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Thread: Emergency Fund
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March 20th, 2020, 10:14 PM #11
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March 20th, 2020, 10:36 PM #12Grand Member
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Tioga County,
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Re: Emergency Fund
My working career after college initially I made 2/3rds of my money for the year in 4-5 months, so you had to learn to spread it out over the year. I also had a small ebay business to help.
My mindset is always to keep money to the side because you just do not know.
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March 21st, 2020, 12:09 AM #13Super Member
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Pittsburgh,
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Re: Emergency Fund
My industry is in the tank right now, and I’ll be furloughed for at least 2-3 months. Having 6-8 months worth of savings is keeping my family from having to worry about how the mortgage is gonna get paid, or how we’ll put food on the table.
Every time the wife or I get ‘free’ money, it goes right into savings.
- Pay raises get split between the 401k and savings
- Any bonus’s go into savings
- We keep three separate checking accounts: household, and separate ones for each of us for weekly personal spending
Both paychecks go into the household account. We put an allowance into each personal account, just like any monthly bill.
Gas, eating out, entertainment all comes out of the personal accounts. Drain it before the end of the pay period, oh well.
After bills, groceries, and our allowances, everything that’s left over gets put in the SHTF savings.we weren’t using it, we don’t miss it.
Some pays, if we have to buy shoes for the kid, or make repairs to the house, it’s only $20-30, other pays, we could be sacking a few hundred dollars.
We’re lucky, and both do pretty good for ourselves after 20+ years in our respective careers, so we’ll be ok till this all blows over and my company calls me back. But it took a long time to get there, and I remember what it was like NOT to have that cushion, so I really feel for those who haven’t had the time or opportunity to build a safety net. I have a very smart, young lady who works beneath me, and both she and her husband are now both out of a paycheck, and just haven’t had enough time in the workforce to build a few months of savings.
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March 21st, 2020, 12:32 AM #14
Re: Emergency Fund
Much of what people do day to day needs to be reviewed, determine how much money you spend on a latte, lunch, another latte...and so on. That chump change adds up fast. I told my kids we were going to take they to Disney...many years ago. I told them we were going to save all of our change and use it as spending money during the trip. This trip was about a year away. My kids scoured the house looking for change. They cleaned out the sofas, checked the many drawers we have filled with stuff and change. They raided my wife's jar in the laundry room from money and change she found in pockets...needless to say, we found almost 500 bucks in the time frame, including change I would have from daily purchases. Point is, you need to start small and increase over time...you will never notice it, until its a small pile of cash.
Living within your means is the smartest thing to do. I also learned how to do almost everything...from building houses, to repairs.
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March 21st, 2020, 08:50 AM #15
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March 21st, 2020, 10:30 AM #16
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March 21st, 2020, 12:07 PM #17
Re: Emergency Fund
_^^^. This. My wife hates debt. Pay off your CC’s as best you can, save that credit for when you need it. Get ahead on your home (or buy one) so you can borrow against it if needed. Drive your car a few extra years, buy them used... There are all kinds of strategies and we’ve all heard them before. The trick is find one that works for you and stick to it.
For some this may be a wake up call, to others it may be old hat. Either way, I hope we all make it through these downturns.Last edited by Jhaydeno; March 24th, 2020 at 10:17 AM.
Resistance to tyrants is obedience to God.
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March 21st, 2020, 03:34 PM #18
Re: Emergency Fund
I have basically the same strategy and setup. Online savings that has a reasonable return but isn't checking account easy to tap. I understand the opportunity cost of keeping a lot of cash on the sidelines, and it has been very tempting to "put it to work" while the market was going straight up but sitting here today it feels pretty ok.
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March 21st, 2020, 04:45 PM #19Grand Member
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Re: Emergency Fund
I'm beginning to think my emergency fund needs to come home. I really don't see this ending (the current restrictions) for at least 6 weeks. By then shit's going to be real different.
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March 24th, 2020, 12:56 AM #20Active Member
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Lehigh Twp,
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Re: Emergency Fund
I think an emergency fund is critically important. But I think what goes further is living within your means and minimize leverage. Or like Buffett said, "Don't save what's left after spending, spend what's left after saving". I always said to pay yourself first. I always remembered my Mother's wisdom, your housing cost(rent or mortage) should be less then 1 weeks pay and we lived that. I can distinctly remember talking to a fellow employee at a job placement seminar after we were both laid off. I said at least unemployment would pay my mortgage and my wife's pay will have to take care of the rest. He was single, and said unemployment wouldn't even pay his mortgage. Housing is just part of the costs that need to be kept in line.
Then when you do, you can set a little aside each month or pay period to build up that buffer. If you can't, one strategy is to set a second direct deposit to another account just for the emergency fund. Sometimes we tend to spend what's in the account, and if it's not there we learn to live without it. Kind of like 401k contributions.
But I was always a corporate guy, unemployment while not a goal, was very helpful. Unfortunately in my 30 years, I needed it 4 times, 2 of them at the same time as my wife. I say that because we always kept a small emergency fund opting to keep our money invested in tax deferred accounts. But we knew we could cut way back and collect for a few months until we got a new job. I say all that because if you can't collect, then you need a bigger buffer. We always kept a small buffer, but if you had your own business and were unable to collect, a larger amount would be needed.
One other idea that I am always reluctant to say, is the Roth IRA. If you feel you need to keep your money in the market, Roth IRA contributions are always available. Any earnings must stay in the account, but the contributions may be removed. Not a great idea, but it is available. But now is a perfect example of how that idea can backfire, if you kept the Roth in equities(and it should be), you'd be crying while removing the contributions. If you had it in short duration government bonds, you still have it to remove, but the growth would have been awful low.
That's off the top of my head. But by all mean start with whatever you can and pay into the fund with every pay period or more and I would say once you have 3-6 months of expenses in cash then invest the rest. Another benefit of living under your means is the dollar value of the fund is less.
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