Deleted
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EF
Apr 1, 2011 10:21:27 GMT -5
Post by Deleted on Apr 1, 2011 10:21:27 GMT -5
Yep another thread about the Emergency Fund.
We are planning to move in June to a less expensive apartment and the plan is to use the extra income to pay down some debts - credit card first - car loan second - student loans last.
How much of an EF fund should we put aside before focusing on debt.
We currently net $4,700/month and I am thinking it will go down to $4,500 or lower once my wife 401K papers get processed (from 20% to 25).
We currently have $2,700 in our savings account (not including money for the move in June). We contribute between $100-200/month to each ROTH IRA.
The move in June will free up $400-500/month.
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Deleted
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EF
Apr 1, 2011 10:23:11 GMT -5
Post by Deleted on Apr 1, 2011 10:23:11 GMT -5
I think the Dave Ramsey plan of $1000 EF would work well.
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Deleted
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EF
Apr 1, 2011 10:47:48 GMT -5
Post by Deleted on Apr 1, 2011 10:47:48 GMT -5
I think the Dave Ramsey plan of $1000 EF would work well. I am not comfortable with having such a low amount because I feel it will not be enough to cover any major emergencies. Ex: at the beginning of this year my car needed new tires, brakes, transmission fluid, etc and the total came to ~ $1,800
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Deleted
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EF
Apr 1, 2011 10:48:48 GMT -5
Post by Deleted on Apr 1, 2011 10:48:48 GMT -5
How about $2k.
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giramomma
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EF
Apr 1, 2011 10:53:56 GMT -5
Post by giramomma on Apr 1, 2011 10:53:56 GMT -5
Normal car maintenance isn't an emergency, though. When we bought our house, we knew the appliances were getting old, as in 15-20 years old. When the dishwasher broke, it wasn't a surprise, nor was it an emergency.
Car maintenance, for us, is a separate fund than the EF. Actually, it's in our "short term/medium" savings fund. So, when the DVD player goes, we have a place to draw money from that isn't our EF and we don't have to dip into our taxable accounts where our money is invested in the stock market (ie, long term savings fund.)
I would quantify an emergency as "I've just been fired" or "I have to take unpaid time off due to unexpected illness, death in the family, etc."
How much do you need to pay rent, credit cards, and the car loan? Can you do that, plus necessary utilities, paying for gas and car insurance on one of your incomes? Food you can get at a pantry if nothing else. If you can cover everything you need to pay on one income, then I'd do the 1K and pay off the debt as well.
You shouldn't have many emergencies living in an apartment.
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Firebird
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EF
Apr 1, 2011 11:39:12 GMT -5
Post by Firebird on Apr 1, 2011 11:39:12 GMT -5
You guys are in a similar situation to us and my ideal amount for our EF is $10,000 which could carry us through a ~5 month period of mutual unemployment at minimal spending.
However, I'll go as low as $5,000 if there's a more pressing need at hand. It tends to fluctuate between $5k and $10k.
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phil5185
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EF
Apr 1, 2011 11:45:54 GMT -5
Post by phil5185 on Apr 1, 2011 11:45:54 GMT -5
my car needed new tires, brakes, transmission fluid That's an emergency?? All of my cars have needed tires, brakes, batteries, and transmission flushes. But $1800? Flush $175, brakes $250, tires $600.
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The J
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EF
Apr 1, 2011 11:49:10 GMT -5
Post by The J on Apr 1, 2011 11:49:10 GMT -5
my car needed new tires, brakes, transmission fluid That's an emergency?? All of my cars have needed tires, brakes, batteries, and transmission flushes. But $1800? Flush $175, brakes $250, tires $600. Depends on the car Phil. My brakes cost me $175. My ex's brakes cost $400.
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Deleted
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EF
Apr 1, 2011 11:49:55 GMT -5
Post by Deleted on Apr 1, 2011 11:49:55 GMT -5
my car needed new tires, brakes, transmission fluid That's an emergency?? All of my cars have needed tires, brakes, batteries, and transmission flushes. But $1800? Flush $175, brakes $250, tires $600. Depends on the car Phil. My brakes cost me $175. My ex's brakes cost $400. Probably has more to do with whether you need new rotors or not.
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DVM gone riding
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EF
Apr 1, 2011 11:50:42 GMT -5
Post by DVM gone riding on Apr 1, 2011 11:50:42 GMT -5
I think Phils general advice of 5k and then a taxable acct for more is a good idea. You are about 1/2 there so could be to a full 5k in what 3 mos or less (if you add 500 to the 200 you are already putting in) that should carry you through a lot of suddenly needing cash. Then you can put the extra twds debt and if something happens that you need to take out of the fund for you can always slow down for a bit.
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ses
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EF
Apr 1, 2011 11:52:56 GMT -5
Post by ses on Apr 1, 2011 11:52:56 GMT -5
The rule of thumb used to be three to six months living expenses. But with this recession and the average time spent unemployed rising to eight months many advisors recommend the equivalent of eight months living expenses in your EF.
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Deleted
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EF
Apr 1, 2011 12:15:53 GMT -5
Post by Deleted on Apr 1, 2011 12:15:53 GMT -5
A few answers:
we don't have different accounts for different goals like some posters have.
We have a checking account with $500 buffer in it and a savings account with $5,900 in it (all with TD Bank). About $3,200 of that we will expect to use for our next apartment in June.
We use that savings account as EF, or unexpected expenses, quarterly expenses, etc account. Anything we did not expect to have to pay (our car repair) or is more than we expected to pay comes out of that account.
We don't have a different account for let's say car repairs, quarterly renters insurance payment,
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Deleted
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EF
Apr 1, 2011 12:17:49 GMT -5
Post by Deleted on Apr 1, 2011 12:17:49 GMT -5
my car needed new tires, brakes, transmission fluid That's an emergency?? All of my cars have needed tires, brakes, batteries, and transmission flushes. But $1800? Flush $175, brakes $250, tires $600. Yep, still have the bill seating around. Off course service was more than half of it compare to the actual costs of the parts. The work was done at anKIA dealership.
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Deleted
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EF
Apr 1, 2011 12:20:42 GMT -5
Post by Deleted on Apr 1, 2011 12:20:42 GMT -5
my car needed new tires, brakes, transmission fluid That's an emergency?? All of my cars have needed tires, brakes, batteries, and transmission flushes. But $1800? Flush $175, brakes $250, tires $600. The work was done at an ikea dealership. Oh no.. You're replacement parts are probably made out of pressed fiber board.
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Deleted
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EF
Apr 1, 2011 12:20:46 GMT -5
Post by Deleted on Apr 1, 2011 12:20:46 GMT -5
You guys are in a similar situation to us and my ideal amount for our EF is $10,000 which could carry us through a ~5 month period of mutual unemployment at minimal spending. However, I'll go as low as $5,000 if there's a more pressing need at hand. It tends to fluctuate between $5k and $10k. I was thinking between 5-10K also but mostly wanted to go towards 10K. But I thought what would Phil do? Having all that money seating there not earning much interest when I have loans at 6-9% So really lost. But I think I would be comfortable with 5K and then focus on the debt
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Deleted
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EF
Apr 1, 2011 12:22:29 GMT -5
Post by Deleted on Apr 1, 2011 12:22:29 GMT -5
The work was done at an ikea dealership. Oh no.. You're replacement parts are probably made out of pressed fiber board. lol, I am on the phone with my wife and she was telling me she needed me to pick something for her at the ikea next to my parent's house when I go visit them this afternoon lol ;D ;D
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8 Bit WWBG
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EF
Apr 1, 2011 12:34:55 GMT -5
Post by 8 Bit WWBG on Apr 1, 2011 12:34:55 GMT -5
I'm in a similar situation to you and Firebird. I am not comfortable having so little cash on hand, but I want some debts paid off and cash just sitting there will cost me money.
I plan to keep about $4k to $5k in cash, and then everything else goes towards paying down debts.
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NomoreDramaQ1015
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EF
Apr 1, 2011 12:36:47 GMT -5
Post by NomoreDramaQ1015 on Apr 1, 2011 12:36:47 GMT -5
My goal is $5k in the savings account and then look at other better interest earning venues for the rest of our EF till we get to 6 months living expenses.
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telephus44
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EF
Apr 1, 2011 12:40:40 GMT -5
Post by telephus44 on Apr 1, 2011 12:40:40 GMT -5
I think it really depends on what you plan on using it for. Do you want it to cover 6 months of income? Do you want it to cover car repairs and vet bills? Do you want it to cover deductibles for your insurance policies?
Once you figure out what you plan on using it for, then figure an amount. For all those people who keep separate car repair funds, quarterly bills funds, home repair funds, I think they can carry less in an emergency fund.
I'm with Phil on keeping it at 5K. That's where mine is going to end up. I'm at 3K right now, but I just put in $50 per pay period, and eventually I'll stop when it gets to 5K. I'm not knocking myself out to fund it as fast as possible.
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Firebird
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EF
Apr 1, 2011 13:10:13 GMT -5
Post by Firebird on Apr 1, 2011 13:10:13 GMT -5
I don't know if I agree with Phil on this one. I think any higher than $10k is a bit excessive unless you just had a kid or purchased a fixer-upper house but in DINK 20-something or 30-something households like yours, WWBG's and mine, I think it's perfectly reasonable to have between $5k and $10k on hand. Yes, it could grow to $900 bazillion dollars if you let it grow but there's a real value in having that cash on hand as well.
Every time I've needed my EF, I've been grateful to have it exactly where it was.
That's my take.
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azphx1972
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EF
Apr 1, 2011 13:23:58 GMT -5
Post by azphx1972 on Apr 1, 2011 13:23:58 GMT -5
I hate having too much cash sitting idle when you're paying significantly higher interest rates than you're earning, so personally I wouldn't put more than $5k in the EF, but it's your call.
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Deleted
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EF
Apr 1, 2011 13:26:20 GMT -5
Post by Deleted on Apr 1, 2011 13:26:20 GMT -5
For clarification, my answer of a $1k EF was based on the fact that I thought that Cawaiu was in debt reduction mode and wanted to pay off debt asap.
I personally have a $25k cash EF at the moment, but I am not in a rush to pay off the debt that we have.
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Wisconsin Beth
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EF
Apr 1, 2011 15:25:23 GMT -5
Post by Wisconsin Beth on Apr 1, 2011 15:25:23 GMT -5
We're sort of like cawiau in that we have 2 accounts - checking and mm checking. MM currently has about $9K parked in it. But some of that is earmarked for bills due in April (house insurance, car insurance, etc.) and about 3K is earmarked for property taxes in Dec.
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Deleted
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EF
Apr 1, 2011 15:26:30 GMT -5
Post by Deleted on Apr 1, 2011 15:26:30 GMT -5
For clarification, my answer of a $1k EF was based on the fact that I thought that Cawaiu was in debt reduction mode and wanted to pay off debt asap. I personally have a $25k cash EF at the moment, but I am not in a rush to pay off the debt that we have. Thanks Archie. And wow at 25K
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8 Bit WWBG
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EF
Apr 1, 2011 15:27:13 GMT -5
Post by 8 Bit WWBG on Apr 1, 2011 15:27:13 GMT -5
...:::"For clarification, my answer of a $1k EF was based on the fact that I thought that Cawaiu was in debt reduction mode and wanted to pay off debt asap.":::...
This is what Dave Ramsey says too. As a homeowner though, I'd personally want a bit more than $1k. Real home emergencies seem to START at $1k.
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Deleted
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EF
Apr 1, 2011 15:36:22 GMT -5
Post by Deleted on Apr 1, 2011 15:36:22 GMT -5
This is what Dave Ramsey says too. As a homeowner though, I'd personally want a bit more than $1k. Real home emergencies seem to START at $1k. Or sometimes jump it all together and go straight to 2K
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