tag:blogger.com,1999:blog-23550078.post116239349516974902..comments2023-09-29T08:04:32.799-05:00Comments on makingourway: Rethinking emergency fundsmakingourwayhttp://www.blogger.com/profile/13748811641577990850noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-23550078.post-1162754165598406502006-11-05T13:16:00.000-06:002006-11-05T13:16:00.000-06:00I think the "emergency fund" concept is really a w...I think the "emergency fund" concept is really a wake up call for those who have no assets in "taxable accounts". If you don't then your only way of getting cash for an emergency is going into debt against housing equity (if you have it), withdrawing from retirement accounts (if you can) or borrowing on credit cards. For those who have taxable accounts that are pretty large relative to annual expenses, borrowing in an emergency doesn't sound so scary and usually there is some investment that can be sold off to start with - possibly a poor performer...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-23550078.post-1162548017859356562006-11-03T04:00:00.000-06:002006-11-03T04:00:00.000-06:00Yes, it's a bit "uneconomic", but having been unem...Yes, it's a bit "uneconomic", but having been unemployed before after the dotbomb, the last thing I need is the painful feeling of sinking deeper and deeper into debt while wondering if I'll ever find a job, or have the no-pay "job" I may get at a new startup funded.<BR/><BR/>Few people are true examples of homo economicus. Those that manage to pull off that feat, I'll admit, tend to end up rich.Foobaristahttps://www.blogger.com/profile/17695839524769425977noreply@blogger.comtag:blogger.com,1999:blog-23550078.post-1162485308311341612006-11-02T10:35:00.000-06:002006-11-02T10:35:00.000-06:00Two questions come to mind...1. Say you loose your...Two questions come to mind...<BR/><BR/>1. Say you loose your job - now I need a month's salary. Do I pull $$ out of the HELOC each month? Will be kind of strange to use the HELOC to pay the mortgage. <BR/><BR/>2. Rather than 3-6 months salary in a MM account for a 'major' emergency, I can use the equity in my home. How much then should be a 'minor' emergency fund?<BR/><BR/>I really like the discussion. I was trying to ask a similar question over at <A HREF="http://money-and-investing.dogberrypatch.com/archives/dogberrys-personal-financial-management-plan-help-wanted/" REL="nofollow">Dogberry's Personal Finacial Management Plan - Help Wanted</A>.<BR/><BR/><BR/>Dogberry<BR/><A HREF="http://money-and-investing.dogberrypatch.com/" REL="nofollow">Money & Investing Dogberry Patch</A>YeOleImposterhttps://www.blogger.com/profile/01134296290178364775noreply@blogger.comtag:blogger.com,1999:blog-23550078.post-1162475679721912522006-11-02T07:54:00.000-06:002006-11-02T07:54:00.000-06:00Thanks for the wonderful comments.These are my tho...Thanks for the wonderful comments.<BR/>These are my thoughts:<BR/><BR/>1. Lazyman - I think you're doing the right thing with the heloc - it allows you to maximize long term return - provided you have enough assets that could be liquidated to cover the long term debt (incorporating discounts for volatility).<BR/><BR/>2. $2m - we're in the same camp re Lazyman and HELOC.<BR/>I recommend using putting housing savings in a stable value account (MM) unless you have a very long time to save. You might try using quicken's savings goals to accrue savings money for specific purposes:<BR/><BR/>Here are the instructions:<BR/><BR/>"Choose Planning menu > Savings Goals to open the Savings Goal Planner. <BR/>Click New on the button bar. <BR/>Enter a name, amount, and finishing date (date by which you want all money set aside for your goal) for the savings goal. The name you enter will be the name of the account used to track the savings goal."<BR/><BR/>I recommend playing it very careful with savings goals...too many are unmanagable.<BR/><BR/>An alternative is to enter a future dated transaction to remove the money and put the category as the spending source.<BR/><BR/>3. Foobarista - I think you're doing something very similar to what we've been discussing. You're putting your emergency money into a higher return investment - albeit a stable value one - the ibonds.<BR/>Your concern re: digging yourself into debt is something more psychological than economic. In my model, you would only establish enough HELOC such that it could be offset by asset sales (with available assets adjusted for volatility). As long as you knew you would sell an asset to cover the emergency cost, you would be at net zero - if an emergency occurred.<BR/><BR/>I think there are enough ideas here to start creating a planning template.<BR/><BR/>Regards,<BR/>makingourwaymakingourwayhttps://www.blogger.com/profile/13748811641577990850noreply@blogger.comtag:blogger.com,1999:blog-23550078.post-1162443570027298762006-11-01T22:59:00.000-06:002006-11-01T22:59:00.000-06:00I'm in tech, in a notoriously volatile area that s...I'm in tech, in a notoriously volatile area that sometimes has years of downtime, so I have a big long-term efund in I-bonds. They aren't great, but they are currently getting about 6.5% interest, are exempt from state tax - making their effective yield over 7% for us - and are "zero-coupon" so you don't pay taxes until you sell them. I have enough money in these bonds to last about 18 months at our current household burn rate.<BR/><BR/>I have a shorter-term efund with about 2 weeks of expenses in a credit union savings account earning 5%.<BR/><BR/>My own "debt paranoia" prevents me from using debt as an efund - I'd hate the feeling of drifting deeper and deeper into debt while being unemployed.Foobaristahttps://www.blogger.com/profile/17695839524769425977noreply@blogger.comtag:blogger.com,1999:blog-23550078.post-1162408830941675062006-11-01T13:20:00.000-06:002006-11-01T13:20:00.000-06:00Good stuff.I agree on the HELOC - I consider that ...Good stuff.<BR/>I agree on the HELOC - I consider that my emergency fund after my available cash runs out.<BR/><BR/>I never thought about putting together a spending plan or an emergency cash plan - these make a lot of sense. <BR/><BR/>I move monthly monthly to savings accounts but its hard for me to differiate between money I am putting away for emergencies and money for my new home purchase or something. I should find a better way to do this.2millionhttps://www.blogger.com/profile/17168782327023590235noreply@blogger.comtag:blogger.com,1999:blog-23550078.post-1162404448490482752006-11-01T12:07:00.000-06:002006-11-01T12:07:00.000-06:00People laugh at me, but my HELOC is my emergency f...People laugh at me, but my HELOC is my emergency fund. I just don't want to have $25,000+ tied up making 5% in an internet bank. I'd rather have it making 8-12% in the stock market. I can't imagine over the long haul, that I'd have that many emergencies - at least I'd be REALLY unlucky if I did. I'd gladly take an 8% hit on that money for that 5% of the time, in order to have bigger gains for the rest of the 95%.Lazy Man and Moneyhttps://www.blogger.com/profile/00466311860465518498noreply@blogger.com