I was wondering what your emergency fund strategy is, and if my personal strategy makes any sense. It took me several years of living frugally to pay off my debt and save up my emergency fund. So now that I've done that, I thought I'd share my approach.
I'm going with a multi-stage approach:
First, I have $2000 in cash, which is just barely enough for basic rent, food, and most of my utilities in an envelope hidden in my apartment. This is only to be used if I have some sort of problem that prevents me from accessing my bank accounts.
Second, I always keep $500 in my Chase savings account (which pays basically nothing in interest), and anywhere from $500 to $1500 in my Chase checking account, depending on the timing of my paycheck.
Third, I have a credit card with a $7,000 limit that can cover just about any car-related, or last minute travel emergency that comes up. I always pay off this card completely every month.
Forth, I have the bulk of my savings, $25,000, in several 4-week treasury bills at treasurydirect.gov. They're staggered 2 weeks apart and set to continuously re-invest. I should be able to live anywhere from 6 to 8 months on that money if I lost my job.
If an expensive emergency comes up, I'm planning on putting it all on my credit card. Then, I'll cash in some of my treasury bills to pay the CC bill. I like using treasury bills because the interest rate right now is slightly higher than most online bank accounts, and I can't think of any reasonable emergency that would require 100% of my savings to be immediately liquid.
All of my surplus cashflow is going into Vanguard ETFs and my employer's 401k plan. However, I hope I never get desperate enough to cash those in!
I know a lot of people don't like keeping their emergency fund in treasury bills because they aren't as liquid as an online savings account. But I feel it's pretty safe considering half of my money is only ever two weeks away, and I can use my credit card to buffer me until it comes in. Plus, it adds some friction between you and your emergency fund, which reduces the temptation to use it frivolously.
What do you all think? Is there anything I could be doing better?
Submitted April 23, 2019 at 01:43AM by say_no_to_debt http://bit.ly/2vks5Ig
