5 ms·

Do we no longer advise people to maintain emergency funds, etc.? I don't feel comfortable, or maybe the word I am looking for is secure, without at least 6 mont

Do we no longer advise people to maintain emergency funds, etc.? I don't feel comfortable, or maybe the word I am looking for is secure, without at least 6 months of expenses in a savings account.

yardie 5y ago
I advise everyone to talk to a licensed financial advisor. Do you really foresee needing 6-months expenses in cash? In my case, I keep 1-months expenses in cash. And everything else is shoveled into funds, stocks, and securities. Then I have 30 days to figure out how to balance my expenses and converting stocks to cash (~2-3 days). A .1% APY is losing money everyday in a 6% inflation economy.
- toolz 5y ago
  I do the same, losing out on 5 months of savings gaining interest is likely to be a very significant amount of lost potential. Compared to a doomsday scenario where I might lose half of my investments and job at the same time, which would mean most of the world is suffering from the same and I would just have to buckle up for the ride, leaving as much of my investments alone as humanly possible and wait for _maybe_ a year or two for the market to recover, as a somewhat realistic worst case scenario.
- 88913527 5y ago
  If you have an unexpected large expense, like some needed home repair, it can easily be a few months of ordinary expenses. The fact that I normally live off of $3.5k/month is untethered from the cost of a roof replacement. You do pay a price for keeping the additional months of liquidity, but to some it's still worth it.
  - yardie 5y ago
    I'm trying to imagine a large unexpected home repair >$3000 that isn't covered by typical planning or insurance and nothing comes to mind. Emergency roof replacement is managed by insurance (you're paying for it). And a scheduled, expensive, non-emergency, usually involves months of planning and permit pulling. Except for a bail money, how many high-ticket items aren't covered by insurance?
boardwaalk 5y ago
Investment accounts still have a core position where you’d probably keep that. It makes nearly nothing in interest (like being in the bank) but at least there’s less friction in getting it invested.
andreilys 5y ago
If you work in tech chances are you have a high six figure salary and a large line of credit. You may even have a passive income source via rental income, stock dividends or side projects. It doesn’t really make sense to have 6 months of expenses which lose value in a bank account vs. earning you money in the market. If something were to happen you can usually pay it off with your pay cheque/passive income source or use a credit card to bridge you over.
- maxerickson 5y ago
  On the other hand, the foregone earnings will not be huge relative to assets and income. Especially if you make the 6 months as necessary expenses vs typical normal expenses.
- JaimeThompson 5y ago
  That mirrors what a lot of companies turned just in time manufacturing into and it really didn't hold up well over the past few years due to shocks in the system.
- indemnity 5y ago
  Maybe I’m old fashioned, but despite having a paid off HELOC that can cover 42 months of current monthly expenditures, and several zero balance credit cards… I don’t want to be relying on that if I lose my job. Lines of credit can be taken away, and usually at the worst time. So I’m happy to forego some returns on a moderate sized emergency fund in exchange for peace of mind.
- yardie 5y ago
  Outside of SV and NYC I can assure you the majority of tech is not high six figures. Most are barely high five figures.

Do we no longer advise people to maintain emergency funds, etc.? I don't feel comfortable, or maybe the word I am looking for is secure, without at least 6 months of expenses in a savings account.

yardie 5y ago

I advise everyone to talk to a licensed financial advisor. Do you really foresee needing 6-months expenses in cash? In my case, I keep 1-months expenses in cash. And everything else is shoveled into funds, stocks, and securities. Then I have 30 days to figure out how to balance my expenses and converting stocks to cash (~2-3 days). A .1% APY is losing money everyday in a 6% inflation economy.

toolz 5y ago
I do the same, losing out on 5 months of savings gaining interest is likely to be a very significant amount of lost potential. Compared to a doomsday scenario where I might lose half of my investments and job at the same time, which would mean most of the world is suffering from the same and I would just have to buckle up for the ride, leaving as much of my investments alone as humanly possible and wait for _maybe_ a year or two for the market to recover, as a somewhat realistic worst case scenario.
88913527 5y ago
If you have an unexpected large expense, like some needed home repair, it can easily be a few months of ordinary expenses. The fact that I normally live off of $3.5k/month is untethered from the cost of a roof replacement. You do pay a price for keeping the additional months of liquidity, but to some it's still worth it.
- yardie 5y ago
  I'm trying to imagine a large unexpected home repair >$3000 that isn't covered by typical planning or insurance and nothing comes to mind. Emergency roof replacement is managed by insurance (you're paying for it). And a scheduled, expensive, non-emergency, usually involves months of planning and permit pulling. Except for a bail money, how many high-ticket items aren't covered by insurance?

boardwaalk 5y ago

Investment accounts still have a core position where you’d probably keep that. It makes nearly nothing in interest (like being in the bank) but at least there’s less friction in getting it invested.

andreilys 5y ago

If you work in tech chances are you have a high six figure salary and a large line of credit. You may even have a passive income source via rental income, stock dividends or side projects. It doesn’t really make sense to have 6 months of expenses which lose value in a bank account vs. earning you money in the market. If something were to happen you can usually pay it off with your pay cheque/passive income source or use a credit card to bridge you over.

maxerickson 5y ago
On the other hand, the foregone earnings will not be huge relative to assets and income. Especially if you make the 6 months as necessary expenses vs typical normal expenses.
JaimeThompson 5y ago
That mirrors what a lot of companies turned just in time manufacturing into and it really didn't hold up well over the past few years due to shocks in the system.
indemnity 5y ago
Maybe I’m old fashioned, but despite having a paid off HELOC that can cover 42 months of current monthly expenditures, and several zero balance credit cards… I don’t want to be relying on that if I lose my job. Lines of credit can be taken away, and usually at the worst time. So I’m happy to forego some returns on a moderate sized emergency fund in exchange for peace of mind.
yardie 5y ago
Outside of SV and NYC I can assure you the majority of tech is not high six figures. Most are barely high five figures.