The Ways and Means of Coping with Emergencies

Experts have been touting the importance of having an emergency fund since Moses was a lad. So why is it that so many people still don’t have enough (or any?) money set aside just in case? Reasons and rationales abound.

“I’m paying off my debt. That’s the most important thing.”
With the amount of debt people are buried in, it’s no wonder people want to get rid of it as fast as they can. But having a single focus is never a good way to create balance. Money in the bank gives you options — ways to deal — so that you can stay on track with debt repayment even when bad things happen.

Having no cash at the ready means you’ll no doubt be forced to use your credit to deal with a broken furnace, unexpected medical bills, or replacing that tire you blew on the highway. Accessible cash means you can keep to your debt-repayment plan and deal with whatever crisis — large or small — that has come knocking on your door.

“I can’t see the point of letting money sit earning next to nothing.”
While it can be a really sad thing to watch thousands of dollars languishing in a savings account, return isn’t the priority with an emergency fund. Access is. Stick that money into the market and it may not be there just when you need it most. Stick it in a high-interest savings account and while you may be irked by the pittance you’re earning in interest, the emergency fund will be at the ready when you hit the wall. The point is to have some wiggle room when the unexpected happens.

“I have $1,000. That’s enough.”
$1,000 may be enough of an emergency fund if you live under a rock. Yes, you’ll need less of a buffer if your home is paid for, you have no debt, you walk everywhere you go, and you’re happy eating ketchup soup three nights a week. If you want a realistic emergency fund — one that actually gets you though the rough — figure our your monthly essential expenses and multiply by six. That’s how much you need.

Unemployment insurance may help fill the gap if you lose your job, but it doesn’t go far. And unemployment isn’t the worst emergency you may face. Get sick and watch your money evaporate. Even if you have good health and disability insurance plans, your cash flow will still take a kicking until your benefits click on.

“Who needs an emergency fund when you can use a line of credit?”
The people telling us to get an LOC is an emergency fund are the same people who let us buy houses without enough money down, offered us ways to satisfy all your whims while spending money we hadn’t yet earned, and continually raised our limits until many of us had enough debt to bury an elephant.

A line of credit is not an emergency fund…it is debt waiting to happen. If you hit a wall and end up racking up tens of thousands in debt on an LOC, how was that diverting disaster?

The Ways-and-Means Fund
Perhaps the problem with the whole emergency fund thing is that people don’t like to think they’ll have to deal with “emergencies.” It’s not unlike the folks who won’t make a Will because they don’t want to contemplate their demise, or who won’t buy disability insurance because they can’t imagine becoming disabled.

Maybe we’re just calling it by the wrong name. The whole idea of having to deal with “emergencies” can be a real downer. Maybe what we need is nomenclature that sounds far more proactive and positive. We’ll stop predicting disaster and instead focus on the fact that when you have money at the ready, you also have ways and means to deal with whatever life pitches at you.

Hmmm…a Ways-and-Means Fund…cash in the bank that gives us the means so we can figure out ways of dealing with life’s lumps. Your son breaks his arm playing in the yard, and you have the means — the money — you need to take a day off work, get him to the hospital, and cope in whatever other ways you must. Your partner is downsized and you have the means to pay the mortgage and keep food on the table until he finds new ways of bringing home the bacon. You bang up your car, watch your shingles blow off in a wind-storm, or find yourself in the throes of a divorce, and you have the means to keep the financial boat afloat while you find ways to cope with all the other stress in your life.

Convinced that having The Means offers you more Ways of smoothing out life’s bumps? Now it’s just a matter of coming up with the dough. It takes effort to knead intent into action.

Getting started
The best way to create your Ways-and-Means Fund is to set up an automatic deduction from your regular account to a high-interest savings account. If you don’t have much to save, it doesn’t matter — the important thing is just to start…to convert your intent into action. As long as you haven’t started, you’re not creating the means for dealing with what life will inevitably throw at you. Commit $25 per pay to your Ways-and-Means Fund. Once you’ve begun, you’re on your way and then it only becomes a matter of how to boost the amount you’re setting aside to grow your stash of cash.

Most people have expenses they can trim to boost the money going to their Ways-and-Means Fund. Do you buy coffee every day on the way to work? Calculate how much you’re spending, cut it in half, and send the difference to your Ways-and-Means Fund. Smoke? If you smoked half as much, how much would you be able to sock away? Pick up the latest magazine at the checkout counter?

Subscribe to premium cable? Go out for a drink with your friends after work? Buy your lunch at work? Pick up your favorite “stuff” whenever it’s on sale even though you already have 30 pairs of shoes, white shirts, handbags, DVDs, name your vice here. How quickly could you build your Ways-and-Means Fund by focusing on being safe as opposed to being satiated?

If you’re determined to keep all your small indulgences, try the tit-for-tat approach to building your Ways-and-Means Fund. Each time you satisfy a Want, contribute an equal amount to your Ways-and-Means Fund. Not only will it make you really think about whether you’re going to spend the money — in essence whatever you buy is going to cost your cash flow twice as much — you’ll be giving yourself options for the future while you enjoy yourself today.

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There are 63 comments to "The Ways and Means of Coping with Emergencies".

  1. Adam Baker says 13 April 2009 at 05:11

    Great job refuting some of the common excuses people can have to creating an emergency fund.

    The hardest balance for me is how much of an emergency fund to have when still actively getting out of debt. And in addition, do economic times like these dictate changing course and saving even more of a fund while still in debt?

    This article has gotten me rethinking my personal view on emergency funds and how much I should have.

  2. the weakonomist says 13 April 2009 at 05:30

    I have to disagree with the idea that people can’t stand the thought of having money sitting around earning nothing. I’ve met with people from all walks of life in all levels of wealth (and lack thereof), no one has ever cited something like that as a reasoning for not having emergency funds.

    The people that know enough about money to actually think that way are the people smart enough to know what an emergency fund is and why they have it.

    The LOC bit is spot on though. My parents’ banking rep has tried to convince them to do that. I caller her up to let her know that’s dishonest. This was tough since we work at the same bank.

  3. katy says 13 April 2009 at 05:41

    Very thought provoking article. I like the idea of putting an equal amount in the wasnmeans fund for indulgences. And I’ll try to implement it. Puts another slant on things.

  4. ABCs of Investing says 13 April 2009 at 05:51

    Ketchup soup – lol. I agree about the $1k emergency fund – it’s not much.

    I’m in the “It’s ok to use an LOC for an EF” camp. It seems to me that you are better off putting your emergency fund into debt – especially if you have a lot of it.

    If you use your emergency fund to pay off debt, and then end up borrowing it back again – you aren’t adding any debt.

    For example if you have $100k debt and $10k EF – then you put the EF into the debt so you then have no cash and $90k debt. If something happens and you borrow $10k – then you have $100k debt and $10k cash. Exactly what you started with.

    That said, I started an emergency fund a few months ago – mainly because it made me feel better. 🙂

  5. Paul says 13 April 2009 at 06:07

    I need someone to make a much stronger case to pay interest in order to have an ’emergency fund’. If you are in debt, and have access to additional credit, it doesn’t make any sense to put money in a savings account that you could be using to further pay down the debt. If you encounter an emergency, THAT’S when you rely on the high interest loan.

    That said, if you are not in debt, I would certianly suggest 6 months of after tax income in a liquid no/low risk account (my wife and I actually have about a year’s income). I would not rely on credit for an emergency unless you would be paying interest to have the cash.

  6. JimZ says 13 April 2009 at 06:07

    @4 & 5^^

    That’s exactly the thought process that gets you into trouble. Yes, it’s logical, but its not helping you break the cycle. The fact that you are keeping the door open on that debt keeps you “in” that debt. Remember, one of the first steps out of debt is to swear off adding additional debt. If you keep the revolving LOC open, and pay it off with your liquid EF, then borrow from it again, you will never get you out of the borrowing cycle. It’s a process of habitual change that you need to accept and make. Once you have a funded EF and you use it to purchase things in an emergency, it trains you to do the same for normal purchases. Save rather than borrow.

    I don’t think JD was as clear on this as he could have been. You can never guarantee the liquidity of your LOC. They could call you tomorrow and lower your limit, or close it all together. Maybe this example will help:

    This exact thing just happened to my sister-in-law: She got a nice tax return and saw a good opportunity to pay off her CC rather than keep the cash on hand. The bank closed the account within a week of it being paid off because she had been late a couple times last year. Couple weeks later her car’s transmission takes a dump. She can’t get another CC and has no way to borrow the money (her credit rating sucks because of various things). Keep in mind that she *had* a CC when she paid them off, and they closed it immediately afterward. Now surely you would agree that she should have stuffed the money in a savings account, and continued to make on-time payments on the CC. But paying it off was a signal to the bank that they should cut their losses while they were ahead.

    Liquidity is the key to an EF, you don’t want the banks being incontrol of rationing your EF to you. As I stated above, your standing could change tomorrow, and if you don’t have liquid funds readily available, you could be quite surprised when it came time to go dipping into the LOC.

    In short, if you are allowing the banks to have control to the purse strings to your EF, then you don’t have one… plain and simple.

  7. MMGC says 13 April 2009 at 06:17

    @5 – I think it’s a psychological benefit, not a financial one. For me, it definitely is, anyway. Being able to pay bills this month – beyond my means, but not beyond my emergency fund – without resorting to the credit card – has made me feel amazingly better about myself.

    This coming from a college student some $12k in debt; validate at will.

  8. KC says 13 April 2009 at 06:24

    I used to have the “I can’t stand to see my money earning nothing” syndrome. What cured me of this was a sudden auto accident that totaled a car we weren’t planning on getting rid of anytime soon. It was my husband’s car and he was going to need a new one w/i 30 days (insurance rental would expire at that time). We knew the insurance money for the totaled car would take a while (it ended up taking 45 days). But when you need to buy a car and don’t have the luxury of time to thoroughly shop you certainly don’t want to apply a band-aid fix and just buy anything – you want to buy a car you think you’ll keep another 10 years or more.

    We currently had been saving money to apply to our mortgage debt and it was in cash in a money market. We ended up using this to buy a new car. If I had invested this money (as I normally would have done if we weren’t planning on putting a chunk on the mortgage) I wouldn’t have had it so readily available. From this point on I’ve decided I should have enough money in cash to buy a good car – coincidentally this is about 6 months living expenses – as is recommended by many money people. I’m not so worried about what this money is earning in my account (cause frankly its earned more in the past year than any of my investments). I know that I can take care of my family should an expensive emergency come up – and that beats any interest payments I might gain.

  9. ABCs of Investing says 13 April 2009 at 06:38

    JimZ, your argument is quite valid. However, it seems to me that the debate about having an EF or not is dependent on individual factors so maybe statements like “everyone should have an EF” or “everyone should use a LOC for an EF” are not correct.

    Your SIL had bad credit so I suspect she is more at risk of losing her credit than someone who has a good credit rating.

    It might also depend on what kind of interest you are paying for your debt – if you have 18% interest rate debt outstanding then an EF is very expensive to have.

  10. Taylor at Household Management 101 says 13 April 2009 at 06:49

    Having an emergency fund is definitely very important. I was recently laid off, and having that fund in place has really helped me sleep at night. We haven’t had to dip into it much yet, with the severance and the unemployment benefits, but since my daughter recently had a small surgery we are happy to have the money there to pay when the bill comes in (we still have health insurance, thank God!).

    Thanks JD for calling everyone’s attention to the need for an emergency fund. Anyone can need it. I should know, I have not only a college degree but also a graduate degree, and my husband has several graduate degrees, and it happened to us!

  11. Lydia says 13 April 2009 at 07:00

    Currently, my husband is the only one working at a very low income (about $1,400 a month). I’m trying to start my own business while looking for work. I’ve been out of work since February of last year. We got a wake-up call to start seriously saving back in January when my husband lost his job. We had a hundred dollars in a 0.03% interest savings account, just been sitting there. A penny in interest each month, and we occasionally borrowed from it. We never made it grow. Luckily, we had (and still have) no debt.

    Luckily, my husband got a new job and his first paycheck before any bills were due. But in the frantic rush of that week to try and find ways of pinching every penny, I found this blog. Again, my husband only makes about $1,400 a month and I’m working to start my own business. Since mid-January, we’ve saved over $1,100 toward our emergency fund, started saving for a new computer (mine is dying), a car (we’ve had to borrow my parents’), and still have managed to pay all our bills and have money left over for little luxuries like Netflix and occasional (once or twice a month) eating out.

    I felt sick every single night before we had this EF. I think of it as a buffer; a cushion. Every dollar I save is a pillow set in front of me to protect me from the car speeding toward me. If I get enough pillows, I’ll never get hurt.

  12. Charity says 13 April 2009 at 07:30

    Great to see Gail Vaz-Ozlade!! Til’ Debt Do Us Part is one of my favourite TV shows, and I have my oldest kids hooked on watching it, too. :o)

    I like the change of perception in calling the emergency fund the Ways & Means Fund.

  13. John says 13 April 2009 at 07:36

    Hi.
    Nice points about an emergency fund. Having cash on hand is a better way to deal with emergencies rather than credit.
    I keep about 4 months gross in the bank and I also keep a few thousand in cash at home just in case we need something in a hurry. Or in case something comes up that I can turn around for a profit quickly.

    Congratulations on the Mini. How are you handling the hidden expenses, like sales tax, title, registration fees or in my state (mass) excise tax which all add to the cost of buying a car.

    I’m a car guy and I look for bargains that need a bit of work or that people are tired of. I picked up a 1994 Mustang convertible for free that needed head gaskets. I fixed it myself for $850.00 (including brakes) and have been driving it regularly for two years. The cost of ownership goes down with every mile I put on!

    The more I can do myself means more savings, and with three kids I need it!

    Thanks,
    John

  14. Paul says 13 April 2009 at 07:39

    No one has made a logical argument to pay interest to have cash available ‘just in case’. From a building wealth standpoint, I just don’t think it makes any sense.

    If you want to build wealth more slowly, feel free.

  15. Mary says 13 April 2009 at 07:41

    @9: “Your SIL had bad credit so I suspect she is more at risk of losing her credit than someone who has a good credit rating.”

    But even people with good credit are getting their credit limits reduced and/or their interest rates raised as they pay off debt.

    Folks with good credit scores and solid credit histories are now getting caught in the fray. “Most banks are cutting their credit limits,” says Carol Kaplan, spokeswoman for the American Bankers Association. “People with credit scores of at least 720…are not immune. They’re doing it to everyone.”

  16. Zman says 13 April 2009 at 07:43

    I’m thinking that laddered Certificates of Deposit should be an acceptable alternative to emergency funds in a money market. CDs can earn higher interest than MM, definitely higher than plain savings, and are nearly as liquid. The loss of interest penalty would only occur if the CD was redeemed early. Laddered at 3 month intervals, there would always be something coming up for renewal or redemption in the near future.

  17. retired says 13 April 2009 at 07:43

    No matter your income, or insurance when you have a true medical disaster, you run out of insurance coverage, All insurance companies have a coverage limit. My husband got an infection in his spine, 6 surgeries in two months, 6 weeks in a care center flat on his back, pain medications a year of IV and oral antibiotics lead to over $500,000 in medical bills. Insurance coverage dropped to $50,000 life time coverage when my husband turned 65 and eligible for medicare. Our liability was $61,000.
    Medication had to be paid for up front.
    Not only this but we were hit by two hurricanes during his recovery. If I had not been handy we would really be in a bigger financial mess.

    Emergency funds are necessary! I would say 6 months of living expenses readily accessible and 18 months of money invested with the intention of being able to liquidate it if needed.

  18. Mary says 13 April 2009 at 07:50

    Paul @13, here’s your logical case for saving an emergency fund before your debt is completely paid off.

    Stop paying health insurance. Stop paying life insurance. Stop paying disability insurance. Stop paying for home insurance. Stop paying business liability insurance. Hey, if you’re really serious about attacking debt, stop paying auto insurance, too, even though that’s illegal.

    You are probably paying hundreds, even thousands in insurance every year that could go to debt reduction instead. You are not even earning ING style interest on these payments. It is pretty likely that over the next 2-3 years, while you’re paying off debt, that you probably won’t die, get seriously ill, get burgled, have a home fire, be in a car accident, get sued or otherwise get disabled. Probably.

    An emergency fund is an insurance policy you create for yourself that can earn some interest as well. A credit card or LoC is a promise to loan you money up to a certain amount and at a certain interest rate that is completely under the control of a third party. They can revoke or change interest rates any time they please, and they can and have closed the card once it’s paid off, leaving you with no options if you haven’t already created an emergency fund.

    So if all insurance policies are equal to you, cancel them all and just pay off debt. But if you are keeping any kind of insurance that you are not legally obligated to keep, then an emergency fund is a logically consistent choice.

  19. JimZ says 13 April 2009 at 08:15

    Hey @9: ABC

    That’s just it, it’s an inverse relationship. Folks with high interest loans are the ones who have a hard time justifying having cash on hand when they are paying high interest on a debt. I can see their reasoning.

    But see — the thing is — anyone with an 18% loan already has bad credit, and is the poster-child for needing a cash-only EF.

  20. ResortAtSquawCreekTAHOE says 13 April 2009 at 08:33

    Laddering CDs at 2.5-4% currently is the way to go. I’ve managed to save about $200,000 in a 2.75% 9 month option CD, which allows me to draw down to $5,000 if i need it. This week, I’m going to move $130,000 of my money market fund from one bank to a 5 year CD at 4.25%. I don’t need this money, and am fine to just earn 4.25% every year instead of 2.5% currently.

    This may, or may not sound like a lot of savings, but I also have about $1.5 million in mortgage indebtedness to pay interest on every month, so I do have higher expenses in the tune of probably $10,000-$11,000 a month. My income of $300-400k/yr in this economy could go bye bye, and then i’ll be worried.

    I already have about $200,000 in company stock, and $100,000 of $160,000 in my 401K invested in the stock market. So frankly, I don’t want to add to the 300K exposure in the market, especially since my job is related to the stock market!

    When the going gets tough, the tough have CASH. i sleep better at night with 4% returning cash. 3mil is my goal, then i could year 120k/yr in interest. but that’s 12-15 years away.

    My question is on paying of debt the SNowbaLL method. i like the pyschological effect. my smallest debt is my $30,000 school loan at 2.6%. should i pay it off, or just pay it off over 15 more years?

  21. The Frugal Couple says 13 April 2009 at 08:39

    Another reason depending on a line of credit isn’t wise: right now, banks are cutting off the unused portions of LOCs.

    If an LOC is the foundation of your emergency plan, it’s time to start thinking about other ways to prepare.

  22. Steve in Montreal says 13 April 2009 at 08:41

    Boy am I glad I have an emergency fund at the ready and fully loaded. I was laid off, not downsized, right sized, restructured or whatever, I was laid off.
    I have 6 months saved in a so called high interest savings account. I did this with the set it and forget it weekly deduction from my normal account.
    It’s comforting to know I’ll still be able to cover my necessary bills and mortgage payments for a time. I will refund the account when I’m working again. It’s insurance without the fees and I get the premiums back.

  23. JimZ says 13 April 2009 at 09:07

    @20, I think you know the answer. If you are getting 4% on the 30K and they are getting 2.6% of it, then you are yielding 1.4% on borrowed money. Where do I sign up?

  24. xysea says 13 April 2009 at 09:31

    I have a few layers of accounts, but you’re right access is key.

    I have one account that has $500, just for unexpected ‘minor’ emergencies. Since my car is older model and paid for, repairs usually don’t exceed that. Eventually I’d like to have $1000 in it. Then, I have another that has a few thousand in it for bigger emergencies. And I just opened another to be auto-funded by my checking account at $25/mo. It will add up over time. Who knows what I’ll call that one.

    The goal is to never be where I was: in debt, credit score a mess and borrowing from friends or family on top of that.

    My short term goal by end of 2010 is to put $2000 into an account and put that into a CD at my credit union.

  25. Ken says 13 April 2009 at 10:04

    An emergency fund is priority one when it comes to winning with money. So many young couples can’t understand why they can’t get ahead but they never do this first step. Good post!

  26. Kelly says 13 April 2009 at 10:06

    Paul @ 13 – If you lose your job you are still going to have to pay monthly bills, including the credit card bills. If you are unable to make the minimum payments on those credit cards your interest rates are going to go through the roof, not to mention ruining your credit. You might be able to sweet talk your credit card company for a month, but after that you’ll be over 20% interest. Good luck getting them to reduce that rate. You will end up paying a lot more in interest in the long run than if you’d had an emergency fund and could get by on minimum payments for a while.

  27. Tyler Karaszewski says 13 April 2009 at 10:17

    I still think that having six months of living expenses siting around in cash is a ridiculous amount of overkill. $3,000 to $5,000 seems to be enough to cover most legitimate emergencies. If you lose your job, but you’ve got six months (or probably more) worth of expenses sitting in mutual funds (or wherever), you have plenty of time to withdraw some money before you run out of your $3,000 to $5,000 cash cushion. Yeah, maybe the market is down, and if it’s really, really down, like it has been lately, then you’ve only got four months instead of six months savings. Big deal. What are the chances you can’t find a job in four months, but *can find* one in six months? It can’t be that high.

    I don’t know why “you lose your job and it takes you exactly six months to find another one” is the standard for what constitutes an emergency among personal finance people. This is highly dependent upon the job that you hold, and the field that you’re in.

    I would have been laid off at the end of 2006, but I saw it coming two or three months in advance, and found another job so that I had no gap in work (well, about two weeks, but I did that by choice). My current employer, when they do lay people off, gives generous severance packages, which would likely be quite near six months of living expenses anyway. A former co-worker of mine has started his own company in the last year, and would like me to come work for him, so even if I was laid off tomorrow, I essentially have a job lined up for me. I have never, since I started working, been unemployed for anywhere close to six months.

    I realize that this certainly isn’t the case for everyone. Like I said, it’s largely dependent on where you work now, and what field you’re in, but just because some people (hypothetical example — auto workers at GM) are likely to need a hefty emergency fund if they get laid off in the near future doesn’t mean it applies to everyone.

    Here are real “emergencies” I’ve actually had in the last couple years:
    1) My wife’s father had a stroke and we had to fly down to see him. My wife had to take several weeks off to care for him.
    2) $2500 in dental bills.
    3) Over $1000 in veterinary bills.
    4) A speeding ticket for almost $400.
    5) Car service for over $600.

    My $3,000 to $5,000 fund covers all of these just fine.

    You’re probably right, people should stop calling this six month’s expenses fund an “emergency fund”, but what they should call it is a “layoff fund” because that’s what its real purpose is. People could have a $5,000 emergency fund, and if they think it might be prudent (which in certain industries or at certain companies, it is), then they can also start a “layoff fund”.

  28. Sara says 13 April 2009 at 10:26

    @Mary: Great explanation! Self-insurance is the key.

  29. Beth says 13 April 2009 at 10:49

    @ #20. Are you for real? If you’ve got that much money, hire a fee based financial planner!

    I apologize if that sounds rude, but I can’t be the only reader here whose income amounts to less than a quarter of your expenses. It’s great that you’re doing so well, but I don’t think too many of us can give advice 🙂

  30. Chamoiswillow says 13 April 2009 at 10:52

    Congratulations J.D.!!! You are an inspiration, and you deserve your Mini!!!

  31. ABCs of Investing says 13 April 2009 at 11:10

    @JimZ #19 – yes, it occurred to me as I wrote that comment that people who have the worst debt problems probably need the cash EF more so than others (as you said). I guess that’s where the minimal $1000 EF suggestion comes into play – it’s enough to get through some of the rough spots but you aren’t costing yourself too much in interest charges.

    I guess the moral of the story is to not to let debts get out of control in the first place? (yah, there’s some great 20/20 hindsight advice) 🙂

  32. Holly says 13 April 2009 at 12:08

    Man, I love Gail! I read her blog as often as I read this one. I was against the idea of an emergency fund for years, but then again I’m the perfect example of someone struck by little misfortunes that added up to a lot of debt. I found out that I dislike debt and paying interest MUCH more than having a few thousand dollars tucked away for surprises. And I saved while paying off debt. It can be done!

  33. Mary says 13 April 2009 at 12:27

    Tyler@27: “If you lose your job, but you’ve got six months (or probably more) worth of expenses sitting in mutual funds (or wherever), you have plenty of time to withdraw some money before you run out of your $3,000 to $5,000 cash cushion. Yeah, maybe the market is down, and if it’s really, really down, like it has been lately, then you’ve only got four months instead of six months savings. Big deal.”

    Assuming that everyone has additional money in mutual funds — a rather big assumption — I still can’t agree with the option. I cannot anticipate PLANNING to go into long term investments as part of my financial strategy. This strikes me as an incredibly bad idea both in the short term and the long term.

    If the mutual funds are not designated for retirement (401k/RRSP), this means that someone has put a lot of money into the market before building a reasonably sized emergency fund.

    And if these are retirement funds, a withdrawal means you end up paying a penalty (direct or via higher taxes) AND losing principal you need to grow via compound interest.

    Perhaps precisely 6 months isn’t a good fit for everyone, but neither is $3000 to $5000. As a home-owner in a fairly expensive city, my bare-bones monthly budget — including insurance — is about $2500 a month. I cannot envision the equivalent of 2 months of scrimping being enough to safeguard against a drop in business or job loss, serious illness, or basement flooding.

    (I have disability insurance, but it kicks in 90 days AFTER I’ve been rendered disabled. Following your plan, I’d either be plundering my retirement funds or sucking rocks for nutrition on day 61.)

    Some of us are covered by unemployment insurance for X months; some of us aren’t. Some of us are in economically precarious industries or geographical areas; some of us aren’t. There is no one size solution for everyone, but I think most people are better off, especially this year, putting aside at LEAST three months of expenses ASAP.

  34. retired says 13 April 2009 at 12:30

    I have two comments.

    1. I see the logic behind calling a fund a layoff/unemployed fund.
    Set up two accounts:
    Emergency: An interest earning saving account, set up as an overdraft to your checking is a good idea.
    Layoff/unemployment: Something you could access with a little more difficulty but would earn more. The more you make the more you would need to put into this fund, especially if you wages are as contract or self-employment.

    2. The premises behind “get rich slowly” applies to high as well as low-income earners. The more you make the more you have borrowed and the more you need to pay off. A high income does not necessarily means you have lived within your means. Some of these so called financial advisors can lose your money faster than you can. My neighbor lost all of her money to an advisor who took off with her funds. And many have purchased a home and borrowed against it when the values rose but now the houses are not worth what they were.

    A good book to read is “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy”
    by Thomas J. Stanley

    It’s how you live not what you make that can lead you into being a millionaire. Health and Happiness are worth more than wealth.

  35. Mary says 13 April 2009 at 12:34

    (You know what, Tyler? That was snarkier than I expected. I’m sorry. But I really don’t think that investments should be treated as a supplemental emergency fund.)

  36. Tyler Karaszewski says 13 April 2009 at 12:49

    @Mary:
    Maybe $3,000 to 5,000 is low for someone with an expensive mortgage. Maybe, if you were otherwise following my philosophy here, but had an expensive mortgage, it could be more like $5,000 to $10,000. The point here is to have enough to cover “day to day” emergencies (like unexpected car trouble), and give you enough time to access your other investments in the case you experience a more severe emergency.

    Here’s where we’re differing fundamentally:

    You say “…this means that someone has put a lot of money into the market before building a reasonably sized emergency fund.”

    And what I’d say is “…this means that someone has put a lot of money into the market *in lieu of* building an extremely large emergency fund.”

    And yes, I’m assuming these funds aren’t invested in a retirement account. This is a sort of strategy that relates to Gail’s statement of “I can’t see the point of letting money sit earning next to nothing.” It implies that you have extra, non-retirement savings, and your choices include the option of a very large emergency fund, and the option of putting most of that into investments that can be liquidated in a few days or less. i think there’s nothing wrong with choosing the market and realizing that you can, in fact, sell these investments in the case of an emergency.

    What name you give to the account that holds your money is immaterial. Barring certain types of accounts (like tax-exempt retirement accounts, which incur penalties for early withdrawal), taking money out of savings to pay for an emergency reduces your net worth by the same amount, regardless of whether it’s an “investment account” that your pilfering, or an “emergency fund”. If you believe that an emergency is fairly unlikely, and that an investment fund is likely to grow by more than an emergency fund over time, why not leave your money (most of it, anyway) in the fund that grows until you need it?

  37. mike says 13 April 2009 at 12:52

    One thing:

    Do NOT put emergency money in a money market fund. There is a risk–however small–that you might not be able to get it back out. After the collapse of Lehman Brothers, the government had to intervene to prevent a run on money market funds that would have caused large losses for everyone involved.

    Emergency funds belong in only one place and that is an FDIC insured bank account.

  38. Kate F. says 13 April 2009 at 12:56

    I’ve just reached my $1000 EF while paying down debt. I’ve noticed something interesting that I wasn’t expecting –

    Just having the EF makes me less willing to break into it. For me, the EF is for funding unexpected, unbudgeted expenses like car trouble or pet expenses(not for something major like getting laid off). I’ve had both car repairs and expensive vet bills in the past couple of months and I’ve been able to pay cash without dipping into credit or savings. The more I save, the less likely I am to break into it. I love seeing it grow.

    Here’s why I think that it’s a good idea – For a person with habitually poor personal finance, building an EF can help to create financial discipline as well as self-esteem. For the first time in a long time, I’m seeing my money grow (and it has way more effect than seeing my debt disappear.)

  39. liz says 13 April 2009 at 13:21

    I LOVE GAIL! I wish she did a “get out of debt” show for non-couples…, but for now Til Debt Do Us Part still gives a great amount of advice – and this column of course is no different. While I may disagree with Gail on some points (education isn’t an investment worth going into debt for), her no-nonsense approach has helped me forge through some of my own debt issues. Thanks!

    @the folks above //why not leave your money (most of it, anyway) in the fund that grows until you need it//
    Er, cause the market can lose big money if you don’t already have money. I don’t think this advice is really for those that are heavily into investing, more for those that maybe aren’t quite at that level of money management “intelligence” yet. Right now, where I am, I have an emergency fund of $5000. Why won’t I invest it? Because it’s money that I might need. I’m investing in an RRSP on the side, and then *after* that I’ll look at extra investments. I’ve been told that you should only throw savings/ money into the stock market if you don’t need it; right now I need it to pay off debt and save for my future.

    Investing to me, especially in a market that is this volatile, is a long long long term plan, not a short term plan. Any of the ‘short term’ options that I’ve looked at all involve interest rates that are stupidly close to an ING account, and the money is that less liquid. Why bother? If it is looking like my emergency fund is too much money, or I’m feeling more comfortable with my net worth, then I may roll that into something else, but I don’t see the harm in holding that $5K someplace accessible.. This helps me plan a bit too, because once I put money into my RRSP, I don’t look at it again. Ever. So, if I keep them separate (separate companies even), I reduce the urge to want to go and spend that other chunk of cash that is put away…

  40. J.Chu | SuccessRevolution.com says 13 April 2009 at 13:55

    Great Post !!!

    Emergency fund prevents us from panic situation, which could direct us to debt

    Cheers,

    J.Chu

  41. corey says 13 April 2009 at 14:11

    This is what has been working for me in this situation.

    I have a great deal of debt, but have been aggressively paying it off.

    I started putting $100/month into savings for emergencies. If no emergencies came up by the time it hit $1000, I used that $1000 as a bonus debt payment. Then I started over putting $150/month into savings until I hit $1000.

    This has helped me (1) pay off debt faster (2) have a little emergency cushion and (3) create solid savings habits.

    Last month, I was stuck with a huge unexpected car repair bill. I didn’t have to panic or charge it because my system helped me pay for it.

    Not foolproof….but it works for me.

  42. Mary says 13 April 2009 at 14:29

    Tyler @36: “I think there’s nothing wrong with choosing the market and realizing that you can, in fact, sell these investments in the case of an emergency.”

    I’m willing to risk money for long term investments. I don’t expect to retire for 15-20 years, so I can deal with a portfolio that holds more stocks. But my emergency funds have to be safe, and in this economic climate, my emergency fund is going to be larger than it was before I bought this house.

    As liz says @38, I want my emergency funds well identified, segregated and safe. I’m sweating blood putting aside this money right now, and I would rather not lose even a few hundred, let alone a few thousand dollars, if I need to cash in during one of the weeks where a bunch of people sell to lock in the previous week’s gain.

    I could see using an ING account for all or just immediate emergencies. For “second tier” emergencies, like a long period of unemployment, I might choose a guaranteed investment vehicle, like Canadian GICs, that promise x% over several years but yield a lower rate if withdrawn early. But I can’t treat the market as a second tier.

  43. Des says 13 April 2009 at 14:36

    This topic is always a risk-reward calculation. Why stop at 6 months? Why not 12, or 24? What if your whole family gets in a car wreck AND gets cancer and you rack up $10 million in medical bills? Should you have a $10 million emergency fund, just in case?

    The point is not to prepare for ANY emergency, the point is to prepare for the most likely emergencies. So, someone with a very secure job (or one in high demand, or someone highly networked) can keep more of their E-fund in less liquid vehicles.

    No, it doesn’t always need to be liquid savings. Pay your mortgage ahead 6 months rather than keeping cash. That’s a 5-7% return right there, and you’d have to make that payment anyway. Don’t forget that the goal is not to have a certain amount of cash saved. You’re not saving cash for the sake of having cash. You’re saving for the purpose of smoothing out life’s bumps.

  44. Jasmine says 13 April 2009 at 15:25

    Long time lurker, first time poster!

    I think Gail makes an excellent point in her post — “having The Means offers you more Ways of smoothing out life’s bumps”.

    I refer to my small-but-growing EF as my “Crap Happens” account. Perhaps I’m more risk-averse than other people, but the idea of $20K-$30K of emergency money sitting in the stock market makes me physically ill.

    For me, an EF is not meant to make money; it’s meant to keep me from falling back into debt **when** I’m faced with a job loss, catastrophic illness, or other major life upheaval — I even exclude my EF total from my Quicken net worth calculation!

    As with everything in life, you have to do what works for you. By not treating my EF like spare money or an source of income, I don’t lose sleep over declining interest rates or the market machinations.

  45. Terrin says 13 April 2009 at 15:43

    The following passage is an example of not great advice. A financial emergency is a situation where nobody really knows what the ultimate resolution will be. It may be the case that one may lose his or her job and not find employment for years later.

    The benefit of using credit is that if things go really bad you may be able to file Bankruptcy if you need to do so and not have spent your savings.

    I see people every day who spend their entire retirements to try and survive a financial emergency. At the end of the day, some times the retirement savings runs out. If you use credit to try and survive the emergency, you can often discharge that money if you have to do so. If you used your retirement savings, that money is gone.

    The old advice used to be to save up 6 months of your income in case you lose your job. In the State of Michigan right now, there are people who have had unemployment extended up to two years because there are no jobs. That six months of saved income would be exhausted very quickly. If you live off the credit, you can pay it back if things turn around and if things really fall apart you might be able to discharge some of the money in Bankruptcy.

    “‘Who needs an emergency fund when you can use a line of credit?”
    The people telling us to get an LOC is an emergency fund are the same people who let us buy houses without enough money down, offered us ways to satisfy all your whims while spending money we hadn’t yet earned, and continually raised our limits until many of us had enough debt to bury an elephant.

    A line of credit is not an emergency fund…it is debt waiting to happen. If you hit a wall and end up racking up tens of thousands in debt on an LOC, how was that diverting disaster?'”

  46. Lane says 13 April 2009 at 16:09

    I put about $2000 in mutual funds a couple of years ago, specifically for use during an emergency.

    Thankfully I haven’t needed that money, but if I did, I would only be able to get around $1100 at the momentdue to the market sagging. If (God forbid) I needed that money now, I would be taking a huge hit compared to what I initially invested. Not particularly smart money management.

    So from this point forward I’m putting additional emergency fund money in an FBNA savings account. It ain’t sexy or sophisticated, but at least it won’t lose half it’s value at the worst possible time. Peace of mind is the goal here, not maximizing your returns.

  47. Avistew says 13 April 2009 at 16:16

    This article has perfect timing.
    Yesterday my husband (who has psoriasis) had a terrible flare-up on all of his body, that started swelling. We both panicked and he had to go to the hospital.
    Now, they need to keep him there for a few days.

    He is doing okay right now, but even though we’re in France where the costs won’t be a problem, it does highlight that emergencies can happen /anytime/. His psoriasis had been steadily getting better for years, and suddenly it’s worse than has ever been.

    There is no way we could have predicted it, and I am glad we have some money aside be it just so I can visit him and call him, and be able to relax.

    In other words, yes, emergencies happen, they are scary and stressful, and you don’t want to have the added stress of “Oh God, how am I going to pay for this?”

  48. db says 13 April 2009 at 17:16

    To various posters thinking it’s silly to have a big EF — especially those thinking a credit card or LOC fits your needs just fine.

    The credit card or LOC is really only a poor substitute for having emergency funds readily at hand (which to me means 3 months of expenses in liquid savings and as many more months as you can swing either in liquid savings or staggered in CDs such that every three months one comes due with three months of expenses.

    If you REALLY need to rely on a cc or LOC, well ok. Just remember (A) you’re going to have to be able to afford increased payments and (B) you’re going to end up paying off your expenses over a long term, since when you get on your feet you’re going to have a big bill waiting for you.

    When I was laid off in 2002-2003, I used up all my savings and then was using credit cards (laid off 8 months, drew unemployment for 6 months). I used credit cards as little as possible, yet it took me SIX YEARS to recover financially after I went back to work.

    Just in time to start being really nervous again.

    IMHO, planning that bankruptcy will take care of your cc’s isn’t a plan. It’s reckless and irresponsible to have that be part of your plan. Bankruptcy should be an option of last resort.

  49. paul says 13 April 2009 at 17:41

    For me it’s ridiculous to set aside money for any situation. I have one account that is a HELOC and my bank account. What’s the point of setting aside money when I can just write a cheque for any emergency. If I set it aside it just costs me money in lost debt payment. It’s all the same money from the same place. The EF is a silly old fashioned idea that sounds cool on paper, but is no longer necessary.

  50. ResortAtSquawCreekTAHOE says 13 April 2009 at 18:03

    hi beth – i can tell you two things. 1) money doesn’t buy more happiness. i’m happy to live off of 80K/yr, but it just so happens i’m in a profession that pays 1st year associates out of business school 200k, and i’m a director (assoc, vp, director) so the total comp used to be around 500-800k in the good times, so now cut that in half. And, once i passed 100K, i was really no happier. hence, i’m just saving everything, but spend my entire 140K base every year and live it up. it’s enough for me, since 80k is enough already. 2) when you make more, you always spend more. some spend 1 for 1, some spend 2 for 1 and get in trouble. i spend about 35cents of every 1 dollar i make. It’s a never ending cycle.

    i splurged on a vacation property in lake tahoe, b/c i wanted to enjoy life up in our favorite place on earth (Squaw Valley). in retrospect, i should have just saved my money and used the 200k (!) for vacation fees, and not a downpayment. but ohwell, this was my indulgence, and i now i have to pay for it for a long time. at least i get to go snowboarding, golfing, and hiking whenever i want 🙂

    The key to savings is to exactly create different accounts, and lock that money up in CDs or hard to reach places to Protect yourself from yourself! i can’t tell you how many times i’ve received a good chunk of money after tax (100-300K), and easily spent 20-40k on things such as a new car, fancy watches, vacations, presents for wife/family etc. You’ve got to lock that money up somewhere so you don’t go blow yourself up, by spending it all.

    Progress is happiness, not money.

  51. Jeff says 13 April 2009 at 18:37

    I like the idea of keeping around 6 months of expenses in a liquid emergency fund. I also agree that in all likelihood you will be financially better off by using a LOC and putting that money towards your mortgage or investing it. It comes down to whether you want to maximize the return on all of your money or whether you want extra security.

    I am currently saving for a down payment on a house. However, I figure that moving from an apartment into a house will cost me about $1,000/month more. So in order to keep the emergency fund at 6 months, I would also have to save $6,000 more in addition to my down payment. I wonder how many home buyers wait until they have saved up 6 months of home owner expenses in addition to the down payment before buying a house. Using that $6,000 to help me get my down payment faster and using the LOC as an emergency fund is starting to sound better and better…

  52. ResortAtSquawCreekTAHOE says 13 April 2009 at 19:15

    Jeff, i think most people save up 20% down, and have at least 6 months of reserves before and after buying a home.

    at least, most people in San francisco and manhattan do.

  53. Terrin says 13 April 2009 at 20:02

    It is not reckless. It is smart. Further, in today’s economy many people who never dreamed of having to file bankruptcy are doing just that.

    Moreover, you can in good faith 1) save money in a retirement account, and 2) use credit to try and get you over the hump. The two concepts are not incompatible. If things turn around great, you can use your retirement savings to pay off the credit. If things reach the point of last resort you can file bankruptcy without spending your retirement money. You don’t have to intend to file bankruptcy, to have a plan for the possibility.

    The reality is lots of people are not getting back on their feet in months. The older you are the worst the problem is. Financial planning should involve planning for the worst case scenario. The ultimate goal should be to make sure you can feed yourself as long as possible. Over ten percent of the population in Michigan is unemployed. Scary enough those figures don’t include those drawing unemployment.

    Lane writes, “IMHO, planning that bankruptcy will take care of your cc’s isn’t a plan. It’s reckless and irresponsible to have that be part of your plan. Bankruptcy should be an option of last resort.”

  54. db says 13 April 2009 at 23:42

    @Terrin:

    Re “IMHO, planning that bankruptcy will take care of your cc’s isn’t a plan. It’s reckless and irresponsible to have that be part of your plan. Bankruptcy should be an option of last resort.”

    Lane didn’t say it, I said it, and directly in response to this (which you said):

    “The benefit of using credit is that if things go really bad you may be able to file Bankruptcy if you need to do so and not have spent your savings….That six months of saved income would be exhausted very quickly. If you live off the credit, you can pay it back if things turn around and if things really fall apart you might be able to discharge some of the money in Bankruptcy.”

    I find this an irresponsible approach. You are advocating a) keeping yourself afloat through credit and then b) declaring bankruptcy rather than c) touching your savings. (First of all, if you can demonstrate that you HAVE savings, I’m not sure if you can declare bankruptcy).

    Of course, it is a given that if you have 6 months of emergency funds, your emergency might not be resolved in six months (all the more reason to have more than six months if you can. But that doesn’t make this “old-fashioned” or impractical advice. The real answer is if you think you need to be prepared for more than six months of hard times, then you better save more than six months of expenses.

    I don’t fault anybody who gets themselves into a tight jam and ends up needing to declare bankruptcy. Sometimes life hands you a bad break.

    But bankruptcy is admitting that you have spent more money than you have the ability to repay. So you’re going to discharge your debts. Somebody, somewhere, is going to end up bearing the cost of the debts you avoided. Ultimately you will, with things like a severely stained credit rating, and you may find yourself paying back all your debts anyway only under less friendly circumstances (like wage garnishment, unless you then decide the solution is to never go back to work again.)

    I just can’t fathom that somebody would think it’s an actual plan to spend your way out of an emergency on credit and then declare bankruptcy, rather than spend funds you’ve purposely set aside for a rainy day.

    If you are living paycheck-to-paycheck and can’t set aside much and end up in bankruptcy, I have sympathy with that. That’s hard times coming and going, and I hope they get better for you.

    If you can set it aside but choose not to, thinking that you’re going to float yourself on credit instead, then you don’t get my sympathy and have no business declaring bankruptcy.

  55. Beth says 14 April 2009 at 06:16

    @ ResortAtSquawCreekTAHOE

    I totally agree with you about people having more money spending more money. But, as I mentioned, it’s far easier for someone earning more to live on less. For example, it’s easier for someone earning 100K a year to live on half their salary and save the rest than it is for someone earning 40K to live on 20K.

    But you’re totally right — people don’t live that way. It’s been shocking to see people who earn 10-20 times my salary lose everything in this economy. I’m able to save and have an emergency fund. I guess when you have less, you have less to lose 🙂

  56. Jill says 14 April 2009 at 07:47

    To those who claim the idea of an EF is somehow old fashioned, I can say that there are times in true emergency situations when it’s still cash or check only.

    We live in a hurricane bait area that got hit hard in 2004. And, oh yeah, lots of non-native pine trees in my neighborhood that will go down in even light tropical storm force winds.

    When you’ve got a couple pine trees that ended up on your roof and there’s a perfectly nice tree removal crew with all their licensing and workman’s comp paperwork in order who says that, for $2,000 (cash or check only) they can take care of the trees on your roof then you need to be able to pull the trigger on that right on the spot. Phone and internet service can be kind of spotty when that happens, and even if you get through to your financial services provider, it can take them 48-72 hours to transfer funds into your bank account.

    Not good to be playing the game of hoping a funds transfer makes it into your checking account before tree guy cashes the check, and if your only EF is the credit card, then it’s going to take a lot longer and you’re going to be quoted a higher price for someone who takes plastic.

  57. Kelly says 14 April 2009 at 17:30

    I don’t agree 100% with Gail’s guest post, but I like a lot of what she said.

    In my case my spouse and I have low interest debt (averages 4.22%), and we are focused like lasers on paying it off.

    I started with a small emergency fund which was in one month wiped out by car repairs, a blown tire, electrical issues in the house (caused the heat to stop working!), and co-pays from the doctor (after we had maxed out our HSA $.

    We now keep $1,000 in it and add to it monthly with the small side income I’m bringing in. By the end of a year it will have grown to $5,000! We are also aggressively paying off our debt (everything but the mortgage), and hope to have it paid off by mid-year next year.

    I think our plan is perfect for us. My husband’s job is extremely safe, and even in the case of his unemployment with my small income and his severance we would be fine for 6 months.

    After the debt is paid we will breathe a big sigh of relief and start socking away more, but by then our monthly obligations will be significantly less, therefore our emergency needs will be covered much quicker.

  58. Jill K says 14 April 2009 at 18:58

    Tyler @27: Unless you’re union or have a contract, there’s no guarantee your current employer will maintain their generous severance policy. A smart firm has it stated clearly that policies can be changed at any time, with or without notice. And in the current economic climate, reduction of generous policies is happening all the time.

    It sounds like you have other avenues should you lose your job, so that’s great. But never, ever count on what a company will– or won’t– do for you as protection. Do for yourself.

  59. ResortAtSquawCreekTAHOE says 14 April 2009 at 19:24

    beth – you’re exactly right! the less you have, the less you have to lose which is a GREAT thing in the economic downturn. I’ve personally lost probably 400-500K in property/investments in the past 2 years, which is kinda sickening. No matter how much you make, you will still find losing money painful.

    I’m a great example of someone who thought the good times would last for a long time, and spent too much. In my spreadsheet, i had an average total income of 600K for the next 10 years, and I thought I was being careful b/c i made 740K 2 years ago. Conservative i was telling myself. In actuality, I think I will most likely average 375K for at least another 2 years, and then perhaps 450-500K for the next 8 years. Good money, BUT, I was living a lifestyle at 600k, but secretly thinking i would be over 700K/yr.

    Hence, the more you make, the GREATER your chance to blow oneself up if you will. At 700k, you start thinking 2.5 million house. God forbid you buy the 2.5mil house by putting 800,000 down, and have a 1.7 million mortgage, and then go down to a single income or lose your job!

    People with this type of income needs to just set a spending LIMIT every year of say 150K (add your spouses income, and should be over 200K), and then STOP. Bank everything else. Spend your base, save your bonus as they say in finance. These may sound like big numbers, but to live off 200K between both people in cities such as SF or Manhattan is very frugal.

    In a downturn, feel lucky you have relatively little. Use this downturn as an opportunity to get leverage for the inevitable upturn!

  60. RJ says 14 April 2009 at 20:47

    I have as secure a job as anyone can have, but nevertheless have built up an EF of $11,000 over the past couple of years.

    For me, the point of the EF is my 87-year-old father. Over the years I’ve come to realize that in spite of what he says, he hasn’t been particularly good with money. It’s not that he’s overspent, but it’s more that he hasn’t saved much at all, and tends to spend his money on “bargains” that he really doesn’t need. He stays within his budget, but still has a mortgage (claims it was money-smart not to buy the house outright), has a bit of cc debt and other “lines out in the sea” (he’s a strong believer in having and using credit, etc.) His net worth is primarily in his home (in Florida), whose value has fallen a bit. So, I’m quietly trying to prepare for a problem, just in case. And in any event, I’ll have to manage affairs when he gets sick or passes away. Best to have some cash at the ready.

  61. MikeVx says 15 April 2009 at 21:04

    I’m glad that I had an EF when I had some car damage last year. Unfortunately, I had more damage and that went on credit because the EF was drained. I actually had to raid some other funds also, and I am now building it all back up again.

    I have an OLOC that I set up when I stupidly mangled some numbers and was about to go negative. I’ve triggered it three times, the last two for less than a dollar each time. The 23 cents I’ve paid in interest beats the $100+ the bounce fees would have cost. But I don’t think of it as an emergency fund. I think of it as a bad math consequence mitigator.

    My EF has just creeped above $100 and is climbing up again, I just hope that nothing else expensive happens before I get it to a reasonable level.

    I try to plan my finances on the assumption that I could be unemployed tomorrow. (Not too likely, given that I have two departments arguing over who I should work for, but there are no guarantees.) I spent over a decade digging out of a credit hole, and I’m not going in again if I can help it.

    I keep my EF in my ING savings, it is a line in my spreadsheet that divides the account into sub-accounts for various purposes. With an Electric Orange account and ATMs nearby, its about as liquid as anything else.

  62. ResortAtSquawCreekTAHOE says 16 April 2009 at 20:13

    MikeVx – did u say your emergency fund has only $100 in it? I’m sorry, but you’ve got to boost that to like $2-3,000 at least, or at least 1 month’s salary. I’m assuming you don’t make under $1,000/month, and apologies if you do. Best

  63. DDFD at DivorcedDadFrugalDad says 20 April 2009 at 07:05

    The importance of an emergency fund can never be stressed enough! Thanks for this post.

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