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Emergency fund

13

Comments

  • HHuskyHHusky Member Posts: 23,791
    edited March 2021
    Whether one holds "too much" cash is often a question of hindsight.

    I hold "too much" cash because I've seen a lot of volatility. I was holding even more "too much" cash in March 2020.

    Still regret not buying additional NE Seattle Real Estate in 2009 though. That is on the very short list of things Mrs. Husky says she was wrong about.
  • creepycougcreepycoug Member Posts: 24,012
    HHusky said:

    Whether one holds "too much" cash is often a question of hindsight.

    I hold "too much" cash because I've seen a lot of volatility. I was holding even more "too much" cash in March 2020.

    Still regret not buying additional NE Seattle Real Estate in 2009 though. That is on the very short list of things Mrs. Husky says she was wrong about.

    I share some of those regrets myself. Agree how much is too much is a hindsight determination.
  • BleachedAnusDawgBleachedAnusDawg Member Posts: 13,104 Standard Supporter
    edited March 2021

    Given the volatility and uncertainty of the times, maybe it's not overly conservative to have a year.

    PS: My fund, which my colleagues and I used to call the "Fuck You" or "Fuck Off" fund, and which is now called the "Oh Shit!" fund, is kept in account that I never look at or think about, and about which my Chief Spending Officer knows nothing. She literally doesn't know it exists. It must be nice to have blonde hair, blue eyes and big tits and go through life wondering why things always just seem to work out for you. Just lucky I guess.
    #mycreep. I've come full circle on you. No homo. NTTAWWT
  • BleachedAnusDawgBleachedAnusDawg Member Posts: 13,104 Standard Supporter
    FireCohen said:

    I am too cash heavy. Over 12 months is fucking stupid, but I am fucking stupid. Need to just invest my way into something

    I think it depends on how much one of those months is worth.
  • Doog_de_JourDoog_de_Jour Member Posts: 8,041 Standard Supporter
    Tequilla said:



    That said, if you ever find yourself in a situation that requires dipping into the savings, your stress levels are already going to be high. Cutting expenses and living effectively bare bones can just add to the stress you're already feeling. Then add to it the stress that you're going to experience trying to go through the job search (which becomes more difficult and niche as you advance in your career), the interviews, and ultimately some rejection, and stress is going to be at a super high level. This is why planning comes into play and making sure that you have enough to cover a rainy day as comfortably as possible.

    This is an exact situation that I went through in my career when I left a company due to downsizing after a divestiture with a decent sized severance package. I was expecting that the amount of time to find a new position would be relatively quick, took a month plus from the search to take a vacation and enjoy the summer, and then found that as I entered into the Holiday season, I was finding it really hard to find the right niche. The stress is very real and in the grand scheme of things I had a relatively low stress situation given my personal circumstance. But there's stress. There's doubt. There's pressure. So to the extent that you can eliminate any of that, my recommendation is to do so.

    Excellent points you made @Tequilla in your full post.

    I can’t think of a way to make this point without it coming off as a judgement, so I’m crossing my fingers that you’ll trust me that I’m highlighting this to make a point so as to (hopefully) flesh out our discussion.

    Several of you have used the term “Fuck You Fund”. I had never heard that (shows how far I have to go I suppose) vs. Emergency Fund. I’m really thinking for any up-and-comers or the basement dwellers looking to get their financial lives back in order poasters we really should differentiate between the two.

    I will never begrudge someone who has the means/resources to take their time recovering from a layoff or life change to take time off and to collect their thoughts etc...but if you’re able to do that, the funds you’re drawing upon aren’t true emergency funds. Maybe “Get My Shot Together” or “Beach Walk Perspective” fund.

    Emergency funds in my opinion are keeping the basic needs taken care like rent, utilities, etc.

    Again, not judging. I’ve experienced being able to take a breath after a layoff *and* being, “oh shit, I gotta find something, ANYTHING, right away”.


    It’s annoying semantics, I know, but shouldn’t those two things be treated differently in financial planning?
  • USMChawkUSMChawk Member Posts: 1,800
    From reading through this thread it occurred to me that my Roth IRA contributions could be accessed in time of extreme emergency. In that case, I have a few years worth of an emergency fund.
  • BearsWiinBearsWiin Member Posts: 5,069
    pawz said:

    The problem with relying on a HELOC for liquidity is the credit lines can be withdrawn - no warning, just gone.

    It happened A LOT in the '08 downturn. Just gone.

    It helps to have nearly a million in equity

    Our current heloc limit brings us to less than 40% of appraised value, so I'm not worried. WF adjusted our heloc limit in 2009, but that heloc limit put us at 80% of appraised value pre-crisis
  • FireCohenFireCohen Member Posts: 21,823

    I think it depends on how much one of those months is worth.
    I am talking high 4 digits per month
  • whlinderwhlinder Member Posts: 5,262

    Yeah, that really is the right take. There's so much psychology wrapped up in finance. Our house Econ PhD mentioned to me when I was asking him for advice about my kid's graduate education that PhD programs now are really focusing on the cross-discipline stuff. He specifically mentioned psych because, in his words, "We have these models and theories that are rational and should predict human behavior and yet so often do not, so the disciplines are working together to try and solve some of those grey areas.
    Behavioral Econ FTW. If I had a time machine to go back to college I would be all over it.
  • doogiedoogie Member Posts: 15,072
    BearsWiin said:

    It helps to have nearly a million in equity

    Our current heloc limit brings us to less than 40% of appraised value, so I'm not worried. WF adjusted our heloc limit in 2009, but that heloc limit put us at 80% of appraised value pre-crisis
    When the Banks are fucked, be prepared for that heloc to vaporize. No warning, just gone. Your 850 credit score, balance sheet at “loan to value” won’t mean jack as it isn’t personal,
  • HoustonHuskyHoustonHusky Member Posts: 5,999
    edited March 2021
    doogie said:

    When the Banks are fucked, be prepared for that heloc to vaporize. No warning, just gone. Your 850 credit score, balance sheet at “loan to value” won’t mean jack as it isn’t personal,
    Agree with this sentiment, but MBS crash 12 years ago proved the Fed won’t let the banks ever get fucked. Or even more than stub their toe. They will be bailed out and forced to loan out to try and stimulate the economy...as long as the Fed is running the show I don’t expect that to change.
  • jecorneljecornel Member Posts: 9,737
    This thread delivers.
  • BearsWiinBearsWiin Member Posts: 5,069

    Agree with this sentiment, but MBS crash 12 years ago proved the Fed won’t let the banks ever get fucked. Or even more than stub their toe. They will be bailed out and forced to loan out to try and stimulate the economy...as long as the Fed is running the show I don’t expect that to change.
    Not only that, but banks take away credit lines more slowly than I can draw on them. WF took four months in 2008-9 to decide to run scared and take away our remaining credit (after they told me they wouldn't, and I paid it down by $60K). Last year we drew $15K pocket money from our heloc immediately when the lockdowns started (paid it back a few months later when it was clear things had stabilized)
  • TequillaTequilla Member Posts: 20,098

    Excellent points you made @Tequilla in your full post.

    I can’t think of a way to make this point without it coming off as a judgement, so I’m crossing my fingers that you’ll trust me that I’m highlighting this to make a point so as to (hopefully) flesh out our discussion.

    Several of you have used the term “Fuck You Fund”. I had never heard that (shows how far I have to go I suppose) vs. Emergency Fund. I’m really thinking for any up-and-comers or the basement dwellers looking to get their financial lives back in order poasters we really should differentiate between the two.

    I will never begrudge someone who has the means/resources to take their time recovering from a layoff or life change to take time off and to collect their thoughts etc...but if you’re able to do that, the funds you’re drawing upon aren’t true emergency funds. Maybe “Get My Shot Together” or “Beach Walk Perspective” fund.

    Emergency funds in my opinion are keeping the basic needs taken care like rent, utilities, etc.

    Again, not judging. I’ve experienced being able to take a breath after a layoff *and* being, “oh shit, I gotta find something, ANYTHING, right away”.


    It’s annoying semantics, I know, but shouldn’t those two things be treated differently in financial planning?
    Best way I can describe it as follows ...

    One of the reasons that I'm a big advocate of having a very decent sized reserve that covers a certain amount of salary is to take away some of the stress that comes with adversity in life. In my experience, stress is best avoided in life and the residual effects of it aren't positive at all.

    In my particular situation, part of the reason I was afforded the opportunity to take such time away was a combination of my settlement/severance package on the way out the door combined with a little bit of a mix of naivety and arrogance about how quickly I'd be able to get through the hiring process. I definitely miscalculated a bit on that one.

    I'd agree with you that depending on where you are in life it changes what you'd consider to be the right amounts or strategies. If you're in a position where it's much more of a struggle to match income with spend, the best advice that I can give is to make sure that you live within your means, don't fall victim to the debt train to live outside of your means, and focus on ways to enhance your financial future (streamline expenses, how can you grow in your career to increase your income, etc.). If you're relatively young in your career, you're in a position where you're growing your nest a bit and having discipline matters. That said, you're probably not in a spot where you can't make sure that you're splurging on yourself from time to time (it's ok to go get that steakhouse steak from time to time in Vegas for instance versus finding the all you can eat buffet once a day).

    I can't overstate how important it is to be financially literate ... life is much easier if you are
  • TequillaTequilla Member Posts: 20,098
    USMChawk said:

    From reading through this thread it occurred to me that my Roth IRA contributions could be accessed in time of extreme emergency. In that case, I have a few years worth of an emergency fund.

    Technically you can access your 401k as well ... but in any event you don't want to access anything where there's a substantial penalty for cashing some or all of it out early.
  • TequillaTequilla Member Posts: 20,098
    whlinder said:

    Behavioral Econ FTW. If I had a time machine to go back to college I would be all over it.
    Behavioral Finance/Econ is so vitally important

    I was lucky enough in my education and experience that behavioral finance was an area that I had a ton of exposure to. Not only is it vitally important to be able to understand how people react and the associated opportunities that arise from it, but it gives you a really great perspective on how you can avoid some of the common pitfalls that others walk in
  • Pitchfork51Pitchfork51 Member Posts: 27,658
    Emergency funds are racist.
  • USMChawkUSMChawk Member Posts: 1,800
    Tequilla said:

    Technically you can access your 401k as well ... but in any event you don't want to access anything where there's a substantial penalty for cashing some or all of it out early.
    That’s why I specified the Roth contributions. You can withdraw all contributions without paying penalties or taxes (of course you’re paying fees to cash out your investments). Again it’s something you could do, not should do. But we are discussing emergency situations, so...
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