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Old 06-04-2016, 06:01 PM   #21
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If you have enough cash equivalents in a taxable portfolio to cover (say) 6-12 months of expenses, you may not need a dedicated emergency fund. If an emergency hits, you may need to rebalance your taxable portfolio a little bit, but that's a separate issue.

That said, in reality everyone has to assess their own level of comfort in determining the size of that cash reserve.
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Old 06-04-2016, 07:57 PM   #22
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Originally Posted by FI by 2024 View Post
Is there a reason to maintain a separate Emergency Fund if the rest of your finances are set up to absorb hits?

I have about $11K in a dedicated emergency fund. I also have:
>$100K in an easily accessed taxable account
>$20K available credit
>$20K available in cash for other line items (vacation, car expenses, etc)
A very stable job that pays ~2x my expenses

Is there really a reason to maintain an emergency fund at this point? It earns just a few dollars each month sitting in a savings account, when it could be earning far more elsewhere. Since I could easily cover an emergency with the other accounts, it seems silly to let the money languish at .75% APY.
do you have several emergency funds already? maybe. The idea of an emergency account is so you don't have to sell investments at a bad time. your 20k credit should cover that... you don't define the 100k account well enough to see how it fits. your vacation account may work if never runs dry.
for those RE... some cash for the next year or two works well too.
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Old 06-04-2016, 09:58 PM   #23
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Well, this is a very timely topic - up until the last few years, my cash/emergency fund was basically two months expenses..(10K) now, I really do not no what has happened, but I now keep in excess of 200k in liquid cash - I am just do not feel comfortable as in the past- I feel the world has become a little crazy. I am FI and have a well diversified portfolio
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Old 06-05-2016, 05:37 AM   #24
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You need to define for yourself what a true emergency is. Is it an ongoing emergency, or a one-time expense? Is it a $4K expense, or a $10K expense? Is it a rental expense, or one for your own home or car? Or is it a 'great deal' expense, something that you cannot pass up? Or an unexpected tax withholding expense. Then, have many alternate plans to fund it.

To me, an unexpected expense is a one-time lifetime event. You may have several of these, but they are truly unexpected. A new roof should not be unexpected. Nor should a new furnace or major car expense be unexpected. You may not know the timing, but you know it is expected. A major healthcare expense would be considered unexpected. Or a major weather event.

You should be able to fund an expense at least equal to 2-3 months worth of extra spending at one time, maybe a year's worth. If you spend $5K a month, have a ready/instantaneous source of cash that can cover that and then some.

A ready source of cash can be savings, HELOC, a credit card, selling a bond/CD, or even selling equities. You should have a priority system in place to take the least expensive cash first.

I do not have a specific emergency fund. I have a bit of cash in my safe. I have some liquid cash in my checking and savings accounts. I have a bit of cash in my investment accounts. I can wait for next month's rent to come in. I can take my dividends. I can sell some equities. I can charge something on my CC(s). I can borrow some from a property.

An emergency fund, is more of an emergency strategy. Not a place that I have cash sitting waiting fir the emergency.
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Old 06-05-2016, 06:47 AM   #25
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We have ~$11K in a local savings account. It is both an emergency fund and immediate source of cash for DW as she sorts things out if I die first...really more for the latter purpose than the former.
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Old 06-05-2016, 07:00 AM   #26
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Isn't all the talk about emergency fund really for those who are financially ignorant? Meaning most of us have figured this out to some degree. This being live below your means, invest prudently, etc etc. Most of us really don't need emergency funds because we're not so financially challenged that we can't handle it when our refrigerator fails or whatever.

We don't have anything called our emergency fund, but we do have $200k sitting in savings/checking/taxable cash equivalents. Too much for my liking, but it helps the DW sleep better.
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Old 06-05-2016, 02:36 PM   #27
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I'm over 60 so I can access IRAs without tax penalty.

No need for a separate emergency fund.
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Any point at which an Emergency Fund becomes unnecessary?
Old 06-05-2016, 09:21 PM   #28
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Any point at which an Emergency Fund becomes unnecessary?

What Senator said.

If the #%*^ really hits the fan, I'd tap every bit of our net worth and credit sources as needed to address it. IOW, it's ALL emergency fund, plus a $2 million umbrella liability policy. This is because:
A) I prefer to stay fully-invested, and
B) I manage the "emergencies" (really just temporary cash flow needs) we've had to date with an unsecured line of credit. The pain of periodically having some LOC debt motivates me pay it off out of salary earnings ASAP in a way that spending some of my excess cash then paying my lazy self back would not. It's all psychological.
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Old 06-05-2016, 09:36 PM   #29
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We have a 30K of EF in our bank in MM account which is about 6 months of monthly expenses.

We do not touch this at all, unless it meets:

Medical emergency

or

death

We keep a minimum of about 5k in checking and another $5K in savings account to pay for other type of expenses outside regular monthly bills like oil change, tire replacements, or AC compressor at 100 degree heat. Anytime we have expenses that we cannot absorb with our checking balance we use our savings to pay for it--like a major car repairs (timing belt or a new a garage opener/labor installation). But that's only happen one or maybe twice a year (can't remember really). Our checking account fund mostly 98% of our monthly needs/expenses.

We also have another 5K in Vanguard (Wellington fund) that we add $300 weekly (automatic setup) that fund family vacation and daughter's catholic school tuition. We just wrote a check last month for next year's school year. We save a year in advance so we can always pay the entire school year in lump sum when its due.
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Old 06-06-2016, 01:15 AM   #30
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We're still working. As kind of a default, our emergency fund ends up being the minimum account balances of two shared "working" accounts which keep the accounts fee free for us. The minimum balances could cover our core expenses for 6-9 months.

One additional strategy I'd like to employ is setting up a line of credit against the house which could give us a little more flexibility if we end up in a bind and are short on liquidity.
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Old 06-06-2016, 01:53 AM   #31
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The most likely emergency for a 65 year old retired guy is medical related. Have to go to US for open heart surgery overnight. How much could it be? Maybe 200-500k Max. We have that covered.
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Old 06-07-2016, 10:03 AM   #32
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I no longer have an emergency fund. I used to save up 6 months to a year's worth of living expenses, which I would always ball park around $2k (its actually around $2,333 but $2k is close enough).

I stopped because I have monthly income from my taxable brokerage account of around $1,800 from multiple CEFs. Once I get that income to $2,333 (i.e. $28k) I will be theoretically financially independent.

Before I would retire I'd like to have 3 years living expenses in cash. So I'll have an emergency fund again at some point.
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Old 06-07-2016, 10:10 AM   #33
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The most likely emergency for a 65 year old retired guy is medical related. Have to go to US for open heart surgery overnight. How much could it be? Maybe 200-500k Max. We have that covered.
That kind of money doesn't need to be paid out all at once.

And that assumes you don't have insurance.

It's hard to imagine immediate emergencies that $20K would cover more than adequately and give you time to unwind non-cash assets.
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Old 06-08-2016, 01:55 AM   #34
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That kind of money doesn't need to be paid out all at once.

And that assumes you don't have insurance.

It's hard to imagine immediate emergencies that $20K would cover more than adequately and give you time to unwind non-cash assets.
Generally agree. But most insurance in Canada would not pay for anything they think is elective or could be handled by the system in Canada. I'm thinking of something that is serious but for whatever reason might not be done right away in Canada. A short trip to the Cleveland clinic will have it done next day, but obviously will be expensive.
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Old 06-08-2016, 10:00 AM   #35
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Quote:
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The most likely emergency for a 65 year old retired guy is medical related. Have to go to US for open heart surgery overnight. How much could it be? Maybe 200-500k Max. We have that covered.
I find emergency coverage is excellent and timely. Elective surgery is much worse and, if you don't want to endure a year of pain, then paying seems to be the best option. One of our rich friends decided to tough it out because the post-op recovery for the hip replacement would take too many months away from home.

And one of our friends is in the hospital on antibiotics awaiting her open heart surgery. She could be on home care but she is not in her neighborhood hospital and they refused to handle her as an outpatient (Richmond General). So she takes up a bed in St Pauls instead.
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