Emergency fund necessary?
I know there have been questions about this before and I know there are different philosophies about this (ramsey, themoneyguys, etc), but I wanted some thoughts on this. I keep about 5 months of expenses in HYSA. At the same bank (my primary) I have another…
I know there have been questions about this before and I know there are different philosophies about this (ramsey, themoneyguys, etc), but I wanted some thoughts on this. I keep about 5 months of expenses in HYSA. At the same bank (my primary) I have another ~12mos of expenses invested (sgov, index funds) that can be liquidated within a few days. I am considering a large, unnecessary purchase that would leave me with as little as 3mos of expenses in HYSA after liquidating sgov and the index funds. But I have enough sick leave and vacation time at work that even if I couldn’t work, it would take about 9mos to burn through. If I got fired, they would have to pay out about 6mos of expenses in parachute money. I have insurance for everything I can think of. And I have a lot of other investments, my FA could always wire me some of that in a matter of days if I really needed it. Is a 6-month emergency fund really necessary if you have other resources?
已收录讨论
well the EF is not only for job loss or time off. It could be an sudden HVAC replacement if you didn't have a sinking fund for it. That can run someone 10k+ easily. It could be for a High deductible home insurance claim? Perhaps you have a 1% deductible, and you have a $1M home. That means, you gotta pay the first $10K in damages before they pay out. AKA you roof is largely on you, your flooded kitchen is on you. etc. Also, the very large/ unnecessary purchase, is this a toy, or a money making thing? investment into a business, or real estate? If it is a toy, is it something you should probably systematically save up for instead of buy on a whim? I'm thinking of a garage queen (sports car). Sounds like you are going to be fine either way, but those are some of the question that pop in my head.
It is a toy (✈️), and I don’t own my own home but there are some other expensive catastrophes that could come to pass in my life. I’m wondering if I need to discuss with the FA and pull from somewhere else.
If you’re buying an airplane, you’ll need the emergency fund at your first inspection. I hope you’ll have built it all the way back up by then. My real advice, don’t buy an airplane unless you are very wealthy.
If you’re providing for just yourself take the risk imo. If you have a family you are providing for then it looks a little different. Also a lot easier to rebuild savings when it’s just you
How confident are you that you could find another job to replace your income? I like to match my emergency fund to the number of months I think it would take me to find replacement income. That very much depends on your skillset and the job market and changes over time.
I would build it back up asap if you do this. Sick pay won’t help if you have a major expensive that comes up, only if you lose your job
I'd you feel like 3 months of emergency money is enough, that's still very reasonable.
If you feel like it's easy to find a similar paying job in your field, sure. But I don't count my emergency fund for things I can predict. I keep separate sinking funds for house/ car/ travel/ hobbies etc.
Is a 6-month emergency fund really necessary if you have other resources? 3-6 months is a starting point, and a good guideline for many people. As with all things personal finance, you should personalize it. If your resources would allow you to comfortably weather the emergencies you need to plan for, then no, you don't need to arbitrarily hold additional resources to prepare for emergencies.
Short answer is no. You have access to money if needed.
The time buffer afforded by emergency savings doesn’t include sick/leave/vacation IMO…it means not earning a paycheck. No job. 17mo is certainly quite conservative. 3 months is less. Not sure how you arrive at the 6 otherwise, or how much of any of this includes work benefits. You figure out what savings buffer you’re comfortable with.
Don't do it. Don't use your emergency money for a discretionary purpose. Save it for an emergency. Spend some of your cash, but keep back 6 months of expenses in your emergency fund. You next emergency might be that your company goes bankrupt, and you lose your job, your sick leave, and your vacation, no severance, no money at all.
No. The recommendation is 3-6 months. But it depends on your risks and situation. Like if you work in an industry that is up and coming and it would be unlikely you'd ever be out of work. Or your work is extremely stable. You can probably take more risks. But it's also not just about job loss. It's HVAC, car repairs, kids broken bones. Etc. The intention of the EF is as a shock absorber to all that so you don't have to sell valuable investments at a time of need. But if you have several million invested and a significant chunk of that is in a brokerage. I mean it's hardly likely that a 20K HVAC repair or a 5K broken arm is going to take you out. There is a certain point you can take a bit more risks. It's usually recommended to have one to avoid selling. But you have to weigh the risks yourself. Just remember that usually when an emergency happens there's often something else not right in the world. These things can and often do go together. Job loss and market down turns. Car repair and sick kids. HVAC and a down market. So... if you feel queezy about selling off your assets in say a 40% dip in the market. Then you absolutely should have an EF.
You may find these links helpful: Emergency Funds "How to handle $" I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.