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Old 10-29-2009, 05:39 AM
 
Location: North Carolina
531 posts, read 1,806,173 times
Reputation: 302

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I think the idea of an "emergency fund" may have been a Suze Orman invention. Or, at the very least, she talks about it all the time.

The idea of having separate monies set aside to live on seems an artificial and maybe, dare I say it, *bad* idea. Your well-paid, frugal-living friend should max out her 401K so long as it is advantageous tax-wise to do so. The rest she should just save--not in some bogus "emergency fund", but just save. She'll want to be careful not to invest those non-IRA savings in things that generate lots of taxes, but tax avoidance is NOT the sole reason to pick investments.

There are always ways to beat the tax man. The wealthy elite who run our government make sure of that. Save the money. Avoid the taxes as best you can. When you are retired, you can control how much "income" you get and tax avoidance becomes much easier (I think this is what mathjak was trying to say before all hell broke loose).
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Old 10-29-2009, 06:31 AM
 
204 posts, read 541,662 times
Reputation: 65
Quote:
Originally Posted by mathjak107 View Post
i myself have chosen not to respond any further.
you just did.
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Old 10-29-2009, 11:49 AM
 
16,092 posts, read 36,591,693 times
Reputation: 6277
If you can max it out when you are young the compounding is all the better. I would then fund a Roth, then buy a home on a 15-year mortgage. I would save some for emergency, some for vacations (important to do some international travel while young) and then you don't have to worry about the rest.
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Old 10-29-2009, 12:07 PM
 
71,763 posts, read 71,853,273 times
Reputation: 49311
from your mouth to gods ears... ha ha ha we all should have had that happen to us.........

actually i remember when my life started out just that way , but then a little some thing called a wife and kids happened...

there went the best laid plans of mice and men...
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Old 10-29-2009, 12:14 PM
 
48,516 posts, read 83,989,888 times
Reputation: 18050
Quote:
Originally Posted by goat1of2 View Post
I think the idea of an "emergency fund" may have been a Suze Orman invention. Or, at the very least, she talks about it all the time.

The idea of having separate monies set aside to live on seems an artificial and maybe, dare I say it, *bad* idea. Your well-paid, frugal-living friend should max out her 401K so long as it is advantageous tax-wise to do so. The rest she should just save--not in some bogus "emergency fund", but just save. She'll want to be careful not to invest those non-IRA savings in things that generate lots of taxes, but tax avoidance is NOT the sole reason to pick investments.

There are always ways to beat the tax man. The wealthy elite who run our government make sure of that. Save the money. Avoid the taxes as best you can. When you are retired, you can control how much "income" you get and tax avoidance becomes much easier (I think this is what mathjak was trying to say before all hell broke loose).
I don't think its was her invention ;just what has shown to be a wise choice proven by those that used it. Emergency funding have saved a ton of people.She seems to be able to accomplish this from OPs information given.
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Old 10-29-2009, 01:25 PM
 
Location: Alaska
5,356 posts, read 16,356,662 times
Reputation: 4024
Quote:
Originally Posted by goat1of2 View Post
I think the idea of an "emergency fund" may have been a Suze Orman invention. Or, at the very least, she talks about it all the time.

The idea of having separate monies set aside to live on seems an artificial and maybe, dare I say it, *bad* idea. Your well-paid, frugal-living friend should max out her 401K so long as it is advantageous tax-wise to do so. The rest she should just save--not in some bogus "emergency fund", but just save. She'll want to be careful not to invest those non-IRA savings in things that generate lots of taxes, but tax avoidance is NOT the sole reason to pick investments.

There are always ways to beat the tax man. The wealthy elite who run our government make sure of that. Save the money. Avoid the taxes as best you can. When you are retired, you can control how much "income" you get and tax avoidance becomes much easier (I think this is what mathjak was trying to say before all hell broke loose).
I'm guessing an emergency fund predates Suze Orman. I first heard of the concept back in the 80's, from a Finance professor. On the last day of class, he gave us a life talk. Part of it was what I believe he called an escape fund and escape plan. He basically said that if you got into a job you hated, you'd have an option to get out. In my lifetime, I've used it once.

The idea of an emergency fund is to designate a portion of your savings to cover your living expenses for a period of time in case you get laid off or quit. There's no requirement for you to keep it in a separate account from the rest of your savings. It's designated as such so you don't use it to buy a new car or house one month and get laid off the next. If you're undisciplined, you can maintain it in a separate savings or other type of account.

Sure, you can just call it savings, but most people do not have the discipline to think that their savings will last them for x amount of months of expenses. Creating an emergency fund will get them to think about it. BTW, if you do get laid off, all of your savings becomes your emergency fund. Although, I have read stories about people going on vacation after losing their job.
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Old 10-29-2009, 01:36 PM
 
71,763 posts, read 71,853,273 times
Reputation: 49311
I use the ray lucia bucket system and for our emergency fund we call it a cup........ it just holds extra money for emergencys so it dosnt screw up the time frames the buckets hold in place
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Old 10-29-2009, 04:13 PM
 
1,340 posts, read 2,493,443 times
Reputation: 760
Quote:
Originally Posted by Iwillthink4u View Post
My best friend who is 28 years old, single, makes 110k, and has about 46k in her 401k. She contributes 10% with a 4% company match.

She's saving (in cash) about half of her take home (about 3k saved in cash monthly) after 401k, paying mortgage, and expenses (no other debt). Emergency fund of only 6k.

should she contribute more to her 401k or keep it as is?
What would you do?
I would cash out ASAP and buy Euros.
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Old 10-31-2009, 10:35 AM
 
8,204 posts, read 11,925,738 times
Reputation: 18020
Quote:
Originally Posted by Wingfoot View Post
I would cash out ASAP and buy Euros.
And that, my friends, is a perfect example of why you shouldn't take financial advice from anonymous people on Internet message boards.
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Old 10-31-2009, 12:02 PM
 
71,763 posts, read 71,853,273 times
Reputation: 49311
now that was funny HA HA ,i dont think it will allow me to give you anymore rep points....

actually it did!
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