Can you handle a $2,000 USD emergency?

[vi edit]

Shit happens and it usually all happens at the same time. Like say a rock destroys your windshield ($350) and then you hit a pothole and destroy your rim and tire (another $400) and then you find out your kid went fishing in the toilet bowl for turds using your $600 Iphone as bait. And then find out your pet has some wierd infection and has a $200 vet bill and $50 in meds. And in the stress of all this you wind up speeding in a construction zone getting you a $380 fine.

And then you buy a $20 bottle of whiskey to make the pain go away. Only to wake up the next day and get a bill in the mail for your cable bill that went up $30 a month.

Yeh. Shit happens.

 

[dullard]

Shit happens and it usually all happens at the same time. Like say a rock destroys your windshield ($350) and then you hit a pothole and destroy your rim and tire (another $400) and then you find out your kid went fishing in the toilet bowl for turds using your $600 Iphone as bait. And then find out your pet has some wierd infection and has a $200 vet bill and $50 in meds. And in the stress of all this you wind up speeding in a construction zone getting you a $380 fine.

And then you buy a $20 bottle of whiskey to make the pain go away. Only to wake up the next day and get a bill in the mail for your cable bill that went up $30 a month.

Yeh. Shit happens.

It happens, but replacing an Iphone isn't an emergency.

 

[MetalMat]

random 2000 dollar things/shit? like what? im genuinely curious, because i certainly dont have that in savings

Cars can be a huge money pit.

 

[ShawnD1]

RULE #1 OF HOME OWNERSHIP: "If It Breaks, Fixing It Will Cost $2,000.00"


Know this, if you ever intend on buying your own place.

Kinda the same applies to cars. Maybe $1000 instead.

No car is infinitely reliable. It is $2000 to replace an engine, a transmission, or just to get another running used car.

Some dick ran a stop sign and wrote off my honda. You can guess how much that incident cost. Insurance gives you what your car is worth, not what it will cost to get another car. My parents drove some ghetto cars worth about $1000 and the deductible was something like $500.

 

[nickbits]

I hope most of you guys are in your early 20s or teens. I would freak if I didn't have 20k in my checking/savings account. 2k reserve is a joke.

 

[LucJoe]

I hope most of you guys are in your early 20s or teens. I would freak if I didn't have 20k in my checking/savings account. 2k reserve is a joke.

Agreed. 2k is nothing. The fact that 50% of Americans wouldn't be able to come up with 2k in an emergency really says something about the current state of things in our country...

 

[ShawnD1]

I hope most of you guys are in your early 20s or teens. I would freak if I didn't have 20k in my checking/savings account. 2k reserve is a joke.

I should be up to 20k in the bank by the end of the year

/ukranian jew

 

[cerebusPu]

i think i need more than 2K to feel safe. that doesnt even cover one month for us.
some days i like home ownership. most days its a giant money pit.

 

[joesmoke]

nickbits, you really keep 20k in checking/savings? any particular reason you need that much readily available? couldnt you keep most of it invested?

 

[CrazyAznDriver]

yes, I just had 2 root canals/crowns in the last month adfajglafgjalfkjals!!!

 

[AreaCode707]

My parents were broke when I was little (dad was a musician) and pretty flush when I was a teen (switched careers to be a recruiter during the .com boom) and then almost bankrupt when I was in college and lost their house (.com bust).

That has made me extremely skittish about money. I had $500 in the bank when I got out of college, moved and had no job. I got work asap and saved like crazy. I didn't really start spending money until I had over $10k in savings, and now I consider $20k in accessible savings to be my comfortable emergency fund.

I know that's on the super cautious side, but I saved up most of it when I was still under $50k a year income (paying $325 in rent for a MIL unit in someone's house, mostly eating baked potatoes and rice.)

Now that we own a house, I can't imagine having less than that in emergency fund. One broken water pipe, one earthquake, one health disaster or just a car quitting on us and you can be out anywhere between $2k-20k. Not to mention losing a job and having to cover living expenses like mortgage and COBRA, etc.

I don't ever want to lose a home like my parents did simply for the lack of a few thousand in savings.

 

[Corporate Thug]

ironically, I'm coming upon a 2k emergency. fortunately, I can afford it.

 

[spidey07]

nickbits, you really keep 20k in checking/savings? any particular reason you need that much readily available? couldnt you keep most of it invested?

Many people keep 6 months expense in savings liquid, that can be much more than 20k. It's there for liquid cash with zero risk.

2 months in checking
6 months in savings
invest the rest.

 

[CPA]

wouldnt someone who rents, has good health insurance and a reliable car not really have to worry about that?

Until your apartment catches on fire, you have to meet your deductible or you get in an accident and the ahole who hit you doesn't have insurance, and you have to put up your deductible.

 

[SaDiZTiKStyLeZ]

No.
Well kind of. But when unemployed, all that savings is just enough to float on until I do begin making money again.

 

[ShawnD1]

nickbits, you really keep 20k in checking/savings? any particular reason you need that much readily available? couldnt you keep most of it invested?

Even when investing, yes you sit on huge piles of cash in case something goes on sale and you want it. A stock you're looking at hits a price you want, you can buy it immediately instead of selling off a bunch of other shit first, which may not be possible because that other shit is down or is on its way up and you don't want to sell it.

When I took an investing class, the investor guy teaching it recommended keeping a certain percent bonds, certain percent stock, certain percent cash. Every once in a while you buy and sell things so you're still in those percentages. You might hold 20% of your entire life savings/retirement in cash.

 

[nickbits]

nickbits, you really keep 20k in checking/savings? any particular reason you need that much readily available? couldnt you keep most of it invested?

What happens if you have it invested then need to cash it out when the market is down like in 2008? 20-25k (8 months expenses) is my target to keep "100% safe and liquid". Above that is invested more agressively.

 

[Schadenfreude]

wouldnt someone who rents, has good health insurance and a reliable car not really have to worry about that?

Just an example:

- Say you have a car, and for some unknown reason the engine blew out.
Is that an issue with insurance? No, they'd say that was normal wear & tear.

 

[dullard]

What happens if you have it invested then need to cash it out when the market is down like in 2008? 20-25k (8 months expenses) is my target to keep "100% safe and liquid". Above that is invested more agressively.

Mathematically, after $2k, it is almost always a better idea to NOT have the money in savings. It is better to build wealth that you can borrow against. That means paying off debt and building up investments.

There is no need to have 8 months of expenses saved. When would you ever need that? When you are unemployed? That is why you have unemployment insurance. Those unemployment premiums are far, far cheaper than what you lose by not investing that $20k.

If you have that $20k invested, and you need it suddenly during a market crash (like in 2008), then you get a loan with it as collateral. You get ~10% on average return on your stocks and you might in a rare case have to get a temporary small loan against it (probably paying far less than 10% interest).

Plus, part of good investing is to have a money market account with some cash for when you spot a good deal. That is in effect a good source of emergency funds too. That is, you won't have to sell anything or borrow anything in the emergency. But, it is normally used for the days when you see a great investment (you wouldn't do that if you reserved it solely for emergencies).

 

[soulcougher73]

i think i need more than 2K to feel safe. that doesnt even cover one month for us.
some days i like home ownership. most days its a giant money pit.

This. Been in our first home for just over a year now. Still not sure im sold on home ownership. Its very costly.

 

[edro]

LOL, $2000.

I spent over $2000 on lunch today.

 

[GundamW]

Many people keep 6 months expense in savings liquid, that can be much more than 20k. It's there for liquid cash with zero risk.

2 months in checking
6 months in savings
invest the rest.

Agree.
Once you add mortgage, car payment, necessary/medical bills together for 6 months, it can easily get up to $20K. With kids, it's even more.

A Personal Finance class should be mandatory in any high school.

 

[ShawnD1]

Plus, part of good investing is to have a money market account with some cash for when you spot a good deal. That is in effect a good source of emergency funds too. That is, you won't have to sell anything or borrow anything in the emergency. But, it is normally used for the days when you see a great investment (you wouldn't do that if you reserved it solely for emergencies).

Can you explain a bit more about money market accounts? I'd like to know more about how they work, what you can and can't do with them, why someone might not want one, etc.

 

[dullard]

This. Been in our first home for just over a year now. Still not sure im sold on home ownership. Its very costly.

Homes are very, very costly for the first five years after you get your first home. Then, assuming you don't go up to a massively more expensive house later, they just get cheaper and cheaper. While rent just goes up and up. After a couple decades the home is nearly free while rent will be thousands of dollars a month.

 

[RockinZ28]

Yes. I've had such emergencies, such as a slickdeal on a big screen plasma tv last year .