Going rogue with my emergency fund - Mothering Forums

Forum Jump: 
 
Thread Tools
#1 of 7 Old 05-05-2013, 03:48 AM - Thread Starter
 
EmsMom's Avatar
 
Join Date: Dec 2001
Posts: 1,383
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 8 Post(s)

Opinions needed!   I have about a 6 month expenses emergency fund.  But I am still putting away some money and in the next 6 months to a year, I will get some cash influx.  My goal is an emergency fund of one year expenses.  But it seems crazy to have all of it earning virtuallly no interest in a savings account.  I want it reasonably safe.  I already max out my IRA contribution and I want to keep the money liquid anyway.  Thinking of investing in tax free municipal bonds with Vanguard.  Investments are mostly A to AAA bonds, expense is low and the income is tax exempt. Paying around 5% interest.  I have no debt, I live a minimalist lifestyle with joy, and I have life insurance and disability insurance.  All on-line calculators say I am doing pretty well for my planned minimalist retirement in approximately 20 years.  I don't currently have a mortgage as I rent, but I am hoping to buy a house with a mortgage in the next 6 months if I find the right house.  As soon as I secure the one year emergency fund and enough to replace my car (I also save money in a car fund), I might start paying down the mortgage, but at this time it appears that I can get a very low interest rate on the loan, so I may forgo that and keep putting money in bonds.

 

I know this is not the DR thing, but I haven't had issues with debt or spending in at least 15 years.  I also invest in my education and training in various fields so as to create some resiliency in income production.  And I regularly invest in my household so as to reduce future expenses.  As soon as I buy my house, extra money will go into things such as insulation, energy saving items, etc.

 

Anyway, are there negatives about bond funds?  Will my money be accessible if I should anticipate needing it with 5 or 6 months advance notice.  Any suggestions?

EmsMom is online now  
#2 of 7 Old 05-08-2013, 06:04 AM
Administrator
 
cynthia mosher's Avatar
 
Join Date: Aug 1999
Location: Arabia!
Posts: 38,838
Mentioned: 14 Post(s)
Tagged: 0 Thread(s)
Quoted: 96 Post(s)

Bumping this up. Anyone have advice to share?


cynthia mosher is online now  
#3 of 7 Old 05-08-2013, 06:58 AM
 
bruebee's Avatar
 
Join Date: Feb 2012
Location: Middle earth
Posts: 70
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)
You are doing awesome! Congratulations on your progress so far! I don't know anything about bonds so the only thing I have to add is this... make absolutely sure that the emergency fund money is easily accessible and you can have it within a couple of days. Also make sure any withdrawals are not taxed upon withdrawal. I hope you find a solution that works for you.
bruebee is offline  
#4 of 7 Old 05-08-2013, 07:41 AM
 
LoveOurBabies's Avatar
 
Join Date: Dec 2011
Location: In an Australian kitchen
Posts: 618
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 1 Post(s)

I also don't have anything to contribute about bonds, as I've never dealt with them before, but I wanted to chime in with a HUGE thumbs up as well! Well done mama. thumb.gif
 


 

Me:  run.gif  DH:  hammer.gif 

 

Our babies:  reading.gif  blahblah.gif energy.gif moon.gif and a  stork-suprise.gif  coming in July

 

 

 

LoveOurBabies is offline  
#5 of 7 Old 05-08-2013, 10:40 AM
 
winterfan's Avatar
 
Join Date: Jan 2013
Posts: 9
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

Personally, I would be careful about investing in any kind of bond fund now when rates can only go up, except maybe short term funds.  If you are planning to purchase a house and will need to access the money, I would skip investing and just put it in the highest interest rate account I could find. 

 

We only keep about five or six months of cash for emergencies.  We also live simply and we have no mortgage.  If, for whatever reason we go through our reserves, we can also tap our Roth contributions penalty-free.   

winterfan is offline  
#6 of 7 Old 05-08-2013, 11:56 AM
 
maptome's Avatar
 
Join Date: Feb 2010
Posts: 475
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

There is an element of risk with a bond fund, so if you're okay with losing money, then go for it.  I would replenish it back to your emergency fund goal number though if the value goes down.  We keep a year of income for our emergency fund in cash.  It sucks to think about lost potential income, but I just think of it as paying for a "financial insurance."
 

maptome is offline  
#7 of 7 Old 05-08-2013, 05:50 PM - Thread Starter
 
EmsMom's Avatar
 
Join Date: Dec 2001
Posts: 1,383
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 8 Post(s)

Alright, I got some replies!  Thanks Cynthia Mosher!!  I am pretty determined to have a full year of emergency expenses (single mom here!) but truthfully, my job is pretty secure, I am in the process of getting disability insurance and even if I did get laid off, I would still have unemployment.  Plus there is a small amount of child support.  And I put money in a car fund every month and make every effort to max out my IRA every year as well.  I still want to hit that 1 year of expenses mark, maybe just because I am a stubborn woman : ).   I think it seems reasonable to take some risk to increase the yield. 

 

But thanks for all the kudos!!!  You know, I left my marriage 4 years ago with $400 and a financial plan.  Now I have my masters, a new job and just got a fancy new title (no extra money, though) and am looking to buy a house (I am eligible for the usda loan for low income families).  Yippee!! 

 

I actually wrote a reader story for Get Rich Slowly if anyone is interested : http://www.getrichslowly.org/blog/2012/01/22/reader-story-a-frugal-happy-life/

 

Thanks for the input ladies, you are all the best!!!
 

EmsMom is online now  
Reply

Tags
Finances

Quick Reply
Message:
Drag and Drop File Upload
Drag files here to attach!
Upload Progress: 0
Options

Register Now

In order to be able to post messages on the Mothering Forums forums, you must first register.
Please enter your desired user name, your email address and other required details in the form below.
User Name:
If you do not want to register, fill this field only and the name will be used as user name for your post.
Password
Please enter a password for your user account. Note that passwords are case-sensitive.
Password:
Confirm Password:
Email Address
Please enter a valid email address for yourself.
Email Address:

Log-in

Human Verification

In order to verify that you are a human and not a spam bot, please enter the answer into the following box below based on the instructions contained in the graphic.



User Tag List

Thread Tools
Show Printable Version Show Printable Version
Email this Page Email this Page


Forum Jump: 

Posting Rules  
You may post new threads
You may post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are Off