Emergency Fund Savings Plan

[karice2]

This seems to be the board where people would know this type of info so I am going to go for it. I am blessed enough to have a position that pays very well. I don't have any kids and I bought my house really cheap. No car payment and my credit card is paid off and closed. I already max out my 401K and they give me a pretty good match at work.

There have been some hiccups along the way but I now want to start a serious savings plan. Since I am single, it weighs on my everyday that i have to be able to support me if the bottom falls out. I just feel anxious without a certain cash reserve.

I have reviewed the numbers a couple of times and think that i can set aside about $1000 per month. For those that have an emergency fund, when do you take it from a standard savings account to something like a CD or mutual fund? Do you separate the savings out for things like household versus never touch unless fired.

I have also been decluttering a lot. I feel guilty because I haven't had a yard sale or put anything or Ebay. I have mostly been donating it or throwing it away. I guess I just think it isn't worth anything but someone's trash is someones treasure. The only thing I have been planning on selling is my Longaberger Baskets. I have no idea why I bought those things. Any recommendations?

 

[minnie1928]

I've been keeping my savings in online bank savings accounts (HSBC, ING, Cap One) and out of CDs largely because CD rates aren't much better than savings accounts right now. A good friend of mine told me about smartypig.com, she's earning 2.15% (or something close to that) so I might look into that too.

There's nothing wrong with donating your stuff, just remember to keep records so that you can deduct them off your taxes. I often just take pictures of things before I donate them, that way I remember what I donated and have proof of it.

 

[cjlvsccm]

Hi karice2!

Yes, you are blessed and congrats on your decision!

DH & I each keep a separate, but co-owned, Money Market acct at a credit union (lower minimums for better interest), for a minimum of 6 months of NET PAY. We know that from our working net pay we also put some ordinary savings aside, so in reality it should last longer than 6 months, even if we DIDN'T cut back on spending, which we most certainly would do if either job was lost.

And we want it fully liquid, so a MM is our choice. But really, depending on what your bank/c.u. offers, a CD would probably have little loss of interest if you had to cash it before its maturity.

But in addition to our MM, we also staggered some CD's in various amounts/ length terms, for the minimums of those terms.

And again, depending on your bank/c.u., you should be able to open a MM for $1000... ours just gets better interest at higher tiers as our goal was reached. So we might move some into a higher rate CD since we have met our goals. The liquidity/ access is very important to us.

I wish you great success in your saving. It certainly does ease one's mind, not having to sweat the what-if's quite so bad.

 

[amylevan]

We have a two separate types of savings. We have a regular savings account which I keep at $5000. This account is used for the "uh-oh"s. As in, uh-oh the car broke down. Or, uh-oh the water heater broke. It's an ING account that was getting very good interest a few years ago. Not so much anymore though.

We also have investment accounts (mutual funds and stocks) managed by an investment firm for our longer term investments. We inherited most of the money when my mother-in-law passed away. We don't touch it (although we have used it for some home remodeling projects instead of a loan) so its there in the event of a true major emergency. And if we never use it all, it will be added to our 401k for retirement.

 

[PatsMom]

My emergency reserve is mostly in cash in a credit union account. Doesn't earn much interest but its very accessible if I need it. I also have a bunch of savings bonds that my mother bought me over the years that I consider part of my cash reserve.

We keep three months expenses in cash. My husband is retired so his income is pension and social security. Unless the bottom falls out, we'll always have those! My job is pretty secure but nothing is certain so we do keep enough to tide us over. But if we had to, we could live on the retirement income - it would just mean being careful. Or I could take a part time or lower paying job just for extras. If your job is secure, you can keep less of an emergency reserve. Some people also have a home equity line of credit designated as part of their emergency funds

As a single person, I assume that you are a one wage earner household. That means you probably want to go on the high side when figuring your emergency fund needs. There is no second income if you lose your job. You also need to review your long and short term disability coverage. If your employer doesn't provide good coverage, I'd say the first step of your emergency planning would be to see a good insurance broker and see if you can obtain private disability income coverage.

 

[karice2]

Thanks for the advice. I did not think about the disability insurance thing at all. I did choose the high for work but what if I am disabled and not working.

I haven't thought of savings bonds as an investment strategy but i had a friend who used them to fund her travel bug. I know I have that bug. Between Disney and my yearly European adventure I am becoming a super packer.

In my industry, it is not superhard to find new positions and I live in an area that is boosted by federal jobs but I was thinking of having 6-8 months of emergency fund available just in case. I think about $5000 for the this is crap, something else broke fund is a good number to start.

I am going to purchase a smaller car. No car payment and better gas mileage so that I can drop the rental car coverage on my insurance. I want a Mini Cooper in the worst way but those things never drop in price.

I think that I am on my way to a decent plan. The budget will be tightened until I stack up the money in savings that I think I need. Good thing I can cook and have netflix.

 

[RachaelA]

Right now we keep our e-fund in an ING account. Once we get to 6 months (we have maybe 3 1/2 in there). I plan on saving another 3-6 months and putting it in a money market account.

I also keep a $2k buffer in our checking/basic savings at our regular bank.

 

[wdwfan16]

I would start with a savings account. Liquidity is important. Once you have enough to cover three months take two months and put it into a 6 month CD. Repeat again once you have three months. Eventually you will have laddered CDs that will come due every few months and last until the next one come due. Adjust the length of the CDs so your next one comes due when the previous ones money runs out. After you have enough to cover 6-12 months then start putting the money into mutual funds at Vanguard or the like.

BTW our savings account is really a money market at our bank.

 

[bettymae1121]

Right now our savings are just in an ING account, but once we have enough saved that it makes a difference, I'll probably try to find an interest bearing, FDIC insured money market account. The point of emergency savings isn't to invest it, but to keep it liquid and safe.

 

[sunlover13]

We have most of our emergency fund in an ING account. When we started, it was earning 4%. Now, it is earning just over 1%, still better than our savings account in our bank.

We also have a couple of months worth of savings in a money market fund which I continue to put in $100 per month. I've had this for the past 10 or so years.

I consider both of these liquid and easy to draw from in an emergency.

My DD's savings account we put into CD's since I do not want her touching it until she is 18.

Do you contribute to a Roth IRA? That would be another place to save towards your retirement if you are maxing out your 401K. You can put up to $5,000 per year in a Roth IRA.