SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Debt of any kind will be poison if the recession morphs into a full-blown depression.
You're right. However, if inflation returns, my fixed interest rate debt will be a good thing. The pundits I read can't seem to make up their mind which is going to happen, but if you ask me a depression is unlikely. I admit freely that I tend towards relentless and sometimes unfounded optimism. I also try to remind myself that probably upwards of 90% of the pundits two years ago were not predicting we'd be where we are now, so I take their predictions with a rather large grain of salt.
*And not "minimum" living expenses; make an accounting of everything you need to get by during a typical month: rent/mortgage, all utilities, insurance, groceries, gas, auto maintenance, prescriptions, etc. If you do owe on a credit card debt and such, retire that debt now if possible.
I use the average of the last 6 months actual in Quicken. That gives me something of a cushion: When unemployed I would not have income/SS/medicare taxes to pay (currently run 18% of my expenses) but I would have job hunting expenses.
**This should be in a savings account, CD, money-market fund or such. Liquid and accessible. A high interest rate is not important. It should not be in a stock and/or bond-owning mutual fund, a variable-life policy, or anything else tricky.
I agree that it should be liquid and accessible. I don't see a problem with having a portion of it in a taxable mutual fund, particularly if the emergency fund in total is overfunded.
For example, if I figure I need 6 months of expenses at $5K per month, that's $30K required. I personally would feel quite comfortable if I had $15K in a savings account and $30K in a taxable Vanguard balanced index mutual fund of some sort. In fact, except for the specific numbers I just used, that is pretty much my current situation and I feel comfortable with it.
As always, JMHO and YMMV.
2Cor521