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  • Emergency fund

    i know many of you do not keep much emergency money laying around.  If for no other reason you should do it to avoid aggravation.  I recently wrecked my SUV.  I was sandwiched in between a minivan and a pickup truck on the interstate. I was not hurt.  Dealing with the auto insurer Allstate has moved along at the speed of molasses.  It has taken them 3+ weeks to decide that my vehicle is a total loss.  The body shop guy realized this from day 1.  Once an inspector looked at the damage it was declared a total loss.  Any way I realized that 2 outcomes were possible.  One they fix it and it takes 2 months with me stuck in a tiny rental or it gets totaled.  Either way I decided I will just get another SUV and quit caring if they fix it or total it.  I still do not have a check but I have a nearly new SUV and stopped being mad about it quickly because I had money for this type of situation.  I feel especially sad for all the people in greater Houston just starting to deal with insurance. Having cash on hand is priceless rather having to wait for a check to get on with life.

  • #2
    yup.

    my EF can replace both cars, as this would effect our ability to make more income the most....

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    • #3
      I'm with you hatton. We keep a 6 month EF in a savings account. Never know when you'll need it and it's easy to access. Our house was destroyed by hurricane Ike in 2008, this experience is probably partly why we're so conservative. The insurance company took a while to get us our money. We were in med school and had a small EF but not enough to repair the house. Luckily USAA temporarily increased our credit limit and gave us 6 months interest free so we could put all the needed repairs on the credit card and pay it off once the insurance check came through. I can't tell you how much that meant to us and what we learned from that experience.

      I've still got family in Houston and my heart just aches for the whole region. I know what they are facing and what it feels like to see your home town totally wrecked. It's heartbreaking.

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      • #4
        Cash is King. We could live five years on our Emergency Fund.

        People whose lives have been upended are going to suffer problems that cash alone cannot solve. There will be lots of mosquitoes and a shortage of food, drinking water, and other resources, and an undersupply of labor and services to get their lives back to normal. I guess if you have enough money, you can pick up and skip town like my wife's brother and cousin (both physicians) did after Katrina. Most will not or cannot do the same.

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        • #5
          I go back and forth on the emergency fund.  I have more cash than I probably should, and I keep trying to reduce my cash balance.  That said, my high paying job could be tough to replace in an economic downturn.  Doctors are in a fairly recession proof industry.  I think most docs could get by with the usually recommended 3-6 months in liquid reserves (and maybe even less).   I find it hard to believe that the overwhelming majority of docs couldn't find work to earn enough to cover their expenses in a relatively short period of time if necessary.

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          • #6
            Sorry to hear about the SUV and I'm glad you're OK.

            I tend to keep less cash on hand, but when I need cash, I can sell from taxable and have it in 48 hours, like I did last month to come up with > $100,000 to buy property. The important thing is to have an emergency plan, which can be a sizable taxable account, HELOC, credit card balance, big paychecks, etc...

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            • #7
              yes i also keep a huge amount in EF, but probably there are alternatives to a large EF.

              you could buy a cheap honda to tide you over until the check became available?

              you could borrow a car from your rich friends?

              you could rent a car?

               

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              • #8
                I think it also greatly depends on where you are at in life. I think it's reasonable for a physician in a stable situation to keep a large EF if that makes you feel comfortable for situations like exactly what happened to you, or if you're more comfortable having to wait until the next paycheck/selling investments in order to keep a lower or nonexistent EF then that's ok too. As long as you have a realistic plan for dealing with real emergencies.

                Since my wife is still in residency and our paychecks are relatively small and with no money in a taxable account to draw from, we have an EF/savings account of around 10k. However, I was listening to one of the WCI podcasts on EF's last week, and I'm starting to think that a large chunk of that 10k would be better used to help pay down an existing personal loan that I owe about 15k on. That kind of debt is an emergency to me.

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                • #9
                  I keep $2K in an emergency fund, which is about the equivalent of one of my wife's residency paychecks. That should cover most of the emergency fund issues that pop up where I no kidding have to go pull cash out of the bank right now.

                  Thanks to my credit card churning hobby, we have access to almost $100,000 in credit from a combination of banks and card companies. If I had to drop $3K on a credit card for an unexpected expense, our earnings between then and the due date would most likely prevent the need to pay any interest.

                  In a real pinch I could tap about $30K of Roth funds without getting hit by a tax penalty.

                  Funny thing is, in less than 10 days I should close on the sale of our old med school house. That will free up about $1k a month of expenses, and with it the risk of things that can go wrong with having a long-distance rental. I expect once the Roths are topped up for the year we may want to have closer to $10K in an emergency fund.

                   

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                  • #10




                    Thanks to my credit card churning hobby, we have access to almost $100,000 in credit from a combination of banks and card companies.
                    Click to expand...


                    That is a serious amount of credit for someone with what I suspect is a low current income level based on the other points in your post.  I am sure you are aware, but opening too many cards in a short amount of time can negatively impact your credit score.

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                    • #11
                      Kind of odd in terms of the delay with Allstate.  Guess I can understand if you didn't have Comp/Collision with Allstate.  My wife had a similar situation earlier this year.  We knew within a week and half that the vehicle was a total loss, yet within another week we had a check for $23K (could have gotta the rental car but didn't need it).  The only thing that is an issue is the $500 deductible currently (and is basically between the insurance companies to fight out).  We were in position to purchase another car before our insurance company cut us a check.  We used some of our EF $6k (replaced quickly) to get the same vehicle newest model year.  I should have gotten a bonus, given I called most of the dealerships within a 400 mile radius to find the exact new vehicle for an acceptable amount.

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                      • #12
                        Hatton, glad you're ok!

                        I go back and forth about holding cash as a late mid-career doc.  I have a little bit in cash, enough to smooth things out, but not buy a car.  A good sized float on the credit card to combine with AR (and other income) coming in each month.  A pretty big taxable that includes several different asset classes that I could liquidate prn.

                        As I cut back on my work, I'm realizing that the money coming in may not be enough to cover the credit card float for a big emergency.  And I'd hate to liquidate my HSA.  One of my goals is to eventually build up a hefty cash position.  But this is also another reason I want to pay off my mortgage.  (I know, I know.)

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                        • #13
                          Echoing PoF above, while I keep 100K or so in an EF, I also have access to 350K in a HELOC which I haven't had to use. I know it's there, and would be immediately accessible if the need ever arises. It costs me nothing to have it, but it provides real protection from urgencies. And from worry.
                          My Youtube channel: https://www.youtube.com/channel/UCFF...MwBiAAKd5N8qPg

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                          • #14







                            Thanks to my credit card churning hobby, we have access to almost $100,000 in credit from a combination of banks and card companies.
                            Click to expand…


                            That is a serious amount of credit for someone with what I suspect is a low current income level based on the other points in your post.  I am sure you are aware, but opening too many cards in a short amount of time can negatively impact your credit score.
                            Click to expand...


                            770 according to Credit Karma. Whatever drop in credit score I've taken by opening a card has self-corrected within about three months. I've been doing this for almost two years.

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                            • #15










                              Thanks to my credit card churning hobby, we have access to almost $100,000 in credit from a combination of banks and card companies.
                              Click to expand…


                              That is a serious amount of credit for someone with what I suspect is a low current income level based on the other points in your post.  I am sure you are aware, but opening too many cards in a short amount of time can negatively impact your credit score.
                              Click to expand…


                              770 according to Credit Karma. Whatever drop in credit score I’ve taken by opening a card has self-corrected within about three months. I’ve been doing this for almost two years.
                              Click to expand...


                              I take an academic interest in my credit score (my AmEx provides it), but it doesn't really matter.  Back in the day, I guess it was important for utilities, rental applications, possibly a job, a better credit card, maybe a first-time doctors' home loan.  At a certain point, however....

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