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Is there still a reason to keep saving cash if your emergency fund has been funded?
Or should you divert all that money into paying down the house, your student loans?
Ok, other than maybe making a second account that isn't emergency fund but more like urgency fund (like for repairs, house maintenance, house upgrades like a new microwave, etc)...
To me, it sounds like your "urgency" fund should be part of your emergency fund. Those things you list don't go away should you lose your job. It doesn't all have to be cash.
Once you are adequately funded, you can start to think in terms of returns. Can you earn more than your mortgage? Look ahead too, if you think in a few years you can earn more, you just might be better saving your cash now. I remember getting 17% interest on a TBill. I am not saying they will return to those rates but can you imagine getting 10% guaranteed while your mortgage is at 3.5%. I think this period will go down as the bargain of a lifetime.
To me, it sounds like your "urgency" fund should be part of your emergency fund. Those things you list don't go away should you lose your job. It doesn't all have to be cash.
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Must disagree. Wear and tear and eventual replacement are NOT an emergency, but a foreseen and planned for (On my part anyway) event.
Must disagree. Wear and tear and eventual replacement
are NOT an emergency, but a foreseen and planned for (On my part anyway) event.
Absolutely.
It burns me up (in auto forums) when tires, brakes and other service work are called repairs.
Back to the OP:
Quote:
Is there still a reason to keep saving cash if your emergency fund has been funded?
Or should you divert all that money into paying down the house, your student loans?
You should plan to save, set a side a fixed amount on a regular basis, until you die.
What you use that money for, once you actually have it on hand, can and will vary.
(more EF reserve, investments, paying down debt, vacations and luxuries... whatever)
The principle is that the decision making process to actually spend $X on something is a very
different proposition when you actually have the $X in hand ...vs only having it in mind.
Last edited by MrRational; 05-12-2013 at 07:27 PM..
Location: Prescott Valley,az summer/east valley Az winter
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it depends on your definition of "cash" and what you plan on doing with the remaining money.
If you are saying I'm free to spend whatever remains on frivolous stuff I disagree. If you feel you can now invest toward future needs by investments and saving for retirement~ kids education ~ your next vehicle when you need one~ your house~ then feel free. Or if you have debts now is the time to pay them off. I wasn't able to save a large retirement account but my invested assets allow a quite comfortable but not extravagant retirement
I've never felt the need to have a strictly all-cash emergency fund.
I've been buying stocks for as long as I can remember, mid-teens. One time I sold some stock to fund an emergency. But if it ever happens again, I'd rather put my stocks up as collateral for a low-interest margin loan, and then just pay it back. That way I don't pay the capital gains tax, and can still collect the dividends.
Emergencies suck, but fat chance I'm letting extra money sit in cash for several years at a time.
Mattress stuffing is pointless. Once you've got whatever you feel comfortable as far as an emergency fund saved up, saving additional cash is indeed pointless. I don't really see the point of an urgency fund. If I know I need tires in the next six months, I just keep that in the back of my mind and set aside some money for it. If I run over 43 nails and blowout all four tires and I can't cover it with what's in my checking account, then it's an emergency.
I'd invest the extra portion conservatively (i.e. a conservative and diversified fund with large cap stocks, bonds, real estate, etc.) If that gives you heart palpitations, at least get CDs..
Id look at maxing out your Roth or IRA contributions.
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