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You can also have a EF strategy that relies on a mix of less liquid investments (savings bonds, CDs, etc), cash, short term strategic use of CC’s etc.Quote:
Originally Posted by Foggy_Goggles
I don’t see my EF as something outside of my overall portfolio, but something that is part of the overall plan that is worth growing at the best rate possible.
I’ve also never actually used my EF in 20 years of having one.
Where did I say that there was no principal risk? That was my whole thesis, accepting some of that risk (while still in a conservative investment) for greater returns. In fact, I just posted some hypothetical numbers that included a 15% downturn. Seriously, reading is fundamental.Quote:
Originally Posted by Foggy_Goggles
And my my whole point is keeping money in cash for those things doesn't make a lot of sense to me. Yes, Name Redacted is right that I chose a 10 year period after which the market crashes, and sure, I guess I gamed the numbers in that respect. But in the last 25-30 years or so, we have had only 2 significant downturns, and by significant I mean downturns that were big enough to wipe out more than just the gains you'd made in the last 2 or 3 years prior. So for me, I think I'd rather make more than MM rates for my EF. But my EF is a more significant part of my investments than for many. Obviously, YMMV.
And yes, Foggy, I am relying on PERA. If PERA fails, I am fucked, and the entire state is fucked since there's a statutory mandate to fund it. But I don't really have any choice but to rely on it, so... :shrug:
Not what I meant.Quote:
Originally Posted by J. Barron DeJong
ok. Guess I didn’t get it.Quote:
Originally Posted by Name Redacted
I thought there was some risk in relying on a HELOC for emergencies. Could lose it due to change in job status or maybe housing market downturn? (Sorry, don’t recall the specifics.)Quote:
Originally Posted by Conundrum
I'm sure there is but probably less risk than not having a reserve fund or HELOC or any other safety nets. Seems like there's ways to attach risk to any of the solutions being presented. Cash-opportunity cost and inflation. Heloc-might be pulled for job or market conditions. 401k loan-pulling money at bottom, reducing future gains. Stock-market fluctuations. Real estate-market conditions and liquidity. CDs-immediate liquidity. Family safety net-dealing with family and shame and guilt. Being poor-not having any available options except digging a much deeper hole.Quote:
Originally Posted by J. Barron DeJong
I do agree with that. I wasn't suggesting illiquid investments that couldn't be used to handle emergencies; the whole point was that it was an emergency fund. But "emergency" doesn't have to be "walk into the bank and withdraw $10k", it can be "sell off some of the fund and transfer it to my bank account". One gets you the money that day, the other gets it to you in a few days, which should be sufficient to handle any emergency that doesn't involve the mafia.Quote:
Originally Posted by Foggy_Goggles
Since we're on a ski forum, my real advice would be have a car you can sleep in, a second credit card with a high limit and $0 balance, a few grand cash, and your passport in an envelope ready to go at moment's notice. And if you have a dog, someone who can watch it while you bug out to escape trouble or find yourself...either AK or the Alps would be good options here.
I thought the risk was that the bank has the option of canceling it, and if they exercise that option it's likely to be at a time when you most needed it.Quote:
Originally Posted by J. Barron DeJong
That said, I had a HELOC as my emergency fund until I sold the house.
Yeah, the concern was cancellation when to you actually need it. Just don’t recall what the possible triggers for cancellation were.Quote:
Originally Posted by Danno
Check.Quote:
Originally Posted by Foggy_Goggles
And even that is *almost* gone.
https://media.makeameme.org/created/...oon-5a0f78.jpg
Motley Fool says it’s ok to use HELOC as a supplement:
While it's not a bad idea to secure a HELOC and use it as extra protection in the face of life's unknowns, that HELOC should supplement an existing emergency fund rather than replace it. If you're sitting on loads of equity in your home, you can think about socking away three months of living expenses in the bank rather than six months' worth, and then securing a HELOC as well. That way, you'll have some cash on hand, coupled with a means of accessing more should the need arise.
I have a mortgage at 2.75% and a car loan at 0.9%. Acceptable?Quote:
Originally Posted by Foggy_Goggles
IMHO HELOCs are a bad emergency fund. Banks can and do proactively close HELOCs during economic downturns and real estate downturns to expose their risk. If the price of real estate falls, the amount of home equity decreases and banks start slashing HELOCs. There is a real chance you won't have access to the money during the times when you are most likely to need it.
I did the whole "have three to six months of expenses saved up before investing" thing. I've had an emergency fund in place since my mid-20s. It has lost out compared to the opportunity cost of having invested it, but looking at it purely as cash vs invested money doesn't tell the full story.
Having that liquid money in reserve gave me leverage and confidence when negotiating salaries and terms at multiple different employers and it definitely helped me sleep at night. I have repeatedly refused non-compete agreements and doing so has lead to salary increases at future jobs. Financial peace of mind is priceless.
YMMV based on career path and COL. I still think it is worth having a six month emergency fund if at all possible though.
Except that Aflac has a premium due every month while money in a safe liquid interest bearing fund earns money. Aflac works for some folks but like every other type of insurance, they don't give away money unless they think they will make it back plus the vig.Quote:
if you’re that worried about an injury there’s Aflac.
No, you need to pay cash for the third pickup truck.Quote:
Originally Posted by J. Barron DeJong
don’t depend on credit for your emergency fund isn’t the same as virtue signaling/humble bragging about wasting capital
Shiiiiit. I don’t think I have cash on hand for a single one of today’s luxurious pick me ups, let alone three.Quote:
Originally Posted by dunfree
Since I had to look it up- plans may differ on a 401(k) loan, but the IRS max is 50k (or half the balance, whichever is lower) and the interest rate is a couple points higher than prime. You pay the interest to yourself, so seems like a good emergency option. It is not based on hardship- though your administrator may have a separate hardship plan.
If the emergency is losing your job that could be a very bad option.
Worse than The Lending Tree?Quote:
Originally Posted by Mazderati
I’m in the, “sure wish I’d done something with my emergency cash 15 years ago” camp.
In reality, I’ve had a few times along the way when cash got so scary low that it’s more of a PTSD overreaction. Plus I know fuck all about investing.
But my plan now is to stagger it into Ebonds or CDs in 1 year contributions. So there will always be a chunk locked up, but hopefully most of it will be liquid by the time I need/want access to it.
Sent from my iPhone using TGR Forums
C’mon man… get with it… with the Yen so low, Japan is the obvious place to bug out to for a few months until the smoke clears. Other than that, solid plan.Quote:
Originally Posted by Conundrum
I'm sure I have more money than I need to in my EF, but I also don't have a steady paycheck. I could go months with no income. For me, getting 3% in the savings account that I can instantly access is worth more than getting a bit over 4% in a CD for 18 months.
Also not mentioned, if your investments are held in your retirement accounts, you’ll be paying a penalty and taxes when you withdraw. Which will wipe out more than any potential gains that you might have gotten from investing anyway.
Lots of people with a Roth IRA that's been open for a while can withdraw up to the original contributions without penalty. Downside is not putting it back in, but if you have EF money sitting someplace and weren't maxing out the annual Roth contribution that's a good place for the "probably won't need it" money.Quote:
Originally Posted by Name Redacted