Originally posted by LilySayWhat
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Frugal living challenge
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I tried doing the "track every penny" method recommended by Dave Ramsey and I swear I broke out in hives. So, now, on payday, I pull out a set amount for groceries and household consumables for the week. I also need to pull another set of funds out to use for home improvement stuff on a monthly basis. If I can do it from the grocery money, great, but I need a bit more for things like paint. Gawd is paint expensive.
Most of my projects are fairly long term and I finally have most of the tools that I need. It is stuff like new vent covers for C's room now that it is painted or hardware for his curtains that I can't really budget well. I don't know what they will cost, and while I am making due with a lot of things, some stuff really just needs replacing.
I have started to set aside a specific amount into a specified account that I use for purchasing gifts throughout the year. Christmas killed me this year. I didn't spend a lot, but I didn't have the funds set aside like I normally do. Blech.Kris
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Alison, have you found that the amount you want in your emergency fund fluctuates? Once dd starts school full time (private pre-k most likely), the amount we will need for tuition will have to be added in. We have an 8-month emergency fund. Any less, and it makes me nervous.
Do you really need the entire emergency fund readily accessible? A new roof, an emergency trip to dh's parents if anything should happen, etc. won't drain everything, so couldn't some of it go into something that yields a higher interest?married to an anesthesia attending
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We downgraded the emergency fund number while rebuilding it this year, after we pilfered it to do our cash-in refinance. It's a set figure that we aim for, the fact that I think it would cover about 8 months is just a rough estimate that partially presumes we'd pare back hard on extraneous spending if we had to live out of savings. If our fixed expenses changed dramatically, I'm sure our e-fund figure would change too.
The brokerage account and Roth contributions could also be tapped within a few days of transactions, so we kind of count that as the second tier of e-fund, and that almost triples the total. It also makes the cash account that much overkill, LOL. Some day I'll put everything but 1-3 months expenses into a CD ladder or I-bonds or something similarly riskless but accessible, but for now I feel pretty strongly that developing a saving habit is much more important than what, exactly, we do to make that money work for us. (Of course, with interest rates as low as they are, we're actually losing purchasing power by leaving the money there, but I still feel less than urgent about changing that right now.)Alison
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Originally posted by spotty_dog View PostWe downgraded the emergency fund number while rebuilding it this year, after we pilfered it to do our cash-in refinance. It's a set figure that we aim for, the fact that I think it would cover about 8 months is just a rough estimate that partially presumes we'd pare back hard on extraneous spending if we had to live out of savings. If our fixed expenses changed dramatically, I'm sure our e-fund figure would change too.
The brokerage account and Roth contributions could also be tapped within a few days of transactions, so we kind of count that as the second tier of e-fund, and that almost triples the total. It also makes the cash account that much overkill, LOL. Some day I'll put everything but 1-3 months expenses into a CD ladder or I-bonds or something similarly riskless but accessible, but for now I feel pretty strongly that developing a saving habit is much more important than what, exactly, we do to make that money work for us. (Of course, with interest rates as low as they are, we're actually losing purchasing power by leaving the money there, but I still feel less than urgent about changing that right now.)Wife and #1 Fan of Attending Adult & Geriatric Psychiatrist.
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If we do a CD ladder, I'd probably plow everything into staggered maturities from 3 months to 5 years, then just roll over into 5 year certificates as they mature. I wouldn't worry about the low interest on a 3-month certificate; it can't be much worse than the savings account! And I wouldn't worry about the long maturity on a 5-year; the early withdrawal penalty is only on the interest earned, and often is waived after a certain holding period. It would be worth breaking in a true emergency.
But I-bonds might be a better choice, since it's mostly inflation risk I want to protect against, and since the early withdrawal penalty is pretty minor (3 months' interest if you redeem between 1 and 5 years, nothing after 5 years). With the interest adjusting every 6 months to keep up with the CPI-U and the fed, it's a pretty flexible and decently-yielding riskless investment. Only downside is you can only buy $10K per spouse per year, so we couldn't do it all at once. Especially since I kind of want I-bonds in my fixed-income allocation for retirement purposes, so we'd prioritize between the two goals. Maybe the e-fund could go in a combination of CDs and I-bonds, or hi-yield online savings and I-bonds...honestly, it's probably a good idea to keep a nice chunk of cash during the year that the I-bonds are completely inaccessible...hrm.Alison
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FWIW, the White Coat investor does not keep a 6 month retirement fund because he feels like he can make better interest on his money elsewhere and physicians normally can find some type of work if desperate well within a six month window if the excrement hits the fan.In my dreams I run with the Kenyans.
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I think our financial guy recommends 3 months, we've just started saving hard this month and it was so nice to see these little bucket withdrawals taken out of our checking account automatically. I needed that push to get it started.Wife to NSG out of training, mom to 2, 10 & 8, and a beagle with wings.
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Yep, there's no good reason for us to sit on tens of thousands in cash/equivalents, and I don't recommend it. There are a lot of very good logical arguments to keep the total smaller, including the ability to rely on brokerage accounts, Roth contributions, even HELOCs and credit cards in the case of a true emergency, job loss, or disability. But our system works for us and lets us sleep easy, and as far as I'm concerned the only way it's broken is that there is a negative real return on the account it's in; the amount is technically being bled away by inflation. But it's not so broken I'm rushing to fix it.Alison
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