How much is your emergency fund? My husband and I are DINKS with 5K monthly expenses but (because we are very privileged) live near family who could help us if something happened. We only keep 5K in our emergency fund because I want to invest as much as I can in index funds.

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$7K for me. I only try to keep around 2 months worth (it's actually been several thousand lower because I keep investing into this market).

I do have a mortgage now, so even if I stayed with family, the payments still need to be made.

If I had an emergency that required significantly more funds for whatever reason I have:

1) taxable investments I can borrow against at a relatively low interest rate
2) ROTH IRA contributions I can pull from
3) credit card that I can charge to essential buy a month of time before paying off

likehelpful

If I lost my job then:

1) I'd most likely receive severance
2) 1-3 that I mentioned above would cover costs and buy me time
3) based on my experiences, I do not think it would be hard for me to find work in tax...

It's tax... Companies can not escape this reporting obligation.

I could find a role that pays 3x less than what I currently make and it would still be enough to cover expenses.

Also keep in mind that I don't have a family I'm supporting. If I was, then I'd probably do at least 4 months of savings (and those savings would be higher due to child care costs).

likehelpful

I do not think an emergency fund is necessary for DINKs making a lot of money quite frankly. I would put everything in a well-diversified portfolio in that situation

likehelpful

6 months living expenses minimum.

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I have done this, great way to save and earn a little something

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I’ve got 6months, with 1/4 cash as from minimum chqing acct balances. The rest is invested in balanced index funds. An interest only line of credit is available for extreme/prolonged emergencies.

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My wife and I (we’re both women) keep $60K in cash, which could cover 6-12 months of expenses depending on circumstances. I had to negotiate this down from $100K with her because she is fearful of investing and prefers hoarding cash, whereas I am aggressive with investing and prefer to buy index funds- and not lose out on those returns unnecessarily like you said.

I do think $5K is far too little. I’d say $20K minimum to make sure you don’t have to incur capital gains taxes etc from withdrawing from a taxable brokerage account, or so you have cash to pay off big bills going on a credit card. (eg medical emergency, need new car after car crash, urgent home repair)

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You can borrow against your investments at a relatively low interest rate. You don't need to sell anything. I can understand wanting to hold more cash now, but it's also important to recognize ideal times to plow money into the market so maybe some balance could be struck? (But this also may not matter much - see below).

Cash savings as a % of net worth is irrelevant. Only important numbers are your total retirement target goal, the annual savings required to get there using conservative avg rate of return, and your monthly expenses. If you're keeping an emergency fund based on your monthly expenses and you're still on track an early retirement goal, then you're all set and have lower risk = probably less stress and more comfort.

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Aren’t all you with 6 months in emergency funds (im guessing thats anywhere from 30-60K) missing out on so many market gains? It seems silly to me to have that much cash on hand even though I know its the conventional wisdom. (Esp people without a mortgage).

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Yeah even at $17k a month - $600k is like three years - that seems really conservative.

I like being close to a year and thought I trended pretty conservative. Three years seems over the top. Especially if a lot of this is child care - presumably it will go down over the next couple years?

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Just curious for people who only save up for emergency fund. Where do you guys get your down payment for houses or property. Do you guys eventually sell off or is that another savings not considered in your emergency fund?

likehelpful

I guess it depends how much you want to buy and how soon. Before I bought - I just threw everything I could in a savings account - nothing was specifically earmarked as downpayment funds or emergency.

My wife and I basically maxed 401ks and everything else went to a savings account

likehelpful

I'm like you, $5k super liquid (basic savings), above & beyond semi-liquid (funds). You can liquidate within 1-3 business days and if there's a fire type emergency we have like $30k+ in available credit if it's a "have to pay right this minute" emergency.

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150k emergency

I keep six months of expenses for us liquid, so wife and I leave little over $60,000 in a HYSA.

I’d say keep two months in a high yield savings account. If you’re a white collar professional, you likely won’t be unemployed for long if you’re let go (even if you have a make a little less for a while). And am I lost, does not one treat equities like an emergency? I know it’s not ideal to sell at a loss but…thus the term “emergency” right? If you’ve got 100k+ sitting in stocks and two mos worth in savings, you’re covered for an emergency. Anything required more than this is an apocalypse

Yes. If those investments are primarily low cost index funds (US/int'l) I'd consider it relatively safe enough to borrow against. No need to sell anything..

This is what wealthy people do. Invest, borrow, and die (all tax related).

You incur the cost of the interest for hopefully a short time period and get to mostly pay back on your own terms without risking any impact to your credit. No need for personal loan at a higher interest rate and certainly no need for a 25%+ APR credit card (although 0% balance transfers are option - but risky if you have no income for over a year).

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