Giving the Middle-Finger to My Emergency Fund

I am a big proponent of having an emergency fund. In fact, one of my medium term goals is to have a $10,000 emergency fund (about 4.5 months of living expenses). So you may be surprised to hear that I recently took $4,000 out of my emergency fund (balance was at $6,200 at the time) and used it in a way that I feel is much more productive.

Where did it go?

That $4,000 went right into my Roth IRA. With my goal of maxing my 401(k) for the year, I knew it was going to be tough to max the Roth in 2010. However, I know that these early years are the most important for the growth of my Roth. Somehow, someway, I was determined to make sure I was able to contribute the full $5,000 for the year.

With both retirement accounts getting maxed for the year, I know my investment accounts are going to grow at a faster pace than I could have ever hoped. A little bit of sacrifice now (and it really is only a little bit) will set me up for that boat and house on the beach that J. Money and I always talk about for our early 40s.

What happens if an emergency occurs?

Well I am glad you asked. I still have an emergency fund of about $2500. So, I am covered for at least a little bit. I also have additional cash savings (set up for specifics savings goals) that I can spend if I am really in a tight spot. There is also a $1500 cash buffer that I keep in my checking account. All in all, I am at about the same place I was cash wise prior to the $4K being yanked out.

You then ask, what happens if I burn through all of that cash?  Well I am glad you asked, because that was a legit concern of mine as well. I consulted with a financial advisor (someone who is 30 years my senior and specializes in retirement accounts including the Roth IRA) and found out an interesting aspect to Roth’s. Now, we already know you can take out your principle investments at any time without penalty. We also know you can’t put that money back in until the next tax year if you have already maxed your contribution for the year. BUT, you CAN take out principle funds from your Roth for a maximum of 60 days and return them in full without penalty once over the course of a year. If you return the funds within those 60 days, it’s like it never happened.

This was all the reasoning I needed to make that jump.  If I can have a 60 day loan from my Roth with no stipulations, I know all my financial bases are covered.

Why did I do it?

Well, I explained what I would do if an emergency occurred above, but that doesn’t get to the fundamental logic for me making this bold move. While I embrace an emergency fund, I do so begrudgingly.

Cash is cash, and having ample cash reserves is important. Does it matter if it’s in an ING sub account labeled as “emergency fund”?

While having that $10,000 e-fund is important to me, it is only a mid-level priority. Maxing out my investments in mutual funds (especially my Roth in my mid 20s) takes priority over almost all other financial decisions I make.

It certainly also helps that I have diversified my income over the past two years and that I have a position with my employer that I feel is extremely secure.

What do you think?  Have I made another personal finance sin?  Have I gone absolutely mad because I feel the emergency fund isn’t the holy grail of my personal finance life?  Let me know your thoughts below.

266 Responses to Giving the Middle-Finger to My Emergency Fund
  1. Health and Fitness
    April 20, 2018 | 6:04 pm

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    April 20, 2018 | 7:22 pm

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    April 20, 2018 | 7:47 pm

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    April 20, 2018 | 10:34 pm

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    April 20, 2018 | 11:10 pm

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    April 21, 2018 | 1:26 am

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    April 21, 2018 | 1:27 am

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    April 21, 2018 | 1:33 am

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Giving the Middle-Finger to My Emergency Fund

I am a big proponent of having an emergency fund. In fact, one of my medium term goals is to have a $10,000 emergency fund (about 4.5 months of living expenses). So you may be surprised to hear that I recently took $4,000 out of my emergency fund (balance was at $6,200 at the time) and used it in a way that I feel is much more productive.

Where did it go?

That $4,000 went right into my Roth IRA. With my goal of maxing my 401(k) for the year, I knew it was going to be tough to max the Roth in 2010. However, I know that these early years are the most important for the growth of my Roth. Somehow, someway, I was determined to make sure I was able to contribute the full $5,000 for the year.

With both retirement accounts getting maxed for the year, I know my investment accounts are going to grow at a faster pace than I could have ever hoped. A little bit of sacrifice now (and it really is only a little bit) will set me up for that boat and house on the beach that J. Money and I always talk about for our early 40s.

What happens if an emergency occurs?

Well I am glad you asked. I still have an emergency fund of about $2500. So, I am covered for at least a little bit. I also have additional cash savings (set up for specifics savings goals) that I can spend if I am really in a tight spot. There is also a $1500 cash buffer that I keep in my checking account. All in all, I am at about the same place I was cash wise prior to the $4K being yanked out.

You then ask, what happens if I burn through all of that cash?  Well I am glad you asked, because that was a legit concern of mine as well. I consulted with a financial advisor (someone who is 30 years my senior and specializes in retirement accounts including the Roth IRA) and found out an interesting aspect to Roth’s. Now, we already know you can take out your principle investments at any time without penalty. We also know you can’t put that money back in until the next tax year if you have already maxed your contribution for the year. BUT, you CAN take out principle funds from your Roth for a maximum of 60 days and return them in full without penalty once over the course of a year. If you return the funds within those 60 days, it’s like it never happened.

This was all the reasoning I needed to make that jump.  If I can have a 60 day loan from my Roth with no stipulations, I know all my financial bases are covered.

Why did I do it?

Well, I explained what I would do if an emergency occurred above, but that doesn’t get to the fundamental logic for me making this bold move. While I embrace an emergency fund, I do so begrudgingly.

Cash is cash, and having ample cash reserves is important. Does it matter if it’s in an ING sub account labeled as “emergency fund”?

While having that $10,000 e-fund is important to me, it is only a mid-level priority. Maxing out my investments in mutual funds (especially my Roth in my mid 20s) takes priority over almost all other financial decisions I make.

It certainly also helps that I have diversified my income over the past two years and that I have a position with my employer that I feel is extremely secure.

What do you think?  Have I made another personal finance sin?  Have I gone absolutely mad because I feel the emergency fund isn’t the holy grail of my personal finance life?  Let me know your thoughts below.

266 Responses to Giving the Middle-Finger to My Emergency Fund
  1. Health and Fitness
    April 20, 2018 | 6:04 pm

    I¡¦ve been exploring for a little for any high-quality articles or weblog posts on this sort of space . Exploring in Yahoo I eventually stumbled upon this website. Studying this information So i¡¦m glad to express that I have an incredibly good uncanny feeling I found out just what I needed. I so much no doubt will make sure to do not disregard this site and give it a look on a relentless basis.

  2. Health and Fitness
    April 20, 2018 | 7:22 pm

    Good write-up, I am regular visitor of one¡¦s site, maintain up the nice operate, and It is going to be a regular visitor for a lengthy time.

  3. Health and Fitness
    April 20, 2018 | 7:31 pm

    Absolutely written subject material , thankyou for selective information .

  4. Health and Fitness
    April 20, 2018 | 7:47 pm

    Enjoyed reading through this, very good stuff, appreciate it. “Be not careless in deeds, nor confused in words, nor rambling in thought.” by Marcus Aurelius Antoninus.

  5. Health and Fitness
    April 20, 2018 | 9:22 pm

    I dugg some of you post as I cerebrated they were handy extremely helpful

  6. decorindoperkasa
    April 20, 2018 | 10:34 pm

    Hiya, I’m really glad I have found this info. Today bloggers publish just about gossip and internet stuff and this is actually irritating. A good website with interesting content, that’s what I need. Thanks for making this website, and I will be visiting again. Do you do newsletters by email?

  7. Daftar PokerPelangi
    April 20, 2018 | 11:10 pm

    Hiya, I’m really glad I have found this information. Today bloggers publish just about gossip and net stuff and this is really irritating. A good web site with interesting content, that is what I need. Thank you for making this web site, and I’ll be visiting again. Do you do newsletters by email?

  8. Domino QQ
    April 21, 2018 | 12:59 am

    Hiya, I am really glad I’ve found this info. Today bloggers publish just about gossip and internet stuff and this is actually annoying. A good blog with interesting content, this is what I need. Thanks for making this web-site, and I’ll be visiting again. Do you do newsletters by email?

  9. spy gadgets
    April 21, 2018 | 1:26 am

    I’m still learning from you, while I’m trying to reach my goals. I certainly love reading all that is posted on your website.Keep the tips coming. I liked it!

  10. Health and Fitness
    April 21, 2018 | 1:27 am

    I am not sure where you’re getting your information, but good topic. I needs to spend some time learning much more or understanding more. Thanks for fantastic info I was looking for this information for my mission.

  11. business current events
    April 21, 2018 | 1:27 am

    I¡¦ve read a few excellent stuff here. Definitely price bookmarking for revisiting. I surprise how so much effort you put to make this sort of great informative web site.

  12. Business
    April 21, 2018 | 1:33 am

    I simply wanted to thank you very much once more. I do not know the things I would have handled without the type of advice contributed by you directly on this problem. It truly was a real alarming circumstance in my view, but encountering a new specialised way you treated the issue took me to jump over delight. I’m grateful for the service and in addition sincerely hope you know what a great job you are undertaking instructing many others through the use of your web page. I’m certain you have never encountered all of us.

  13. slack
    April 21, 2018 | 1:41 am

    Thanks a bunch for sharing this with all folks you really recognise what you are talking approximately! Bookmarked. Kindly additionally seek advice from my web site =). We can have a hyperlink alternate agreement between us!

  14. Daftar Poker
    April 21, 2018 | 2:01 am

    Awesome write-up. I am a normal visitor of your site and appreciate you taking the time to maintain the nice site. I’ll be a frequent visitor for a really long time.

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  1. aurora basement
  2. basement finishing companies denver co
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