Wednesday, November 19, 2008

Emergency funds 911

Here's a post on Get Rich Slowly about emergency funds. He recommends putting away 3-6 months of basic living expenses in a cash, low-interest-bearing account. It's a good post, very thorough, and it's standard advice for the personal finance genre, but c'mon - 3 to 6 months? That's a downpayment for a house.

I'd guess we have about maybe one month in our emergency account, and it's sort of lucky we have that much, as we built it with the rather rare occurrences of a high holiday pulpit and a tax rebate. Plus, we're always battling against tapping into it to make our monthly bills. At this point, it could cover a car repair, or a low-grade medical situation, but if (God forbid ptui ptui ptui) I lost my job, well, we don't have enough in there to cover that.

This strikes me as the kind of advice that, if you were able to take it, you wouldn't need to be looking at frugality websites. It's also the kind of advice that makes people despair of ever being in a plus situation, if you ask me. (Advice that's impossible for the average person to follow is not good advice, imo.) Also, if you're saving so much this way, are you neglecting your retirement savings? That's another big goal that (based on financial advisors) I'm consistently underfunding.

So I'd be interested to know what people think about this, so leave a comment: how much (on a month basis) do you have in your emergency savings? Do you think it's enough - how much would you say is optimal?


Pokeberry Mary said...

gosh Moti.. I hate to say this. I put money in savings before I pay bills. Our credit was wrecked when Hubby's industry nosedived after 9-11. We now keep alot in our savings because we always know that you absolutely can lose your job--and may never get it back. God forbid or not --that's normal now.

On the plus side though, our savings is going to buy a house--God willing. That plus alot of personal sacrifice, sweat equity and probably some less than comfortable digs while we work on it. Assuming we don't get some kind of bad news in our inspection--we intend to pay for this house cash. thanks to savings--and still have a cushion.

I only wish we had lived like this before 9-11, and the dot com bust or whatever that was that hit us.

no regrets on saving $. I look at darn near every expense with a critical eye. For instance--you mentioned once you like to to build up a little collection of alcohol-- try the boxed wines, you might find one you like. Don't live like Solomon til you are as rich as him. ;)

Pokeberry Mary said...

I will also say--learn to fix your car. most fixes you can buy the tools for far less than the repair costs. We have lots of tools now, including an engine hoist. I have only once paid someone to fix a car in 27 years of marriage-$900 dollars! and two days later the thing broke down again!. Hubby has learned to do all the car repairs and taught our sons and daughter as he does them. Get some tools and check the library or ebay for the chilton manual that covers your vehicle. DIY.

rebmoti said...

Well, I'm putting 25% of my net income into paying down debt, that has a lot to do with why we can't save a lot. I don't think I'm unique in this. I did lose my job and got another one that doesn't pay as well, but I don't think at this stage it's possible for me to save enough to live on without working - if I was unemployed for any amount of time I don't know what we'd do. Again, nothing unusual there. And as for fixing my car, well, I did manage to put some brake fluid in it once, but otherwise I live by Clint's aphorism: "A man's gotta know his limitations."

Pokeberry Mary said...

Moti== What we have been trying to instill in our sons is that your limitations are expandable.
Just something you can chew on.
Best of wishes for you.

Pokeberry Mary said...

I guess I'm not sure what you meant by live on without working.. you mean if you lost your job again?

Even when my husband lost his job he kept working at anything/everything.

I'm just saying- if you don't have something saved for hard times--you really shouldn't be spending on anything else--that makes sense doesn't it?