Emergency fund and cash on-hand

Home Personal Finance and Budgeting Emergency fund and cash on-hand

  •  WorkforFIRE 
    Status: Physician
    Posts: 37
    Joined: 11/22/2018

    What do y’all do for an emergency fund? 6 months of Mo they expenses? 9 month?
    What about additional free cash? Does anyone keep additional cash above the emergency fund…if so, how much and what’s the reasoning..

    Thanks everyone!

    #189551 Reply
    ENT Doc ENT Doc 
    Status: Physician
    Posts: 2510
    Joined: 01/14/2017

    3 months basic living expenses, not standard living expenses. Plus we have 2.5 months of buffer in a working capital account. I think to put 3-6 months of normal living expenses in isn’t necessary, as habits will change in an emergent situation.

    As for separate cash, we combine needs for down payment, planned car purchase, etc. in the same place as the E Fund – VMMXX.

    #189561 Reply
    White.Beard.Doc White.Beard.Doc 
    Status: Physician
    Posts: 639
    Joined: 02/06/2016

    The answer depends on the status of your financial circumstances and other investments.  Are you just starting out?   Do you have kids? Student loans? A mortgage? Single income? Double income?  The details matter in terms of your financial obligations.

    When we were starting out, we tried to have 3 months of expenses in cash, but that wasn’t always the case.  We bought our long term home one year after I became an attending and the cash was pretty tight those first few months after closing.  That would be one end of the spectrum.

    Decades later, we don’t really need an emergency fund because of the various buckets of investments we have, and the large borrowing power we have if there were to be a change in circumstances.  I could easily come up with plenty of cash in a heartbeat from many sources.  But the reality is, it would be highly unlikely for us to need much as these days there are no more student loans or mortgages to deal with.

    Generally speaking, 3 to 6 months of expenses in short term funds is a fairly good guide.  I like Ally bank or Vanguard Money Market Funds, either taxable or municipal depending on your tax bracket.  Physician job security tends to be very good, but when you do have to switch jobs, hospital credentialing can cause several month delays even after finding a new job, particularly for hospital based practitioners. Disability can also lead to delays in the insurance kicking in, depending on how many months of waiting you elected for your disability policy.

    #189563 Reply
    Liked by Vagabond MD
    Status: Small Business Owner
    Posts: 1435
    Joined: 02/01/2016

    This why I prefer to consider it “contingency” funds, but that ship has sailed on the title. Not all funds necessary for a given contingency have the same liquidity and safety requirements.

    Bailing your [email protected]$$ BIL out of jail might require immediate cash (safe/ATM).

    Buying that vehicle, spouse’s collectible or your new toy might need ACH, cashier’s check, etc…

    Your vehicle blows a transmission, the heat/AC dies on the coldest/hottest day of the year, etc… Requires a credit card with funds available by the payment date.

    Long term unemployment or financial drain needs a substantial long-term but likely predictable cash flow.

    These can be liability matched; cash, B&M bank/CU, online bank/CU, Savings Bonds, short-term CDs/Treasuries ladder, short duration bond fund, etc…

    #189567 Reply
    Liked by Hank, Tim, Zaphod
    Status: Physician
    Posts: 2699
    Joined: 01/08/2016
    What do y’all do for an emergency fund?

    Click to expand…

    high yield savings, some Ibonds

    6 months of Mo they expenses? 9 month?

    Click to expand…

    we actually keep a dollar figure. it would last 6-12 months probably.

    What about additional free cash?

    Click to expand…

    none, other than whats in the checking account. everything else is invested in something. it might be conservative, but no cash.



    #189569 Reply
    Status: Physician
    Posts: 239
    Joined: 06/14/2016

    It depends on your stage of life and the probability of an emergency occurring. When you’re mid-career with a couple million in taxable that you can liquidate in a few days, an e-fund is less important, We keep under a months worth of funds in our checking, but are W2 with stable incomes. We have sufficient muni bonds in taxable we could liquidate in a couple days to cover anything our paycheck float wouldn’t.

    #189572 Reply
     Larry Ragman 
    Status: Other Professional
    Posts: 361
    Joined: 08/30/2018

    I was going to say I have no emergency fund per se, but then realized I actually have ~6 months of liquid assets on float. As SR says, for me this is more in the way of contingency money. I call it “save to spend.” That is, I’ll probably spend it on something (travel, taxes) but I usually don’t closely match the funds to any specific expenses. Completely separate bucket from my investments. Full disclosure, I am FI and have a military pension that could support my core spending. We are also relatively frugal and I save 50% before taxes. So, I am probably more cavalier about this than I should be.

    #189581 Reply
    Liked by Tim
    Status: Physician
    Posts: 37
    Joined: 11/22/2018

    Thanks for the comments. Seems like many of y’all invest any free cash after an e-fund.

    Follow up question – Why put money in VMMXX? Ally or purepoint get you 2.35 savings. I’m not following..

    #189598 Reply
    Status: Physician
    Posts: 52
    Joined: 05/16/2017

    Does anyone use Amex high yield savings?

    #189599 Reply
    ENT Doc ENT Doc 
    Status: Physician
    Posts: 2510
    Joined: 01/14/2017

    VMMXX is over 2.5% right now.

    #189611 Reply
    CordMcNally CordMcNally 
    Status: Physician
    Posts: 1441
    Joined: 01/03/2017

    We currently have about 9 months in a high interest saving account but that will be whittled down to about 3-4 months when the market opens on Monday.


    The only time we keep additional cash is if we have a big purchase coming up. However, in the past, our emergency fund has covered any big purchases and then we just cash flow into the emergency fund to whatever level it was before.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #189613 Reply
    Status: Physician
    Posts: 399
    Joined: 07/12/2017

    like others mentioned, i think it is evolutionary as well…you start with slim E fund and then gradually build until you can cover 3-6 months expenses…then you get to the point you don’t even need an eFund as you can cover expenses plus have cash on hand  to splurge on last minute big purchases like luxurious vacations or anything else…then you get to the point where you have excessive cash (like very excessive) because your net worth is X millions and you don’t need any risk and have won the game.

    #189633 Reply
    Status: Physician
    Posts: 1260
    Joined: 12/07/2016
    Splash Refinancing Bonus

    I also shoot for 3 months of basic living expenses as ENTdoc describes.  If that were to run dry, the taxable account would be used next.  In a worst case scenario, if the taxable account dried up, I could turn to the Roth IRAs for additional funds.  Ideally, that would never happen as the taxable account should eventually be large enough to sustain us for years if needed.  My goals this year are to start beefing up my taxable finally, now that I’m just about done paying off debt.

    #189642 Reply
    Liked by Tim, Lithium
    birddog birddog 
    Status: Physician
    Posts: 14
    Joined: 02/05/2019

    We have 6 months expenses plus a little extra for a vehicle that we’re anticipating to have to replace in the future.  We keep the cash at Vanguard in VMSXX (Vanguard Municipal Money Market Fund), which is federally tax-exempt income.  Currently earning 1.45% (which is 2.23% equivalent if at the 35% federal tax bracket or 2.3% if at 37% tax bracket).

    #189795 Reply

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