"Emergency Fund Savings" -- Questions and Discussion (Full Version)

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"Emergency Fund Savings" -- Questions and Discussion


We have a fully-funded Emergency Fund.
  13% (12)
We have a partially-funded Emergency Fund.
  12% (11)
We do not have an Emergency Fund.
  8% (7)
$1000 is enough for an Emergency Fund.
  2% (2)
3 months expenses is enough for an Emergency Fund.
  6% (6)
6 months expenses is enough for an Emergency Fund.
  12% (11)
You need MORE than 6 months of expenses in an Emergency Fund.
  5% (5)
We are completely debt-free (including mortgage).
  5% (5)
We are debt-free, except for mortgage.
  11% (10)
Our priority right now is debt reduction, not Emergency Fund building.
  9% (8)
We cannot afford to put money into an Emergency Fund right now.
  5% (5)
Our "Emergency Fund" plan would be to borrow against our home.
  2% (2)
Our "Emergency Fund" Plan would be to use credit cards.
  3% (3)


Total Votes : 87
(last vote on : 4/27/2008 5:52:47 PM)
(Poll will run till: -- )


Message

Harvie -> "Emergency Fund Savings" -- Questions and Discussion (4/10/2008 12:55:07 PM)

We've been diligently working the past few years to build up our Emergency Fund Savings. Of course, there's always the question of how much is "enough" .... and if you look at different websites and experts, the advice that they give is all over the map. Of course, more is better ... but at what point can you stop putting money into and emergency fund and start actually spending? (Not spending the money in the fund, but spending new money rather than adding to the fund?)

And how much is needed? 3 or 6 or 8 months of expenses? ALL expenses, or just NECESSARY expenses? (After all, in a financial crisis, some of our recurring monthly expenses would get canceled ... cable, cell phone, spider guy, etc.)

How much is a realistic savings goal? (Not an "ideal" goal, but an actual, attainable/possible goal?)

Multiple answers allowed. All related comments welcomed.



GroupW -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/10/2008 1:03:11 PM)

I don't think there's a hard and fast rule. For me, 6 months is definitely not enough. If I lost my job, it would take me the better part of a year or more to find another (at least in the current environment). For me, 12-18 months is probably closer to the mark. Given the sum of money that is involved with that time period though, I'd probably not keep it in money market type investments.

For some people 2-3 months might be sufficient. It depends to some degree on how easy it is to find another job, the amount of disability income you might have, how long it would take you to adjust your expense levels to rock bottom, and what kind of standard of living you would like to protect while you're unemployed, etc.

I don't think there's a hard and fast rule here. To some degree, you have to sit down and do the math for yourself and figure out how much risk you're willing to take.

BT



Harvie -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/10/2008 1:08:13 PM)

While I see your point, I just don't know how "attainable" or "realistic" it is (at least for us) to have a goal of having 12-18 months of expenses saved up .... that would probably take us 20+ years to achieve .... and by then my wonderful DH would be retired, anyway.

Do you think that telling people to have 12-18 months of expenses saved up might be a bit daunting? (By that, does it seem so high and unattainable that people get discouraged and don't even try?)



danas_mom -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/10/2008 1:46:34 PM)

I voted as follows:

We have a partially funded emergency fund;

$1000 is enough for an emergency fund;

Our priority right now is debt reductions; and

We cannot afford to put money in an emergency fund right now.

I realize those may sound a bit conflicting, but here's what we have done -

We recently put $1000 into a savings account (from the tax refund) as an emergency fund. We have had to draw against it a couple of times and have about $750 left. (We also have about $350 in an out of state credit union that we keep on hand for yearly optical expenses not covered by insurance, but I don't count that as emergency savings.) Hubby would not have any problem finding another job if he were to lose his current job for any reason, so I consider $1000 for unexpected auto repairs, major appliance replacement, etc to be sufficient. We cannot afford to continually fund the emergency fund, so we put money back when we can out of tax refunds, school money, etc.



BlueAdept -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/10/2008 2:48:15 PM)

If you have most (all) of your debts paid off, then the month costs of living. Food, Gas for the car, eletric, ... etc.... you should have 6-8 months of those. Chances are if you are debt free that reduced the total amount you would need.

Having said that, it is perfectly reasonable to say you need enough to continue living until you find new employement. If someone thinks it might take 12-18 months, then they need that much set aside for an emergncy fund. However, they also need to consider if they should not take a part-time or different job while looking for that new position.

If you were to loose a job, you would get 26+ weeks (who knows how many now) unemployement compensation. That would reduce the amount you would need in the first 6 months. You would likely find that some of the monthly costs associated with work would not continue to be there. However there are other costs that might be there that were not.



GroupW -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/10/2008 3:42:44 PM)

quote:

ORIGINAL: Harvie

While I see your point, I just don't know how "attainable" or "realistic" it is (at least for us) to have a goal of having 12-18 months of expenses saved up .... that would probably take us 20+ years to achieve .... and by then my wonderful DH would be retired, anyway.

Do you think that telling people to have 12-18 months of expenses saved up might be a bit daunting? (By that, does it seem so high and unattainable that people get discouraged and don't even try?)


I don't think that's realistic either for most people. Given my chosen career, I'm in a little bit of an abnormal situation. I only mention that to demonstrate that everyone's situation is a bit different. For many folks, 2-3 months might be more than enough. I just think everyone needs to sit down and walk through the numbers for themselves. First, it gives some peace of mind that you really do have a kitty set aside and that it's sufficient. Second, so you don't under or oversave for emergencies. Oversaving can be bad as well if you keep the emergency funds sitting in a low earning account somewhere when it could be invested in higher yielding opportunities.



paulsbride -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/10/2008 3:47:52 PM)

We have a partially funded Emergency fund - we want to have two months income in our Emergency fund, and we are 2/3 of the way there.
Two months income could allow us to continue living as we are right now for two months (with money still going into savings), or three months with minor tweaking, or four months with major cut backs/eliminating things.

Our goal right now is debt reduction (car, which will be paid off in a month or two and school debt) so the majority of our extra money right now is going to pay off debt, but we do feel comfortable with the Emergency Fund we currently have in place.



peace77 -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/11/2008 12:06:12 PM)

It used to be that a worker could find a new job that paid the same or better in just a couple of months.
Now it takes several months to year and often longer to find a job and that often means taking a pay cut or settling for less than you had before.

It used to be that companies were generous with sick leave, now many companies don't offer it or offer just a few days and are not willing to hold your job until your return.

It used to be that a person could pay a medical bill in a reasonable amount of time even if they had to make payments. But now, medical bills even for a short stay in the hospital or recuperating in a nursing home can force a family into bankruptcy.

It used to be that car manufacturers made cars that could withstand a fender bender. In efforts to save weight and increase gas mileage, bumpers have become little more than decoration. Minor accidents can easily result in huge repair bills.

Financial planners used to advise people to save 3 months worth of expenses and that was sufficient.

It just isn't sufficient any more. Often, people are hit with a double or triple whammy of job loss, medical bills and sometimes car repair bills.
Therefore, some financial advisors increased their recommendation to 6 months worth of savings. Suze Orman recommends 8 (eight) months worth of expenses in savings.

Here is an ARTICLEabout emergency savings. It includes an explanation of a Beginner Emergency Fund.

The Beginner Emergency Fund is for those who are focused on paying off debt. It means to first save $1,000 (or $500) for those who have incomes under $20,000.


Peace,
Anne



10SNE1? -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/11/2008 12:33:35 PM)

I voted totally debt-free( including mortgage) and fully-funded emergency fund.

However, we are in our mid-40s and with a waay above average household income.

I didn't vote on the question of adequate emergency fund because I agree that it just isn't one size fits all.

I wanted to caution those of you who say " hubby could get another job, no problem." We would have said that several years ago as well. Then Enron happened. While my hubby wasn't with Anderson, he is in the field and we watched many "innocent victims" lose significant salaries overnight and then have to seek employment while saddled with the sigma of their previous employer. Good men and women who could have " written their own ticket" one day found themselves "lepers" the next.

An at-fault accident, an accusation, a temporary lapse in judgment on the part of you or someone else can wreck a career.

We don't need to "fear" that but we shouldn't plan as if our incomes can be easily restored no matter what.

Ok Harvie, I got to ask: Just what is a spider guy? Cause if that is the guy who keeps you home from being overrun by spiders....that isn't a "luxury" in my book. [8D]



NoShow -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/11/2008 1:07:31 PM)

I voted fully funded.

The Rule of thumb I give when asked is to first base it on your age. For the typical person, as they go from first entering the workforce to a veteran of, along the path "replacement" jobs become more scarce as you move from entry-level to more specialized. Also, most people "hard commit" a larger percentage of their income as time goes by.

So I use; in your 20's have 1.5 months, 30's have 3 months, 40's have 6 months, 50's have 12 months and 60's have 24 months. Then adjust it to your individual situation. Most people incorrectly adjust it down.

I started build an Emergency Fund (I call it my Reserve, which only is used to replace loss of income, my Emergency fund is to cover unexpected timing-wise things and is equal to one months income) at the same time I started short, medium and long term savings and retirement.



NoShow -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/11/2008 1:16:01 PM)

quote:

ORIGINAL: 10SNE1?

I wanted to caution those of you who say " hubby could get another job, no problem."


To me, the Emergency fund (or what I call Reserve) is to replace loss of income. So it's also there for medical issues. I've known a number of people that "couldn't" work due to medical situations. Even if they had some form of disability, most still had a significant "gap" to fill between the benefits they received and the expenses they had. Same thing with unemployment income, most still have a gap to fill.

Though one may be "willing" to work, doesn't necessarily insure one will be "able" to.



LCannon -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/11/2008 2:09:15 PM)

My "Emergency Fund Savings" is my mutual funds held in my broker's(firm's) name. That accomplishes two things(at least), it grows(hopefully<teehee>)over time(I contribute monthly plus it grows over time) and I can withdraw cash from it after seven day settlement. I also have access to a small amount of($3-5000)cash via my Money Market account for immediate cash.



Consecrated2God -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/12/2008 8:27:02 AM)

Our emergency fund isn't fully funded yet, but at this point we're not sure how much we're going to save back as our emergency fund before we move on to the next baby step and start retirement saving. My husband wants to start after we get 3 months worth of expenses, and I'm thinking maybe we should aim for 6. We've only got about $2500 saved back so far, so we've got some time to discuss it first before we have to make a decision. [;)]

If he got laid off, our expenses would go up, not down. He's a full time pastor and we live in a parsonage, so we'd have to find a place to rent. However, there are plenty of churches open and he could probably find another church fairly quickly, and the likelihood of him being laid off is very slim at this point, so it's hard to know how many months to save for.

We have no debt. We're putting back $160 a month right now. Our plan was at this stage in our lives to be putting back $220 a month, but our income isn't quite big enough now to cover the difference. I could work, but I haven't had any luck getting a job yet and I'm starting to play around with the idea of some other ways of making money besides getting a job again.



Miss Giggles -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/12/2008 11:07:53 AM)

I am working on mine. I am aiming at 3 months first and then will do 6 months but will have to pay some debt down first.

It's hard to say how long it would take to find a job. I was out of work for 3 months a year or two ago and I did ok with unemployment. This states economy is bad but other states are hiring for my field.. so it depends on what you do. The people that are having the hardest time finding a job right now are those close to retirement and with limited skills (like people that put 30 years on the line) and there definitely is age discrimination. In the meantime the hospitals are paying for people to come in from other countries to work as nurses and stuff.

Although some recruiters are saying that they have positions that aren't being filled because there are so many people leaving the state.. not sure how true that is.



Harvie -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/13/2008 2:26:04 AM)

quote:

ORIGINAL: 10SNE1?

Ok Harvie, I got to ask: Just what is a spider guy? Cause if that is the guy who keeps you home from being overrun by spiders....that isn't a "luxury" in my book. [8D]


You've got it. We have quite a spider problem around here, so we have a pest control company (called The Spider Guy) who comes once a month to spray.

(((( .. )))) <---- spider!!!



iSERVEaJEW -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/13/2008 2:55:50 AM)

quote:

ORIGINAL: Harvie

We've been diligently working the past few years to build up our Emergency Fund Savings. Of course, there's always the question of how much is "enough" .... and if you look at different websites and experts, the advice that they give is all over the map. Of course, more is better ... but at what point can you stop putting money into and emergency fund and start actually spending? (Not spending the money in the fund, but spending new money rather than adding to the fund?)

And how much is needed? 3 or 6 or 8 months of expenses? ALL expenses, or just NECESSARY expenses? (After all, in a financial crisis, some of our recurring monthly expenses would get canceled ... cable, cell phone, spider guy, etc.)

How much is a realistic savings goal? (Not an "ideal" goal, but an actual, attainable/possible goal?)

Multiple answers allowed. All related comments welcomed.

Have you considered actual gold and silver coins? If things get really bad with the economy the price of the dollar might continue to drop and the price of gold/silver might rise.

I also see having dehydrated food for my family as more important than money.

http://www.efoodsdirect.com/



3cappuccinosmom -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/13/2008 8:14:08 AM)

Well, my dh would like to have 10K sitting there waiting for disaster, but since his income is 30K, that's gonna take a loong time.

However, we do have enough for 4-6 months of expenses. We are already very conservative spenders, so there wouldn't be much cutting down to do, I could maybe cut 100 bucks out of what we spend, unless dh suddenly took a liking to beans. [:D]

I voted wrong--we are completely debt free, no mortgage right now. Not having the house payment is what has allowed us to save so much.



creationtalk -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/20/2008 1:05:50 AM)

I really don't know how to reply to this.

I have money in savings...a few months worth I think. I have no idea how much money I need in savings. I am very good at what I do, but it is highly specialized, so depending on the next president, the job could disappear without much hope of finding another anytime soon. I'd love to have enough in savings that I can pay off all debt at once (until this month, I was earning more on my CD's than my highest consumer debt). I am paying down debt--goal is debt free (except mortgage) in 4 years, though 5 might be a bit more realistic. Just got a promotion and pay raise at work--90% of net will go to debt.



stellaluna -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/20/2008 10:04:14 AM)

We are debt-free as of next month...just a few hundred dollars left to pay off. And we have about three months worth of salary in savings, but we plan to double it by September. We want the money for moving expenses, but we should end up with the vast majority of that money still in the account after moving expenses are paid.



buckifn -> RE: "Emergency Fund Savings" -- Questions and Discussion (4/20/2008 8:22:24 PM)

I would say at least enough to cover 8 months of having no income at all...I would also say stocking non-perishable foods and bottled water is a good idea.... 3 months or so of that isn't unreasonable imo........we also keep emerg supplies in our vehicles ..food and drinks for 3 days, blankets, etc....another thing to stock up on is batteries for a radio you know would work in an emerg. 7 days without electricity due to an ice storm taught us quite a few lessons about being prepared.



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