5 ms·
> It's not logical or financially wise I'm taken aback by this statement. I am in an incredibly similar situation to your wife in terms of growing up and being
by Gamemaster1379 4y ago
> It's not logical or financially wise
I'm taken aback by this statement. I am in an incredibly similar situation to your wife in terms of growing up and being successful today, and I do this. Granted, I think I'm at 3.5 months, but the point stands.
Sure, the money isn't generating more wealth, but that amount is finite. It's a cushion that should effectively indefinitely and every dollar beyond is vigorously invested. And, should something happen to employment, you use it as a buffer (assuming no severance) and replenish as soon as you're employed again.
I have a friend who helped me get where I am. He makes even more than I do, but financially, I'm more well off than he is because he thinks that every single dollar needs invested -- to the point that despite making the top 2-3% of income for our entire region, he regularly is paying off revolving credit card interest because he isn't equipped to pay a $500 unexpected expense.
Sure, if you invest every single dollar, it's always earning 7-10% on average. But if you have to then pay 20%+ APR on credit cards because you can't handle unexpected expenses, it begs the question whether you're really getting ahead.
- yunwal 4y agoStocks are liquid enough that you can sell enough to pay your credit card off before getting hit with interest. There's no reason to have 6 months worth of expenses in cash just sitting around unless you strongly suspect a crash.
- mcguire 4y agoThe S&P 500 is down 21% since the beginning of the year.
- astrange 4y agoMuni bond and treasury ETFs are not down 21%, and neither is my emergency fund investment account.
- pishpash 4y agoBroad munis and intermediate treasuries are both down 10% YTD, and so are TIPS (though at least those have had inflation adjustments). You might want to check your "emergency fund investment account" lol...
- astrange 4y agoIt’s on target still. Less margin than usual, but the gains from the last 10 years have made up for that. Betterment recommends 30% margin: https://www.betterment.com/resources/funding-a-safety-net-calculate-your-target-amount https://www.betterment.com/resources/funding-a-safety-net-ca...
- pishpash 4y agoGains from the past isn't so much the point, but rather when you may need to liquidate. An emergency fund is typically needed at the worst possible time, when the economy isn't good and investments are deflated. That's the liquidity risk you take with anything but cash.
- mcguire 4y ago"Stocks are liquid enough..." Neither of those are stocks. Bonds are (usually) less volatile than stocks, but yeah, be careful about using them for short-term emergency funds.
- astrange 4y agoBond ETFs are equally as liquid as stocks.
- Damogran6 4y agoAnd will be back up in less than 18 months.
- fallingfrog 4y agoHope springs eternal, but stimulus from the fed does not.
- refurb 4y agoBut still up 40% from the post-Covid low.
- fallingfrog 4y agoFor now
- mabbo 4y agoThat sounds like a lot of work, with added risks. With our system, our bills get paid with the money we have, and then when we make more money, it just goes back to the buffer account. Overflow goes into investing.
- maxerickson 4y agoIt's not something you need to justify to other people!
- pishpash 4y agoStocks are the definition of not liquid, in that their implied duration is 10+ years at least. How many fools are using stocks as an emergency fund during a tightening cycle that's removing liquidity at the fastest pace since the 1980's?