maybe 50-75%. Rest in cash. You can always pull from taxable too like the other person mentioned.
I guess I didn't define liquidity. Yes, it's true that you can get access to it easily but you can't get back into it easily. You start the 1yr waiting period over again with every deposit. That's fine for some scenarios, like drawing down for unemployment or infrequent large expenses but not if you use emergency funds to smooth over cash flow issues like we do. We just refinanced, for example, and used them to spot the escrow between the lenders.

Keeping 50-75% i-bonds would work tho, as you said, or I suppose worst case we just give up potential interest hopping in/out of them on occasion as needed. I agree, this is a good option.
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Re: What are you all doing for emergency funds?

Post by nisiprius »

investor.was.here wrote: Fri Sep 17, 2021 3:39 pm With inflation running at 5%/yr and expected to stay there for 3yrs...
What's your source for that?
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Re: What are you all doing for emergency funds?

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Re: What are you all doing for emergency funds?

Post by FoundingFather »

Our emergency fund is a split of extra money in checking, for cash flow purposes as you said, and I bonds, mostly I Bonds. My family's living expenses are fairly low, however, compared to yours, so it didn't take long for us to switch the emergency fund to I Bonds.

While we were within the first year of I Bond hands off period, we just made sure we had enough money in initial contributions to our Roth IRAs in short duration bonds to act as an emergency fund, temporarily. Didn't use it, so we were able to switch it back to VT (total world stock ETF) once the I Bonds were liquid.

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Re: What are you all doing for emergency funds?

Post by livesoft »

We haven't had an emergency fund for years. I found out that I can get a few thousand dollars from my child transferred in a few minutes to my checking account. That is, I can use my child's emergency fund if needed. :twisted:
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Re: What are you all doing for emergency funds?

Post by JohnnyBravo »

Our emergency fund is part of our portfolio. I dedicate a % that’s equivalent to 2 years of living expenses to HYSA and i-bonds (the plan is 100% I-bonds, getting there).

Our definition of emergency might be a little different than others though. Given that we also have a large bond allocation (in dollar amount) and a stable, high paying job, I can’t fathom any emergency that we can’t handle at this point, other than job loss / business failure. That’s what our emergency fund is for.

But as mentioned above, one must have enough stashed away for this strategy to work.
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Re: What are you all doing for emergency funds?

Post by climber2020 »

Cash in a bank account paying nothing. It’s a small portion of my overall portfolio.

If you want some return on your EF, then put 30% of it in a stock index fund and accept that that portion may occasionally drop in value.

Once you have a large enough taxable account, a huge EF isn’t needed.
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Re: What are you all doing for emergency funds?

Post by nisiprius »

Cash in bank accounts and gripe about it.

Beyond that, being retired we are bond-fund heavy, some in Roth accounts, and regard those as usable for emergencies (although I haven't gotten around to doing whatever you need to do these days to get checkwriting access). It doesn't matter much to me if bonds are down, say, 10%, when you need them in an emergency--it's an emergency.

I used to consider series I savings bonds as potentially part of our emergency fund, but I closed our Treasury Direct accounts and I don't know how quickly we can actually redeem paper bonds these days.
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Re: What are you all doing for emergency funds?

Post by anon_investor »

EF is now around 10 months of unreduced expenses with about 65% in I Bonds and 35% in savings account/no penalty CDs.

The plan is to shift expiring no penalty CDs to I Bonds and expand EF to 12 months, to ultimately be about 2 months in savings account and 10 months in I Bonds.
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Re: What are you all doing for emergency funds?

Post by secondopinion »

nisiprius wrote: Fri Sep 17, 2021 5:13 pm Cash in bank accounts and gripe about it.

Beyond that, being retired we are bond-fund heavy, some in Roth accounts, and regard those as usable for emergencies (although I haven't gotten around to doing whatever you need to do these days to get checkwriting access). It doesn't matter much to me if bonds are down, say, 10%, when you need them in an emergency--it's an emergency.

I used to consider series I savings bonds as potentially part of our emergency fund, but I closed our Treasury Direct accounts and I don't know how quickly we can actually redeem paper bonds these days.
Agreed; no one can earn better than what you might see with a HYSA without taking some risk.

I hold most of my emergency fund in CDs. There is a breaking penalty; but it is an emergency, right? I earn relatively decent returns above cash while fixing the risk; I pair it with a HYSA to cut the duration and general risk.
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Re: What are you all doing for emergency funds?

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investor.was.here wrote: Fri Sep 17, 2021 3:39 pm
For us, checking is about 2mo of living expenses and emergency funds about 6mo of expenses. Given that we spend $10-$15k/mo, that's quite a bit of money! Currently, it's split between checking and Ally, basically paying nothing.
investor.was.here,

If you are spending 10K to 15K per month, 8 months of expense earning should not be a problem for you. If you need to care about how much this money is earning, you have a REAL PROBLEM. Your saving rate is too low.

1) What is the size of your investment portfolio?

2) How much do you save and invest per year?

<< that's quite a bit of money!>>

It is not if you are saving 10K to 15K per month.

I keep 2 to 3 years of expense in checking account and money market fund. My portfolio excluding the emergency fund is at 27 years of my expense. I save 1 year of expense every year.

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Re: What are you all doing for emergency funds?

Post by JBTX »

I don't think of it as emergency fund, just safe and liquid funds.

1-2 months (expenses) in no yielding primary checking account
2-3 months in internet savings account approx 0.5%
5-6 months in HM Bradley promotional checking account 3.0%
Approx 1 years worth of ibonds
A few months worth of EE bonds

Occasionally with the checking and savings accounts I may open a new bank account with an up front bonus and park it until terms are met.
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Re: What are you all doing for emergency funds?

Post by pasadena »

My EF is 6 months of expenses.

As of today, it's 40% I-Bonds (purchased this past July) and 60% HYSA at Ally (0.5% APY). I will buy another 10k of I-Bonds in January, and call it a day.

I also have between 1 and 2 months worth of expenses in my "buffer" HYSA, that's basically money for next month's expenses + sinking fund.
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Re: What are you all doing for emergency funds?

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Vanguard Intermeditate Term Tax Exempt
for me.

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Re: What are you all doing for emergency funds?

Post by Horton »

I had mine in a savings account. In a couple weeks, it will be in the Vanguard LifeStrategy Income Fund (VASIX). I will also begin factoring it into my overall asset allocation.
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Re: What are you all doing for emergency funds?

Post by mikejuss »

Your emergency-fund money is sitting in a low- or no-interest account for, presumably, a very brief period of time before you spend it. What kind of return do you expect? I wouldn't worry about this.
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Re: What are you all doing for emergency funds?

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Re: What are you all doing for emergency funds?

Post by Sandtrap »

4x in various bank and business accounts.
Includes business reserves
Liquid
Accessible
Principle Secure

Outside of investment portfolio.
Returns not a concern
Zero volatility

Checks all the blocks for an EF.
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Re: What are you all doing for emergency funds?

Post by willthrill81 »

Considering that our portfolio is at nearly 10x our annual expenses, we have no need for an emergency fund and kicked ours to the curb (by investing it as the remainder of our portfolio) several years ago. We do have a cash fund used to save for irregular and non-monthly expenses that usually has several months' of our expenses in it, but we're using those funds regularly, so I wouldn't consider it an emergency fund.
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Re: What are you all doing for emergency funds?

Post by imak »

Since 2021, for my emergency funds, I am following the approach suggested by vineviz in this excellent thread:

Smarter approach to emergency funds:
viewtopic.php?t=309472

TL;DR (quoting vineviz):
"Slightly overfund the emergency fund and invest it in a very conservative balanced fund (e.g. a fund that is 20% to 30% stocks) such as the Vanguard LifeStrategy Income Fund (VASIX)."

Personally, in my implementation, I am 30% US equities, 10% ex-US equities and 60% long-bonds, using Vanguard ETFs. There is also an element of tax-loss harvesting possible in this approach, by selling the portion of this portfolio which has low/negative cost basis, when an emergency expense needs to be covered.
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Re: What are you all doing for emergency funds?

Post by winterfan »

We keep a small amount in cash in a savings account and we have money in a taxable account that we can tap. My spouse is over 59.5 too, so if there is a real emergency, we can use some of the fixed income investments in his IRA. We also have an open HELOC and credit cards in case it's something we have to pay for immediately.
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Re: What are you all doing for emergency funds?

Post by onourway »

investor.was.here wrote: Fri Sep 17, 2021 3:52 pm

I've considered this in the past as well and I've seen that argument used here before. Mainly, reserves for us are kept in a balanced fund and the argument goes, you don't need a dedicated emergency fund if you have sufficient assets. The opportunity cost of keeping emergency funds exceeds the cost of withdrawing during drawdowns over time. It's a strong argument and I like it. One downside is that liquidity is poor for anything invested, due to tax implications. Other is that invested assets aren't insured. Now that I think about it, we don't have SIPC insured assets to fall back on. Would only apply to cash in the brokerage.

Another option I was considering was a hybrid approach. 66% in NTSX and 33% in Anchor. This strategy would only be used for emergency funds, not long term savings goals (ie reserves).
The tax implications of a brokerage account are, at worst, the same as any interest earned from a bank (normal income tax rate on short-term gains), or better yet, lower, (long-term capital gains). Not to mention the opportunity to tax-loss harvest in bad years. It only appears worse because the potential gains are so much larger.

We keep several months of expenses (generally $50k or so) in checking and savings accounts because it makes cash flow management simpler, then everything else is invested.
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Re: What are you all doing for emergency funds?

Post by ApeAttack »

anon_investor wrote: Fri Sep 17, 2021 5:21 pm EF is now around 10 months of unreduced expenses with about 65% in I Bonds and 35% in savings account/no penalty CDs.

The plan is to shift expiring no penalty CDs to I Bonds and expand EF to 12 months, to ultimately be about 2 months in savings account and 10 months in I Bonds.
I'll be at 2/3 I-Bonds too in about a year, and I think I'll stay at 1/3 cash in a money market account at that point. This is for roughly 12-18 months of expenses.

I'll still keep buying I-Bonds each year as part of the bond portion of my AA.
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Re: What are you all doing for emergency funds?

Post by RXfiles »

mikejuss wrote: Fri Sep 17, 2021 7:42 pm Your emergency-fund money is sitting in a low- or no-interest account for, presumably, a very brief period of time before you spend it. What kind of return do you expect? I wouldn't worry about this.
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Re: What are you all doing for emergency funds?

Post by anon_investor »

ApeAttack wrote: Fri Sep 17, 2021 9:57 pm
anon_investor wrote: Fri Sep 17, 2021 5:21 pm EF is now around 10 months of unreduced expenses with about 65% in I Bonds and 35% in savings account/no penalty CDs.

The plan is to shift expiring no penalty CDs to I Bonds and expand EF to 12 months, to ultimately be about 2 months in savings account and 10 months in I Bonds.
I'll be at 2/3 I-Bonds too in about a year, and I think I'll stay at 1/3 cash in a money market account at that point. This is for roughly 12-18 months of expenses.

I'll still keep buying I-Bonds each year as part of the bond portion of my AA.
What kind of interest are you getting in your money market account?
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Re: What are you all doing for emergency funds?

Post by UpperNwGuy »

Half in two certificates of deposit and the other half in a high yield savings account. I don't understand why so many people here seem to be in a sudden panic about inflation and the low interest rates. I survived the 1970s, so I'm sure I'll survive the 2020s.
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Re: What are you all doing for emergency funds?

Post by Nathan Drake »

M1 Finance margin loans are my emergency fund. 2% interest on your after-tax brokerage account.
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Re: What are you all doing for emergency funds?

Post by pascalwager »

I guess that would be my checking account buffer--up to a point--several thousand $. Don't want to lose the buffer function. Then it would be my investment portfolio in the form of two taxable brokerage accounts. Sell stock funds and rebalance in my three tax-sheltered accounts.
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Re: What are you all doing for emergency funds?

Post by ApeAttack »

anon_investor wrote: Fri Sep 17, 2021 10:08 pm
ApeAttack wrote: Fri Sep 17, 2021 9:57 pm
anon_investor wrote: Fri Sep 17, 2021 5:21 pm EF is now around 10 months of unreduced expenses with about 65% in I Bonds and 35% in savings account/no penalty CDs.

The plan is to shift expiring no penalty CDs to I Bonds and expand EF to 12 months, to ultimately be about 2 months in savings account and 10 months in I Bonds.
I'll be at 2/3 I-Bonds too in about a year, and I think I'll stay at 1/3 cash in a money market account at that point. This is for roughly 12-18 months of expenses.

I'll still keep buying I-Bonds each year as part of the bond portion of my AA.
What kind of interest are you getting in your money market account?
Just the crappy Capital One rate (0.4% last time I checked). At the moment, I still feel a need to hold some money in something I know I can liquidate quickly and that I'm familiar with. However, as the I-Bonds start getting past the 1 year mark I may rethink this strategy. Maybe like 90%+ of my EF can be in I-Bonds.

I'm considering doing a test where I liquidate $25 in I-Bonds (taking a small 3 month interest penalty) just to see how fast I can get the money into my bank account. If it's around 3 days, I would be more willing to put more EF money in I-Bonds.
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Re: What are you all doing for emergency funds?

Post by TierArtz »

Checking: Just enough to pay for bills coming in the next couple of weeks
Savings: $5K
VG Cash Reserves MM: $45K (used for funding Roth IRAs on 02 Jan), and cash-flow hiccups (emergency fund of sorts).
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Re: What are you all doing for emergency funds?

Post by SnowBog »

I no longer consider it a discreet EF, but we keep up to 1 year of expenses in cash (more if we include I Bonds).

We keep a "checking" account with roughly 1 month expenses. Keep another month in saving(s) accounts.

But the bulk of our cash is kept in HMBradley, currently earning 3.5% (with 0.5% credit card bonus added to their top savings tier) on up to $100k. This requires a direct deposit (of at least $2500/month for extra 0.5% CC bonus), and a savings rate of at least 20% (of money deposited, notably credit card payments made from account don't count against savings rate).

HMBradley recently switched back to an invite model, if you can't get an invite you can join the wait list for when they open back up to new customers.

If interested, we build up our HMBradley account throughout the year. Come December we will pull out funds to frontload Backdoor Roths, HSA, 529, I & EE Bond purchases in January. This may cause us to miss the 20% savings threshold and lose the high interest rate for the quarter (while the balance is lower). But as we rebuild the account throughout the year we'll return to the higher rate. Plan to do this for as long as their rates are significantly more then other FDIC insured options.
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Re: What are you all doing for emergency funds?

Post by ivgrivchuck »

investor.was.here wrote: Fri Sep 17, 2021 3:39 pm For us, checking is about 2mo of living expenses and emergency funds about 6mo of expenses. Given that we spend $10-$15k/mo, that's quite a bit of money! Currently, it's split between checking and Ally, basically paying nothing.
Why do you need an emergency fund?

For me I-bonds, credit cards, checking account, brokerage account together guarantee that I have a way to get cash in case of emergency.

I don't need an emergency fund. It is just a mental model for beginners, but not strictly necessary IMO.
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Re: What are you all doing for emergency funds?

Post by bling »

1) paycheck hits bank account.
2) pay off all bills.
3) invest the rest.
4) rinse and repeat.

emergency funds are just mental accounting. i also heavily dislike the term because a lot of people throw out EFs willy-nilly. like, how can a monthly expected expense like your mortgage payment come out of your emergency fund? if we're going to use the definition of the word, emergencies must be unexpected and rare.

for me, my emergency plan goes something like:

1) cash reserves.
2) HELOC.
3) margin.
4) taxable.
5) credit card loan.
5) 529 contributions.
6) roth contributions.
7) 529/roth earnings.
8) does it even matter anymore? i'm broke and no EF would have saved me from this level of distress.

these days, i've even crossed over to the dark side and i just pay off property taxes from my margin account because rates are so low, and then just pay off the loan via my income rather then pre-saving up front. i enjoy the convenience and with the market being bullish came out ahead as well.
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Re: What are you all doing for emergency funds?

Post by anon_investor »

bling wrote: Sat Sep 18, 2021 7:44 am 1) paycheck hits bank account.
2) pay off all bills.
3) invest the rest.
4) rinse and repeat.

emergency funds are just mental accounting. i also heavily dislike the term because a lot of people throw out EFs willy-nilly. like, how can a monthly expected expense like your mortgage payment come out of your emergency fund? if we're going to use the definition of the word, emergencies must be unexpected and rare.

for me, my emergency plan goes something like:

1) cash reserves.
2) HELOC.
3) margin.
4) taxable.
5) credit card loan.
5) 529 contributions.
6) roth contributions.
7) 529/roth earnings.
8) does it even matter anymore? i'm broke and no EF would have saved me from this level of distress.

these days, i've even crossed over to the dark side and i just pay off property taxes from my margin account because rates are so low, and then just pay off the loan via my income rather then pre-saving up front. i enjoy the convenience and with the market being bullish came out ahead as well.
Not concerned about a 2008 scenario?
autopeep
Posts: 223
Joined: Fri Jan 01, 2016 5:30 pm

Re: What are you all doing for emergency funds?

Post by autopeep »

Mutual funds in taxable make up the majority of my assets. Because of that, I recently converted a portion of my EF to a stable value fund in my 403b. Interest on that fund is ~3%.

https://www.bogleheads.org/wiki/Placing ... ed_account
pizzy
Posts: 4339
Joined: Tue Jun 02, 2020 6:59 pm

Re: What are you all doing for emergency funds?

Post by pizzy »

It is just a mental model for beginners
+1
Vanguard/Fidelity | 76% US Stock | 16% Int'l Stock | 8% Cash
EnjoyIt
Posts: 8272
Joined: Sun Dec 29, 2013 7:06 pm

Re: What are you all doing for emergency funds?

Post by EnjoyIt »

KlangFool wrote: Fri Sep 17, 2021 5:35 pm
investor.was.here wrote: Fri Sep 17, 2021 3:39 pm
For us, checking is about 2mo of living expenses and emergency funds about 6mo of expenses. Given that we spend $10-$15k/mo, that's quite a bit of money! Currently, it's split between checking and Ally, basically paying nothing.
investor.was.here,

If you are spending 10K to 15K per month, 8 months of expense earning should not be a problem for you. If you need to care about how much this money is earning, you have a REAL PROBLEM. Your saving rate is too low.

1) What is the size of your investment portfolio?

2) How much do you save and invest per year?

<< that's quite a bit of money!>>

It is not if you are saving 10K to 15K per month.

I keep 2 to 3 years of expense in checking account and money market fund. My portfolio excluding the emergency fund is at 27 years of my expense. I save 1 year of expense every year.

KlangFool
Klangfool,
I understand that recently you were retired and considered yourself financially independent. Now, you have a job but still save 1 year of expenses. Ideally your portfolio will grow as well so that in short order you will be at 29x, 31.5x, 34x, and so forth. Have you considered also increasing your lifestyle expenses to keep in line with your wealth?

I ask because that is what we have done once we became FI. Majority of those new expenses are discretionary and can be cut at any time without adversely affecting our life.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
scrabbler1
Posts: 2798
Joined: Fri Nov 20, 2009 1:39 pm

Re: What are you all doing for emergency funds?

Post by scrabbler1 »

Many people here, including me, use some layered or tiered approach to emergency funds. I don't like tying up any significant part of my portfolio in an account which has zilch or nearly zilch rate of return. My first tier is a small buffer or cushion, around $700, in my local bank's checking account which exceed any minimum balance requirement to avoid monthly fees. This money is quickly and easily accessible, a key part of my first-tier EF.

My second-tier EF is about $40k held in an intermediate-term muni bond fund. This account has checkwriting privileges which adds some accessibility to the money, an important feature. It earns about 2% interest a year, so it isn't earning zilch (nearly $1k a year). There is some risk to principal, but that's okay. In the nearly 30 years I have been in this fund, I have accessed it just under once per year, on average, and have broken even on gains and losses with those sales. Being able to write a check on a moment's notice instead of taking a few days to transfer money to my local bank's checking account is a very useful feature when I needed a large amount of money immediately.
Sonic1968
Posts: 9
Joined: Tue Sep 14, 2021 9:48 am

Re: What are you all doing for emergency funds?

Post by Sonic1968 »

I have a bank account, money maker and now I Bonds
etfan
Posts: 526
Joined: Sun May 16, 2021 4:22 pm

Re: What are you all doing for emergency funds?

Post by etfan »

Horton wrote: Fri Sep 17, 2021 7:19 pm I had mine in a savings account. In a couple weeks, it will be in the Vanguard LifeStrategy Income Fund (VASIX).
Same here.
viewtopic.php?t=309472
I will also begin factoring it into my overall asset allocation.
I do wonder about the necessity of a separate EF if one can just have a portion of their bonds accessible in a taxable account in case of emergencies. Liquidity does not seem like a problem as long as you have 1 month of expenses in a Checking/Savings account, giving you enough time to sell some bonds.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: What are you all doing for emergency funds?

Post by KlangFool »

EnjoyIt wrote: Sat Sep 18, 2021 9:11 am
KlangFool wrote: Fri Sep 17, 2021 5:35 pm
investor.was.here wrote: Fri Sep 17, 2021 3:39 pm
For us, checking is about 2mo of living expenses and emergency funds about 6mo of expenses. Given that we spend $10-$15k/mo, that's quite a bit of money! Currently, it's split between checking and Ally, basically paying nothing.
investor.was.here,

If you are spending 10K to 15K per month, 8 months of expense earning should not be a problem for you. If you need to care about how much this money is earning, you have a REAL PROBLEM. Your saving rate is too low.

1) What is the size of your investment portfolio?

2) How much do you save and invest per year?

<< that's quite a bit of money!>>

It is not if you are saving 10K to 15K per month.

I keep 2 to 3 years of expense in checking account and money market fund. My portfolio excluding the emergency fund is at 27 years of my expense. I save 1 year of expense every year.

KlangFool
Klangfool,
I understand that recently you were retired and considered yourself financially independent. Now, you have a job but still save 1 year of expenses. Ideally your portfolio will grow as well so that in short order you will be at 29x, 31.5x, 34x, and so forth. Have you considered also increasing your lifestyle expenses to keep in line with your wealth?

I ask because that is what we have done once we became FI. Majority of those new expenses are discretionary and can be cut at any time without adversely affecting our life.
EnjoyIt,

Not exactly. I spend more but I am a value conscious person. So, the additional spending has to make sense for me. And, it take time and effort to enjoy some of those stuff.

A) We order take out more.

B) Looking to buy a $3,000 coffee roaster. But, it would take time and effort for me to learn to use the coffee roaster.

C) I am about to pay off my mortgage. So, I could spend 15K more per year even within current annual expense of 60K per year.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: What are you all doing for emergency funds?

Post by KlangFool »

etfan wrote: Sat Sep 18, 2021 9:21 am
I do wonder about the necessity of a separate EF if one can just have a portion of their bonds accessible in a taxable account in case of emergencies.
.
etfan,

But, you pay extra taxes for the bond's interest income. If the taxable account is big enough, why do that? CASH + 100% stock makes a lot more sense.

Bond just does not fit in the taxable account.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
EnjoyIt
Posts: 8272
Joined: Sun Dec 29, 2013 7:06 pm

Re: What are you all doing for emergency funds?

Post by EnjoyIt »

investor.was.here wrote: Fri Sep 17, 2021 3:39 pm For us, checking is about 2mo of living expenses and emergency funds about 6mo of expenses. Given that we spend $10-$15k/mo, that's quite a bit of money! Currently, it's split between checking and Ally, basically paying nothing.

With inflation running at 5%/yr and expected to stay there for 3yrs, it's quite expensive to stick to this strategy. I'm curious what you all are doing about this problem?

[Blockchain technology (cryptocurrency) comments removed by admin LadyGeek]
I have not noticed this addressed so I will ask. What is an emergency for you?

Considering you are on this forum I would assume you are saving 15-20% or more of your income. If not then your emergency fund is the least of your problems. With that in mind again what is an emergency. It shouldn’t be HVAC repair or roof repair, you should be able to pay for it with your income. Medical emergencies don’t count since again you should be able to cover the deductible pretty easily.

In my opinion an emergency for you is losing your job while a recession hits plus or minus a large expense on top. With that in mind, decide how will you cover this expense.

Some things to take into account:

How hard would it be to find employment in a field especially if your industry is in low demand. Some people can find themselves out of work for a year or more.

How much can you cut expenses if times are bad? Do you need to spend $10k-$15k a year or can you cut down to $6k-$8k.

As you can see there are some on this forum who feel they need years of expenses in cash or cash like equivalents. There are others who have plenty of investments in taxable and are willing to tap their investments in an emergency. Only you can decide what you need and what your comfortable with.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
etfan
Posts: 526
Joined: Sun May 16, 2021 4:22 pm

Re: What are you all doing for emergency funds?

Post by etfan »

KlangFool wrote: Sat Sep 18, 2021 9:28 am
etfan wrote: Sat Sep 18, 2021 9:21 am
I do wonder about the necessity of a separate EF if one can just have a portion of their bonds accessible in a taxable account in case of emergencies.
.
etfan,

But, you pay extra taxes for the bond's interest income. If the taxable account is big enough, why do that? CASH + 100% stock makes a lot more sense.

Bond just does not fit in the taxable account.

KlangFool
That's a fair point. I just think of the EF bonds as a better Savings account (which is also taxable).
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