Comments on: The Layers of an Emergency Fund

By: The Layers of an Emergency Fund - Rockstar Finance

The Layers of an Emergency Fund - Rockstar Finance — Sun, 30 Nov 2014 14:26:44 +0000

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By: Kipp

Kipp — Tue, 04 Nov 2014 18:11:16 +0000

Thanks Ginger, I feel that it is important to consider all available funds in case of a dire emergency.

By: Ginger

Ginger — Sun, 02 Nov 2014 21:52:18 +0000

I like that you included your Roth IRA in your EF, so few people do but I think it is an important part of one.

By: Week End Round Up #47 - Debt DisciplineDebt Discipline

Week End Round Up #47 - Debt DisciplineDebt Discipline — Thu, 04 Sep 2014 17:32:21 +0000

[…] The Layers of an Emergency Fund @ Frankly Frugal Finance […]

By: Kipp

Kipp — Thu, 04 Sep 2014 16:13:44 +0000

Hi Jason,

It sounds like you have a very good plan in case if things go south. Interesting you consider your entire net worth your emergency fund, but I suppose it makes sense. There are usually a few things you will keep like a house but if it came down to it, most of us could downsize if need be or find other things that we could sell.

Great that you know where you can cut down on spending as well!

Kipp

By: Bilgefisher

Bilgefisher — Thu, 04 Sep 2014 15:46:52 +0000

My wife and I think in terms of time. Our net worth is our emergency fund, it just matters how quickly we can utilize it.

We have cash reserves at our credit union for a few months or sudden large expense. We have stocks, p2p lending, helocs and 401k loans for past 6 months, and we can sell real estate if we need to move past several years.

The nice thing part is those funds are based off today’s spending. We have a list of items we can cut at any time to extend our reserves.

Jason

By: Kipp

Kipp — Sun, 31 Aug 2014 13:08:59 +0000

Hi Tommy,

Wow $500 a month cut out, that is impressive! Great job not bringing back those lifestyle costs and continuing to save it! If I were to take that same approach I would have $9,600 needed for emergency fund. Which cash wise I plan on being fairly close, around mid $6,000’s. So once my brokerage account grows a bit more I will be there.

Age 51 is a great time to retire! I have went through and crunched my numbers and plan on getting a post together for that. It looks like I could “retire” at 43, but I would want to maybe get a little more income in or work part time to get together money for traveling. But as long as all of my basic needs (plus a few luxuries) are covered, I would be financially independent which is pretty exciting to think about.

By: Kipp

Kipp — Sun, 31 Aug 2014 12:58:04 +0000

I wouldn’t worry too much about the money being in a brokerage account for the long term. With $8,000 in your first two layers in probably wouldn’t be any time soon that you would not have to touch the brokerage account. That beings said, in it is in there long term it is unlikely to lose money over say a 10 year period even right after a market crash. I wouldn’t say it is impossible, but it isn’t very likely.

And yes 1% interest is depressing.

By: LeisureFreak Tommy

LeisureFreak Tommy — Sun, 31 Aug 2014 03:47:50 +0000

Great post. I like your layer approach. When I was 40 I decided a year’s worth of mortgage payments was the ideal emergency fund amount as I figured I could pay the rest of our essential expenses with unemployment payments or other ways if I had to. For us then it meant $12K which we dug in, cut spending waste and dedicated $500 a month to a Money Market Fund. Once $12K was achieved I just contributed the $500 a month to Roth IRAs for the Bride and I knowing it was available in a worst case scenario as you pointed out. I never had to hit the emergency fund and since retiring early at age 51 I now just keep $10K in an emergency fund at a credit union savings account. Even though it is dead money as far as earnings, it is readily available. I hope I never have to hit it either.
Prost!

By: Cecilia@thesingledollar

Cecilia@thesingledollar — Sat, 30 Aug 2014 19:17:56 +0000

This was an interesting post. I don’t have that much saved up in my EF yet, but ideally I’d like to get to a point where I had a year’s expenses (that’s a $12,000 bare bones budget, or, if I wanted to keep up my current lifestyle, about $35,000) available with relatively little hassle and without getting into my retirement accounts.

And…I sort of do. Because I have that much available on my credit cards. Oof. Right now, they really are my “e-fund,” which, yes, is scary. I want a real e-fund built up so that I don’t end up having to make that choice! It’s not so easy to do on a teacher’s salary, so I guess I’m just hoping emergencies hold off until I can get a little more saving done.

In my ideal world, I’d have $2000 in straight cash, $6000 in a CD ladder, and $25,000 in a taxable brokerage account, I guess. I worry about that last, because what if the market crashes right when I need it, but I really don’t like the idea of my (entirely theoretical!) year’s worth of expenses earning less than 1% interest. It’s depressing.