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Reader Poll Results – 6 Months Worth Of Expenses And The Emergency Fund

July 22nd, 2008

NCN

A month ago, I asked my readers to share their ideas about emergency funds, how much money it takes to cover 6 months worth of expenses, and the best place to stash emergency fund cash. I’ve been amazed by the response to the poll. More than 1000 readers have voted – and almost 50 left detailed answers in the comments section!

Here is a quick summary of the poll results, as of July 22, 2008.

For most folks, six months worth of expenses is somewhere between $8,000 and $25,000. But, for many, their goal is more than $30,000! That’s pretty interesting.

As for where to keep the emergecny fund, most opt for an online savings account, a few use a regular savings account, and still others use money market accounts from their local banks.

Because of the poll’s popularity, I’ve decided to keep it up for another month. So, if you haven’t already, head over, cast your vote, and leave a comment.

Posted in Emergency Fund, Polls

7 Comments »

Reader Poll – Just How Much Is 6 Months Worth Of Expenses?

June 13th, 2008

NCN

Many popular personal finance ‘gurus’ suggest maintaining an emergency fund with enough money to cover 6 months worth of expenses. I thought it might be interesting to see what my readers thought about this advice. If you are reading this post in a feed-reader, you will need to click through in order to leave a comment and vote in the poll.

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How Much Is 6 Months Worth Of Expenses?

Now that you’ve voted, a few questions -

Question 1: Where do you keep you emergency fund? In a savings account, money market, checking account, or under the mattress?

Question 2: What about six months worth of expenses? Is this too much… or too little?

Question 3: Would you sacrifice a fully-funded emergency fund in order to fully-fund a Roth IRA (or other retirement / education savings account)?

Question 4: What is the smallest emergency fund with which you wold be comfortable?

Thank you for your participation. Your answers will help me write a future post. If you are a blogger and you write a post about this subject, click the contact button at the top of this page and let me know about it. I’ll be more than happy to link to your post.

Posted in Debt Story, Emergency Fund, Polls

58 Comments »

Updating My Non-Retirement Savings Chart

June 9th, 2008

NCN

One of my goals for 2008 is to rebuild my non-retirement savings. In 2007, we purchased a new-to-us minivan and in early 2008, we had a new baby (and purchased several baby-related items). These expenses worked together to dramatically reduce our non-retirement savings and I’ve been working diligently to rebuild them.

I just made a transfer from my primary checking account to my ING DIRECT Savings Account. My current balance now rests at $5,000. My goal for 2008 is $16,000. Bright readers who can quickly do math in their heads will have already calculated that $16,000 divided by 12 months is $1,333.33. So, after 5 months, I’m a little behind. O.K. I’m a lot behind. In fact, I’m $1,666.6 behind. But, alas, I have a plan!

In just a few weeks, I should receive my economic stimulus rebate check. The amount on the check will read $1,800. I’ll deposit the check and – abracadabra – I’ll be right back on track.

Click here to see my current savings chart over at the No Credit Needed Network – NCNSavings2008.

Posted in 2008 Goals, Emergency Fund, Savings

1 Comment »

Real Life Example Of Why You Need An Emergency Fund

May 1st, 2008

NCN

My wife is an educator. She recently gave birth to our third child, a baby girl. Mommy and baby are doing great. Our older kids are adjusting and they are having so much fun, learning to feed and hold the new baby.

The timing of the birth worked out great. My wife will be home until school lets out in May – and she’ll be able to stay at home during the summer. Altogether, she’ll get more than 4 months with baby, before school starts back, next fall.

As you might imagine, due to the fact that she’ll miss the last few weeks of school, her paychecks over the next four months will be reduced. The actual amount of the reduction will be based on the number of sick days and personal leave days she had remaining, prior to the delivery, and the number of days she actually misses. Suffice to say, things will be a little ‘tight’ around the old NCN household, but we are prepared!

Why? Because, we have an emergency fund! With six months worth of expenses, set aside in our Orange Savings Account, we should be just fine.

Four years ago, when our son was born, we used credit cards to cover the gap between actual and expected income. But, not now. No, now we will use the funds in our savings account, to make up for the lost income. In fact, so far, we are doing just fine, living off of my income alone. But, should we need it, the money is there.

It’s amazing how much better we feel about our current situation, knowing that we have our emergency fund, and that it’s there if we need it. Plus, instead of worrying about paying back our creditors, we can focus on enjoying the new baby!

Posted in Emergency Fund

13 Comments »

Building An Emergency Fund – Where Do I Keep It?

February 27th, 2008

NCN

As I mentioned in my recent post about what to do after getting out of debt, I like the idea of having an emergency fund. After a series of super-secret mathematical calculations – I pulled a number from a hat – and decided that $16,000 would be a good amount to have in ours.

Where do I keep our emergency fund?

Online Savings Account – $14,000

Online Interest Bearing Checking Account – $1,500

Cash In My Pocket – $500

(Currently, our online savings account is with ING DIRECT. Open your account online today. No fees and no minimums!)

I like the idea of having some cash on me, at all times. I also like to keep some money in a checking account, readily accessible for unexpected expenses. The bulk of the money, in my online savings account, is for major, unforeseen life-events. Should I need to withdraw the money, a transfer takes about two days.

(As a side note – I also have just about $2,000 in a brokerage account, invested in an index fund. The money has been sitting in the account for more than two years and I never really do anything with it. Eventually, after I fully-fund my ‘emergency fund’ and all retirement accounts, I’ll turn my attention to this brokerage account. For now, I don’t include this amount in any of my calculations – and I consider it my super-secret, things-have-fallen-apart, emergency stash.)

Observant readers will remember that I’m not afraid to dip into my emergency fund. In fact, if you are going to live ‘no credit needed’ (without borrowing money), then you’ll need an above-average cash reserve. And, when it’s time to buy big-ticket items, you’ll have to use the money that you have ‘on hand’.

Last year, the transmission in our van almost died – and the cost to replace it would have been more than the entire value of the van, itself. So, we traded the van and purchased a newer one, with cash from our ‘emergency fund’. I also dipped into my emergency fund so that I could fully-fund a Roth IRA for my wife (before the April 15th deadline).

Sticklers, no doubt, will question whether or not these ‘dips’ in the ‘emergency fund’ were, in fact, emergencies. I’ve debated these moves myself. But, instead of debating ’shoulda/coulda’ – I’m simply working hard to rebuild the fund.

By the way, you can click here to see how I’m doing as I rebuild my ‘emergency fund’ (non-retirement savings) – and here to see a chart of my progress, over at my other site, the No Credit Needed Network.

I would be interested to hear whether or not you have / want an ‘emergency fund’. How much are you planing to save? Is it invested in mutual funds / stocks or is it just sitting in an online account?

Posted in Debt Free, Emergency Fund, Money Management

26 Comments »