Emergency/Rainy Day Fund

[born2invest]

Do you have one?

How big is it?

Why do you have one and what do you use it for?

[Harvey Specter]

Do you have one?

How big is it?

Why do you have one and what do you use it for?

Kinda. big enough, maybe(hopefully).

A large portion of the revolving credit account on my house is untapped. Therefore, if anything bad happens, we have to drain the account before the bank reduces the limit.

The RC is used for everything though in general the overdrawn amount declines each month.

[born2invest]

Anyone use their credit card as a pure emergency fund?

[False Profit]

I never used to have a rainy day fund but because PEB has been a spine tingler recently I've taken to holding back some cash to buy on the dips.

I've enough in the green to sell when I need money.

[False Profit]

I never used to have a rainy day fund but because PEB has been a spine tingler recently I've taken to holding back some cash to buy on the dips.

I've enough in the green to sell when I need money.

[peat]

My credit card and RCF are NOT considered part of 'the emergency fund'. They are there (available) though and would only be used if absolutely necessary.
I see a convergence in utility from the cash/short term part of my portfolio.
I consider 6 months as the period of time the emergency fund should be able to cover living expenses for.

[TimmyTP]

Do you have one?

Yes

How big is it?

6-12 months' living expenses, depending on the TimmyTP Discomfort Index (TDI).
I still work for a living, so TDI is an industry non-standard, unscientific measure of the stability my medium-term income and unplanned outgoings:
- how well I think the industry sector in which I work will perform in the next 12 months
- how well I think the services I offer will fit/adapt in the next 12 months
- the likelihood and scale of any major uninsured expenses, such as my house falling down or my cars spontaneously combusting
Medical and accident risk is not factored into this calculation, as I have some reasonably hefty insurance, which I blindly hope will cater for that

Why do you have one

1. so I can sleep peacefully
2. because I have a healthy appreciation of cashflow
3. see 1

what do you use it for?

See 1 above.
I think you might be asking what ppl do with it though. I keep it in boring-as term deposits or similar, distributed across 3 institutions, one of which is overseas, but only holds around 15% because this is not supposed to be a currency bet!

If the TDI is low, I am allowed to do whatever my wife likes with some or all the 7-12 month part, keeping the 1-6 sacrosanct. Some examples are shares, an old (but interesting) car, a big holiday and a swimming pool - the 'normal' sorts of things that we lucky folk in the rich countries like to do or plan. Probably the next time I 'play', it will be to make a direct investment in a local business, although my son wants me to buy a fire engine.

Hope that is of interest. What about you?

[born2invest]

Hope that is of interest. What about you?

I have $2000 in an online savings account.

I have it there if I get a large car bill or medical bill such as the MRI I had recently and didn't want to wait 5 months on the public waiting list. I don't see why people have 6 months expenses set aside which would be around $11,000 in my case when it could sit there for 5, 10, 20 years earning 3% interest when you could purchase shares and earn 10% plus a year and always sell if you really needed to.

[peat]

I don't see why people have 6 months expenses set aside which would be around $11,000 in my case when it could sit there for 5, 10, 20 years earning 3% interest when you could purchase shares and earn 10% plus a year and always sell if you really needed to.

Because you may be forced to sell at a loss if you have little discretion in the time you need to liquidate the investment.

[Harvey Specter]

I don't see why people have 6 months expenses set aside ...

Because you are young.

If I lose my job, through fault, injury, sickness, my family still needs to eat and pay the mortgage. However, rather than earning the 3% interest, that is why I have a super sized revolving credit, cost me nothing to maintain (other than a bit of disappline), yet gives me access to 6 figure amounts as quick as I can withdraw it.

TimmyTP reminded me - my work provides income insurance should I have a injury, sickness (80% of salary for as long as I need it) and I also have Southern Cross.

$2k wouldn't last my family more than a fortnight and that's just normal living, not unexpected bills. Tyres on my car probably cost that to replace.