"Emergency Fund" thought process?

[HillCountry]

I don't call it emergency fund. I do have 100k+ sitting idle in my two sets of business checking/saving and personal checking/saving and two papal accounts.

 

[audreyh1]

I don't call it emergency fund. I do have 100k+ sitting idle in my two sets of business checking/saving and personal checking/saving and two papal accounts.

Papal accounts? Are you running funds for the Vatican?

 

[youbet]

I retired right into the 2008 - 2009 Great Recession with a well diversified 55/42/3 portfolio and found that it was easy to find liquidity without selling anything that was painful to sell. We had no unusual expenses during this time and did keep up full spending despite the portfolio tanking 30%.

At first I had feelings of regret for not setting aside a mountain of cash for such eventualities, but soon discovered that I didn't need all the money at once. Over the couple of years or so the portfolio was really in the dumpster I found I could collect divs, int and cap gains, take the cash from maturing bonds and even sell a few things as part of rebalancing. So, while I didn't have the security of a dedicated bucket of low-yielding cash to comfort me, I always found not-too-painful ways to come up with spending money.

I still carry only enough low yielding cash to smooth out peaks and valleys of divs, int, CG's and maturing bonds.

YMMV. You need to be able to mentally handle the idea of going into a downturn without a complete road map of how you'll get adequate liquidity without taking any losses but trust yourself and your well diversified portfolio.

 

[HillCountry]

Papal accounts? Are you running funds for the Vatican?

PayPal

 

[audreyh1]

PayPal

Yeah I figured.

 

[Dash man]

Okay, I'm going to throw out the big "what if?"
Think Cyprus, Greece, Argentina and what's happened in those financial systems. What if an event similar to those three countries caused a widespread panic and there were a breakdown in the global financial markets and the government reacted by freezing the financial markets and institutions. Perhaps allowing minimal ATM withdrawals of $300 or so per day per individual and it took weeks or months before our financial systems were settled down, but hyperinflation was raising its ugly head. Debt default was widespread.
Is your "emergency fund" going to be accessible and sufficient?

 

[foxfirev5]

We've always had an emergency fund, something both of our parents drilled into us. And we've had to use it. About 18 years ago the aging A/C in the previous house died and needed replacing and when we took the plenum off it was "Oh, man, that heat exchanger does not look good" so it was time to replace the furnace too. Nice to be able to simply write a check for both. We've had similar things happen - had to replace the A/C here, and had to replace the water line from the meter near the street to the house.

When FIL found he hadn't paid his property taxes we were the only ones in the family (some of which have higher incomes than we do) who could write a check for $3k on one day's notice. We did eventually get repaid.

So yes, it is nice to have a stash of cash to quickly and easily deal with things like that. As others have mentioned there are other ways to deal with things like that but this works for us.

Yep, nothing like cash. Last week during a quarterly inspection I discovered our 22 year old original roof should be replaced. Not a big deal. Who knows what is next?l
We save monthly from our retirement distributions just like we did when we made $150/WK nearly 40 years ago.

 

[Music Lover]

Cash can be important in a "what if" situation. Keep some on hand because you never know...

 

[W2R]

Okay, I'm going to throw out the big "what if?"
Think Cyprus, Greece, Argentina and what's happened in those financial systems. What if an event similar to those three countries caused a widespread panic and there were a breakdown in the global financial markets and the government reacted by freezing the financial markets and institutions. Perhaps allowing minimal ATM withdrawals of $300 or so per day per individual and it took weeks or months before our financial systems were settled down, but hyperinflation was raising its ugly head. Debt default was widespread.
Is your "emergency fund" going to be accessible and sufficient?

$300/day is the same as $109,500/year. You can't protect yourself from all catastrophic scenarios that the human mind can envision, but I'd be fine in the one you describe for about 2-3 years at my present spending level and present value of the dollar. Since I'd probably freak out and cut back severely on my spending, I'd probably be OK for 3-5 years.


Of course hyperinflation could cut any estimate by 100, 1000, 10,000, or whatever, depending on how bad it is. So there is no way that you or anybody can know. I do know that I'd be doing better than most, and if things get too bad it doesn't matter how much money I have because I'd be somebody's dinner.

 

[Rustic23]

We are like Mystang52. I created a 'cash' account and let it build up until the balance would cover just about all the things we need to replace. car/ac/roof/appliance/paint/etc. That fund is now fully funded. However, we continue to save. Money now goes to investments.

 

[jebmke]

Okay, I'm going to throw out the big "what if?"
Think Cyprus, Greece, Argentina and what's happened in those financial systems. What if an event similar to those three countries caused a widespread panic and there were a breakdown in the global financial markets and the government reacted by freezing the financial markets and institutions. Perhaps allowing minimal ATM withdrawals of $300 or so per day per individual and it took weeks or months before our financial systems were settled down, but hyperinflation was raising its ugly head. Debt default was widespread.
Is your "emergency fund" going to be accessible and sufficient?

In the winter we normally have a few hundred migratory geese in the creek. In summer there are at least a few dozen of the local geese on the nearby golf course. I could eat goose for a while. At least I'd finally get some real use out of my 3-iron.

 

[Al in Ohio]

"Emergency Fund" thought process?

I have had no less than 2-3 years of annual expenses in cash my whole adult life. I never lost a minutes sleep over money. Nowadays with low interest rates it is tiered in CDs, muni bonds, tax advantaged balanced funds and such.

 

[Scuba]

In the winter we normally have a few hundred migratory geese in the creek. In summer there are at least a few dozen of the local geese on the nearby golf course. I could eat goose for a while. At least I'd finally get some real use out of my 3-iron.

[emoji23]

 

[Koolau]

Okay, I'm going to throw out the big "what if?"
Think Cyprus, Greece, Argentina and what's happened in those financial systems. What if an event similar to those three countries caused a widespread panic and there were a breakdown in the global financial markets and the government reacted by freezing the financial markets and institutions. Perhaps allowing minimal ATM withdrawals of $300 or so per day per individual and it took weeks or months before our financial systems were settled down, but hyperinflation was raising its ugly head. Debt default was widespread.
Is your "emergency fund" going to be accessible and sufficient?

I guess I should have mentioned this in my post. I hope it's a relatively unlikely situation, but how can one discount it? My parents went through the depression in which they could not get to their cash (what little they had in the bank.) I realize the FED and US Congress have put in place "solutions" to such problems - but that's a bit like fighting the last war since we do not know what might happen with the US or more likely, the world economy. Perhaps that even speaks for PMs held in a safe place, but that's another thread, heh, heh. YMMV

 

[mickeyd]

We no longer have a EF but do maintain a pretty healthy cash reserve stash. Most of it is in Ally online account (soon to go to PMMF) but about 5% sits in a STB fund. I have tapped the savings account from time to time, but have never had to draw down the STB account.

 

[Another Reader]

I have a number of rentals. My total SWAN accounts for them and me average close to six figures. Paid the property taxes for all the properties, including my house, at the beginning of April. Now in the rebuilding phase. Money is spread among three of the majors and several on-line banks. Cash? I think I have seven dollars and some change.

 

[stephenson]

Hi All,

Thank you so much for your thoughtful comments ... and, the funny ones

My sense is that there are a couple different scenarios we all consider re an "emergency fund." The first is the usual setback in the stock market (emergency due to market conditions), second relates to personal emergency (emergency due to personal needs), and third is catastrophic economic system (emergency economic catastrophe).

We have a variety of income sources and a variety of types of holdings, so we should be able to weather both of the first two types ... the third type could be so pervasive, only a great garden and gold might be helpful

Again, thank you all!!!

 

[youbet]

No dedicated liquid emergency fund here. My well diversified FIRE portfolio could easily provide a year's expenses without any painful selling. I'm fully invested in my 60/39/1 AA.