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re: Emergency Fund
Posted on 3/19/14 at 10:24 pm to reb13
Posted on 3/19/14 at 10:24 pm to reb13
quote:
I do not understand the need for a savings account, what expense cannot be put on a credit card while you unwind your brokerage account? It takes what, 5 days max to get the money?
This was my strategy for a long time, I kept all cash "working" for me and had a 20k personal line of credit I could tap at any time. Then 2008 came along and the bank cancelled my LOC, a week before I received notice that I was being laid off. It was amazing how fast I went from what I thought was being perfectly set up to the brink of having to liquidate holdings right at the bottom. I got through it, barely, without having to take any big losses. But there were a couple months there where I did any and all odd jobs I could scratch together to cover the bills. Then I found an even better job and have lived happily ever after, but since that experience I keep a fully funded emergency fund in a savings account that only a complete and systemic collapse would destroy. Likely over-kill, but I promised myself I'd never again be at the mercy of someone/something else in an emergency.
2
Posted on 3/20/14 at 11:53 am to GrantTheFan
I understand where you are coming from.
But my rationale is simply that as long as it can spend 5 years + in there, even if I have to withdraw in a down turn the account has still made money for me. So the imaginary losses don't really matter to me. The money I put in is still there.
As long as you can get that you don't ever lose anything.
Remember, the point of putting it in an investment account is to earn money if NOTHING ever happens and it isn't needed. As long as you can pull out what you put it, you didn't incur any losses, no matter where the market is at. Period.
If you invest as part of your emergency fund it is very important that it be by itself, and not just a part of a larger pot.
But my rationale is simply that as long as it can spend 5 years + in there, even if I have to withdraw in a down turn the account has still made money for me. So the imaginary losses don't really matter to me. The money I put in is still there.
As long as you can get that you don't ever lose anything.
Remember, the point of putting it in an investment account is to earn money if NOTHING ever happens and it isn't needed. As long as you can pull out what you put it, you didn't incur any losses, no matter where the market is at. Period.
If you invest as part of your emergency fund it is very important that it be by itself, and not just a part of a larger pot.
This post was edited on 3/20/14 at 12:39 pm
Posted on 3/20/14 at 7:44 pm to GrantTheFan
quote:
I kept all cash "working" for me and had a 20k personal line of credit I could tap at any time. Then 2008 came along and the bank cancelled my LOC, a week before I received notice that I was being laid off. It was amazing how fast I went from what I thought was being perfectly set up to the brink of having to liquidate holdings right at the bottom.
But how much more did you have though by not having had to "set aside" anything? For example, if you put $1000 in a Roth and $4000 in a savings account when you could have put the full amount in the Roth, the latter is still the better choice even if you lose your job, etc.
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