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Anyone using their savings for aggressive loan paydown?

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  • Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 334
    Joined: 06/10/2019

    Uh oh. I think my emergency fund at $2M (1 year expenses) may be too big…plus a $500K HELOC as a reserve to quell my concerns. Yes I have almost the equivalent in loans but the interest rates charged for the loans are almost the same rates I get for my reserves, and probably equal once you normalize for the tax advantages associated with carrying those loans.

    I am actually quite surprised by this consensus.

    Most advisors recommend 6 months reserves. An emergency expense is not really a one time $10K expense for example, it’s like a loss of a job for several months or a business losing a major contract I think they are talking about.

    Also, with close to no reserves, what happens when a great opportunity comes along such as a major market correction, a real estate deal, a quality business opportunity comes along?

    #232432 Reply
    Liked by hightower
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1861
    Joined: 02/11/2019

    I think a lot of people confuse emergency funds and dry powder.

    I do not keep any money around to get good deals as they come.  I just buy the market on its ups and downs.

    I do agree the biggest emergency would be job loss.  Any other big loss should be insured.

    If I abruptly decide to take a 3 month sabbatical I could continue my lifestyle with no changes.  (Very unlikely)

    If I lost my job my 3 month E fund would last a lot longer because I would immediately ditch every bit of spending I could until I had another source of income lined up.  Also very unlikely.

    Also my health system has room for another 5 FPs and we are a small community hospital.  I do not think it would be hard to find work assuming I do not screw something up majorly.

     

    “Never let your sense of morals prevent you from doing what is right.”

    #232523 Reply
    Liked by adventure, Tim
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3073
    Joined: 09/18/2018

    @tangler,
    “Having no (small) emergency fund = incentive to work”,

    Might be some behavior issues if a small EF motivation is required. EF is a safety net, not a motivator.

    #232527 Reply
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1195
    Joined: 01/26/2017

    Uh oh. I think my emergency fund at $2M (1 year expenses) may be too big…plus a $500K HELOC as a reserve to quell my concerns. Yes I have almost the equivalent in loans but the interest rates charged for the loans are almost the same rates I get for my reserves, and probably equal once you normalize for the tax advantages associated with carrying those loans.

    I am actually quite surprised by this consensus.

    Most advisors recommend 6 months reserves. An emergency expense is not really a one time $10K expense for example, it’s like a loss of a job for several months or a business losing a major contract I think they are talking about.

    Also, with close to no reserves, what happens when a great opportunity comes along such as a major market correction, a real estate deal, a quality business opportunity comes along?

    Click to expand…

    LOL, you have 2 m sitting around uninvested?

    #232532 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3073
    Joined: 09/18/2018

    “Also, with close to no reserves, what happens when a great opportunity comes along such as a major market correction, a real estate deal, a quality business opportunity comes along?”

    Hmmm, sure doesn’t sound like an emergency does it?
    I think someone else bites.

    #232566 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 334
    Joined: 06/10/2019

    Uh oh. I think my emergency fund at $2M (1 year expenses) may be too big…plus a $500K HELOC as a reserve to quell my concerns. Yes I have almost the equivalent in loans but the interest rates charged for the loans are almost the same rates I get for my reserves, and probably equal once you normalize for the tax advantages associated with carrying those loans.

    I am actually quite surprised by this consensus.

    Most advisors recommend 6 months reserves. An emergency expense is not really a one time $10K expense for example, it’s like a loss of a job for several months or a business losing a major contract I think they are talking about.

    Also, with close to no reserves, what happens when a great opportunity comes along such as a major market correction, a real estate deal, a quality business opportunity comes along?

    Click to expand…

    LOL, you have 2 m sitting around uninvested?

    Click to expand…

    No, invested in no risk 3% 12-18 month CD’s currently, waiting for the right time to enter a mutual fund with 35-40% average annualized returns over the past decade.

    Worry not, I have another $10M invested and returning 10-25% annually.

    #232574 Reply
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1195
    Joined: 01/26/2017

    Uh oh. I think my emergency fund at $2M (1 year expenses) may be too big…plus a $500K HELOC as a reserve to quell my concerns. Yes I have almost the equivalent in loans but the interest rates charged for the loans are almost the same rates I get for my reserves, and probably equal once you normalize for the tax advantages associated with carrying those loans.

    I am actually quite surprised by this consensus.

    Most advisors recommend 6 months reserves. An emergency expense is not really a one time $10K expense for example, it’s like a loss of a job for several months or a business losing a major contract I think they are talking about.

    Also, with close to no reserves, what happens when a great opportunity comes along such as a major market correction, a real estate deal, a quality business opportunity comes along?

    Click to expand…

    LOL, you have 2 m sitting around uninvested?

    Click to expand…

    No, invested in no risk 3% 12-18 month CD’s currently, waiting for the right time to enter a mutual fund with 35-40% average annualized returns over the past decade.

    Worry not, I have another $10M invested and returning 10-25% annually.

    Click to expand…

    Sure you do… (along with the Ferrari, huge house, home theater, child with horse, etc etc).

    And btw good luck finding that mutual fund…

    #232676 Reply
    Liked by MPMD
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 334
    Joined: 06/10/2019

    Silly piggy,

    Already own the fund, up 35 fold over the past decade. Hint: 65cents/share in 2009 now hovering around $25/share. Just want to add another $1M. You can do that math on another round of those returns.

    Do a little research (it’s easy to find), I own not one but two funds with >30% annualized 10 year returns. I’ll give you another hint: up 46+ and 38+ % YTD (and it’s only July). They’re my secret.

    You can choose to believe it…or not…won’t hurt my bank accounts.

    #232686 Reply
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1195
    Joined: 01/26/2017

    So you’re a businessman extraordinaire, physician extraordinaire and now you’re a mutual fund picker extraordinaire? (All the while living a lavish lifestyle)

    Count me as one skeptical little piggy.

    #232688 Reply
    Liked by ENT Doc, Lordosis
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3073
    Joined: 09/18/2018

    Might be in the wrong business. Why would a FM spend time reviewing NP (non-partners ) notes?
    With those kind of returns on the consistent basis sitting in an office seems to be a waste of talent.
    Congratulations!

    #232697 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 334
    Joined: 06/10/2019

    Might be in the wrong business. Why would a FM spend time reviewing NP (non-partners ) notes?
    With those kind of returns on the consistent basis sitting in an office seems to be a waste of talent.
    Congratulations!

    Click to expand…

    I’m sad you feel that direct patient care is a waste of talent, relative to earning money. Maybe the wrong business for income, but without a doubt the right manifestation of my life’s calling.

    No regrets, no burnout, no jealousy. Just zeal and perspective.

    Besides, how is finding good long term returns talent? 10 year returns down to YTD returns are posted all over the internet and the market has cycles presenting fantastic opportunities for fire sale. I found what I found because I looked, and purchased years ago. I will find what I will find because I look and will purchase in due time. No talent involved and…

    …easy to do from an office where I celebrate health and the wonder of life.

    #232714 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 334
    Joined: 06/10/2019

    So you’re a businessman extraordinaire, physician extraordinaire and now you’re a mutual fund picker extraordinaire? (All the while living a lavish lifestyle)

    Count me as one skeptical little piggy.

    Click to expand…

    Not extraordinaire, just trying my best while making errors along the way.

    Skeptical okay, to each his own. I lean more optimist.

    #232718 Reply
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1195
    Joined: 01/26/2017

    You had me going for a while. Your claim to have picked not one but two mutual funds (and held on for 10 years) with astronomical gains, along with your other claims to save 80-90% income while spending lavishly. It all strains credulity. To believe it, one would have to suspend multiple levels of disbelief.

    FLP

    #232719 Reply
    Liked by ENT Doc, MPMD
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3073
    Joined: 09/18/2018
    No talent involved and…

    Click to expand…

    No offense intended, I know of no one that can consistently pick the “winners” only. It’s more along the lines of “fishing tales” and the one that got away.

    #232758 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 334
    Joined: 06/10/2019
    No talent involved and… 

    Click to expand…

    No offense intended, I know of no one that can consistently pick the “winners” only. It’s more along the lines of “fishing tales” and the one that got away.

    Click to expand…

    That’s not how it works. You are correct, I cannot consistently pick the “winners” only, either.

    Those two funds I referred to are both technology based funds. Any one who breathes would have known years ago that technology was going to be a great bet, and it will continue to outperform. Post 2008/9 recession I never bought bank sector funds or real estate funds, for example, as the money was just not seeming to flow there.

    When OPEC decided to start cutting oil production a few years ago, I purchased an energy fund in a relatively small quantity to get my feet wet due to a glimmer of hope with investor inflows. After it didn’t take off for a few months into it, I sold it and purchased more of my superstars and I was off to the races again. You sell your losers and stick with your winners (the underlying fundamentals is their tailwind). No one ever said picking “winners” only. One just can learn to migrate there and when the ship has sailed there and held steady for a few years it’s a spectacular thing.

    I don’t want you to believe, I want myself to improve further and perhaps impress upon those looking for a similar way to take their finances to the next level. I owe nothing to skepticism.

    #233060 Reply

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