Comments on: Giving the Middle-Finger to My Emergency Fund

By: Daddy Paul

Daddy Paul — Wed, 03 Feb 2010 00:44:52 +0000

You appear to have researched the situation you will be ok. From someone who put 80% of my salary into my 401K for three months to max it out and lived out of my HELOC at that time you may be conservative.

By: FinEngr

FinEngr — Mon, 25 Jan 2010 01:22:35 +0000

Glad you used the money – that’s optimizing your system. The only problem I foresee is if that 60-day loan fell over a distribution period, then you’re missing out on that additional amount. But that’s relatively minor.

Emergencies can come in a variety of forms – anticipated/planned, anticipated/not planned, not anticipated/planned, and not anticipated/not planned.

Not sure why people take emergency funds as hallowed accounts that can never be withdrawn from. They always look towards the worst case scenario (not anticipated/not planned). As long as some minimal buffer is maintained (determined by user), one of the benefits is having that liquidity to move around when necessary.

Every year I use my “emergency” savings to fund my yearly Roth contribution on Jan 1st. I’m done for the year, and can focus on other investments. The added bonus is the withdrawal forces me to pump the savings back up to where it was beforehand.

By: Brian

Brian — Thu, 21 Jan 2010 22:14:42 +0000

@Mrs. Micah – Yeah that 60 day period made me feel comfortable enough for this year.

@Budgets are the new Black – I feel the same way… have to get that money in early! BTW, love the blog name.

@Craig – Glad we had that chat, i like what you are doing with your Roth and am pumped for you.

@Kelly – Of course not having a family makes things much much easier. Lets hope no Baby My Next Buck’s come up unexpectedly!!

@MP – Yeah.. i thought about holding the $5000 in a money market account and then dumping it in at the end of the year if i haven’t had an emergency. However, then i would lose the gains that i think the market will make this year. I don’t think it will be as great as last year, but still i think the recovery will continue for 2010.

@J – Its your retirement account balances that inspire me to dump money in there like none other.

@Jabs – Happily ever after… but he will have his boat, and i will have mine. His wife will decorate his, and well, mine will be the bachelor pad… Which one do you want to come visit more often?

@Ken – Thanks… i think living like this is sustainable for a year, but then more income will be necessary, and thus a larger emergency fund. We will see what happens.

@FS – You recommend straight market investments because of the ability to use for mid life purchases as opposed to retirement? I don’t know… i struggle with that, and i make sure i invest in my brokerage account, but i like the feeling of completing something. If i was only allowed to put 10K into the market for a year, i would try to “max” that out. When my income shifts for the positive, i think the Roth will go away and more stocks and mutual funds are where i will focus my assets.

By: Financial Samurai

Financial Samurai — Thu, 21 Jan 2010 03:56:41 +0000

Brian, you’re right. Cash is cash, no matter which way you deposit it. I’m against a ROTH and especially convefting to a ROTH but it’s not bad. It’s just less good. The most important thing is you’re saving and investing! Good work!

By: Ken

Ken — Thu, 21 Jan 2010 03:30:32 +0000

If you have no other debts I think this is a good decision. Saving for retirement is important. It’s all about what you can live with and it sounds like you have thought it out. Good luck.

By: Matt Jabs

Matt Jabs — Wed, 20 Jan 2010 21:06:05 +0000

Sounds smart to me… unless you have any high interest debt remaining. At this point in your life I would advise you do exactly what you did… nice work Brian! Hopefully you & J-Money can get that house boat sooner rather than later… and live happily ever after.

By: J. Money

J. Money — Wed, 20 Jan 2010 20:30:33 +0000

I think you’re crazy, and I love it! Sometimes you’ve gotta be extreme to get this stuff done, so good job. And that comes from someone who LOVES his emergency fund! But truth be told, he loves his retirement accounts more

By: MoneyProgress

MoneyProgress — Wed, 20 Jan 2010 17:55:28 +0000

I’ll admit that I like having a lot of cash on hand, whether you want to call it an emergency fund or whatever else. At the same time, one of my favorite features of the Roth IRA is that you can always take your contributions out at any time if you really have to. I knew this, but I did not know that you could put them back in within 60 days! Thank you very much for pointing that out! Just reinforces even more how great Roths are.

In the end though I would probably be more conservative than you. I like to have 12 months of cash around. Once you have that buffer you can then pile everything else into retirement accounts. It really doesn’t delay your investing that much. What I’ve done before is max out my Roth IRA but leave some of it in a money market account until I’m comfortable that I have enough cash savings and then move it to stocks/bonds/etc.

By: Kelly

Kelly — Wed, 20 Jan 2010 16:43:42 +0000

Makes sense to me! I don’t think you need a huge emergency fund anyway, you’re single, young, and don’t have a ton of expenses to begin with.

If it were me I would’ve kept it in the EF, but I have a family, and many more expensive emergencies.

By: Craig

Craig — Wed, 20 Jan 2010 16:33:58 +0000

I am looking into doing a similar strategy as well based off of your advice and reasoning. It makes sense to get the money in the Roth as early as possible. Hopefully a real emergency does not occur.