financial investment / emergency funds

I can only comment on the last part.  I am working on setting up the Dave Ramsey "Baby Steps" program.  DH and I have good credit, we have a comfortable house and we are not "house poor" (our mortgage is nowhere near 1/4 of our monthly income which is typically the magic number).  However we have a LOT of student debt which was unavoidable given the paths we chose and the fact that we got zero help from parents, plus DH has two degree and is now working on his master's. Anyway the Dave Ramsey program says you have a $1000 emergency fund.  Yes that's right $1000.  Then you evaluate all your debt (except your house) so that each month you are paying the minimum monthly payments and putting extra toward the smallest debt.  Once that's paid off you put the extra, plus whatever you were paying on that dept towards the next smallest and so on. There's several reasons for this that I won't get into here but one of them is exactly what you are saying.  Someone like me who is making less than $40K/yr and can't set tons of money aside can't make anything in interest so there's no point in hoarding away the money when the interest rates on the loans or other debt is higher.

My comfort level for emergencies was extremely low to the point that the anxiety was starting to effect me on a daily basis until I decided to stick with this program.  Again with our combined income we have no trouble paying all our monthly bills and living fairly comfortably (we can see a movie and eat out, and I can afford to train and compete with my dogs as long as I make choices about what events to attend), but I just kept having this panicked feeling that we didn't have a huge emergency cushion.  Now I feel a lot better that I have a program and one that works.  My SIL is doing it too and they've already lost one house and have two babies.  Also my parents are not rich but they would never let me drown in debt.  If an emergency came up I know I can get the money because the very few times I've gone to them in the past I have always paid it back. 

We do not have 6-9 months of funds put aside, but we do have about 3 months of funds in various savings accounts.  The only thing we have in the stock market is our retirement accounts and a 529 account, and right now, that is all I am comfortable having there.  Right now I am in a major financial planning mode for the future.  I recently met with our insurance agent and we are about to make some changes with different insurances.  We are going to invest in more life insurance and take out small Universal life policies on our kids while they are young and cheap, and let their cash surrender values grow.  They are the types of policies with a cash surrender value or that you can borrow from.  One of the many goals for us being to plan for college and retirement.  We have our retirement accounts set up but I want to feel covered in other ways as well, especially if one of us were to die or become disabled. 

As far as an emergency fund to higher proportions goes, we do not use our credit cards for everyday purchases anymore.  We occasionally use our Citi card for big ticket items that we plan to pay off immedietly only to get the miles.  We have a few other established cards that have pretty high limits since we have had them for 10+ years and in the past used them and paid them off multiple times.  In the past, I have ALWAYS been able to borrow on one at 0% for a set period of time.  My husband and I have done many house remodeling projects this way when we knew we could have it paid for in a years time etc.  We don't normally carry a balance on that card unless we have just done a major project.  I always know in the back of my head that we could borrow there if we absolutely had to.

We just closed on our refinance yesterday, and in the next few weeks, we are also going to take out a home equity line of credit to have available in case of an emergency.  We have been looking into disability insurance and our agent suggested that we do this with them.  This particular one is good for 10 years, has no fees, and is always at a very low rate.  There was some benefit to the payment requirements as well, but I can't remember what that was.  I figure that we will probably never use it, but it affords us a little more backup if we ever needed it.

 

Of course I prefer not to carry debt, but if it came down to it, while builidng our savings more and more, I know that we would have other avenues to get money if we were truly in need.

Lies, having only $1000 in savings would drive my anxiety level through the roof.  Clearly the ideal for me is something in between that, and what we have.  I agree with paying down debt for the most part, but typically for people with high credit card debt or really high interest rates.  My peace of mind is worth more than the interest we are paying at the moment.

 We both have retirement accounts that are stock based so that's fine but I agree with not putting a ton more that way.

We have our life insurance through our jobs -- it's only term plans so there is no value associated with it, but it's rather inexpensive.  We will increase the amounts though since right now we both have enough to cover all of our debt -- mortgage, student loans, car, etc (we have no cc debt) but not a great amount beyond that so for the baby's sake we'll increase that.  Last time we looked into it, an insurance policy that had a value (whole life insurance I think it is?) was enough more expensive that it just wasn't worth it to me.  Maybe now I would feel differently though, and of course there are multiple companies so not saying the rate we got was the best out there at the time either.

We just refinanced a couple weeks ago too!  I am glad that's over and done with.

If we cut down to the bare minimums on payments (not paying extra on student loans or whatever) we have about 9 months of expenses put aside.  And of course that's good since with the baby on the way we probably won't be able to contribute as much to it in the near future.  It just seems like a crazy amount to keep as cash. I hesitate to put a ton into a 529 since our state doesn't have a great program, and we probably should fund our retirement more first before worrying about college (we put in a good amount percentage wise but we're well below the yearly max).  I just don't know that I want to tie up more money in the market at this point.  I just can't figure out what other options there really are.

I guess we could pay down DH's school loans or our car or mortgage, but again that won't lower our monthly payment until the end and it's paid off.  So it's sort of tying the money up for a while, still, since we won't see the benefits until it's done.

I'm also being cheap and don't want to pay to sit with a financial advisor who will mostly tell me things I already know, or don't want to do LOL. (at least, that's how initial conversations went last time we got some information from one).

I probably have a bit of an odd philosophy on saving and debt. I too have always loved the idea of zero debt. Unfortunately, sometimes what happens is that you work really hard to get something paid off and then feel free to buy something else and the cycle starts again. I find that a mix of working to pay off debt plus save has worked best. Because my dad really emphasized money management, I had CDs and mutual funds starting in my early 20s. The % rate on CDs is still pitifully low, so I wouldn't tie my money up in that way. What I would suggest is looking in to no-load mutual funds. Vanguard has a huge family of funds and a great website. So does Fidelity. For most of the funds, you might have to deposit a minimum of $500 to open it but then can make monthly automatic payments of $25, $50 or ? They even have targeted funds now based on when you anticipate retiring. It's super easy to pull the money if needed too. I've done it both online and by phone and had a check in 3-4 business days.

It might just be from the weird market lately but I did look at Vanguard (that's who handles our retirement accounts) and most of the mutual funds had lower 1-yr returns than my savings account :(  I will look further though and I can even set up a meeting with our Vanguard guy in case they have options.

Maybe there isn't a product out there, in this market, that can earn anything reasonable without more risk?

I went to a State Farm agent who also does financial planning.  It didn't cost me a dime to meet with her.  I know she has a good background in this so I felt comfortable going to her.  She gave me a lot of really great advice, and helped me to see how what she was suggesting would work for me whether I lived past the policies, or died before them.  She actually suggested a mix of different life insurances.  Most of the whole life/universa life policies were small $25,000 policies mixed with larger term policies, so the rate was much lower for them, but still had cash value.  There were also some return of premium term policies which cost more than a normal term policy, but still less than whole/universal life.  On the kids, it made total sense to get them.  They are super cheap for them, and we can add more as they age and have a cash value when it's time for them to go to school. 

I never would have though to work the life insurance the way she did, but it made 100% sense to me when I saw how she was going to make it work for me.

ETA: I forgot to say, we both take the MAX in life insurance that is offered through my husband's employer because it is so dang cheap!  But I still want some policies that I totally control, whether he works for them or not, so the majority of ours are outside of his employer.

Scroll thru this page and hardly anything has done as poorly as any other type of savings. The last few years have been pretty brutal on the stock market, but historically, it's still offers the best rate of return. Try not to focus on the 1 year or YTD but look at the 10 yr average.

https://personal.vanguard.com/us/funds/vanguard/all?reset=true&sort=name&sortorder=asc&assetclass=all

Since we are a one income family (mine) and I was recently scared out of my mind that I was going to get laid off (in Detroit) we have 7 months worth of income saved.  It completely freaks me out so that is our comfort level.  It's a lot to just sit around, but less than that scares the crap out of me.  We have a small mortgage, own both our cars, and are frugal with our everday spending.  We do like to go on trips so that's our one extravagance.  We figured the money we save from not eating out as often usually sends DH and I to Vegas once a year so it's worth it.

In terms of of liquid cash, we have a combination of our savings and mutual funds account.  In terms of long-term we have our investment account as well as my 401K.  We also have a 529 for Riley's college - it's still pretty small - but I figure we have some time still.

I know that if something absolutely catastrophic happened I could also go to my parents.  Since they are the ones that actually hold our mortgage I know we would be OK there and they wouldn't foreclose on us   We don't really have any credit card debt.  I got into cc debt really bad when I was younger, paid it off and will never go there again - ever!  We charge our utilities and the like each month for the points but its paid off each month.  We usually use those points to pay for flights to Palm Springs each year.

We also have life and disability insurance policies on us - primarily me.  DH jokes that I am worth more dead than live LOL

My personality, my childhood, and my professional background require me to be a saver in order to preserve my sanity.  I couldn't sleep at night if I didn't have a "rainy day fund."  There have been times when that fund was miniscule, but I've always tried to put at least a few pennies aside.  I think the general rule of thumb is to have at least 6-months of expenses saved, but I've heard other figures.  I don't aim for a specific goal of XX number of months, but several months of fixed expenses is ideal (e.g., mortgage, utilities, gas).  Obviously, if our life situation became dire, the expenses we have now would drop significantly, so our monthly $ needs would be lower.  For example, we have a cable TV package that we'd cancel if we had a crisis, and we'd stop all dining out, etc.

Like others have said, our stocks are limited to our retirement accounts, which are invested in a wide array of mutual funds.  However, even doing what they suggest with broad diversification, our funds still tanked with the stock market problems in recent years.  It's incredibly discouraging; we're not so young that we'll recoup all those losses.  Our regular savings are in very low-yield, but liquid, accounts.  I know CDs  and savings accounts have lousy yields, but I need them to be safe and stable (again, to preserve sanity). 

With the downturn in the real estate and construction industries, DH's job took a major hit (pay cuts, followed by being cut to 3 days a week, and fears of complete job loss).  For several months, we were thankful for our rainy day fund.  I know many folks aren't that lucky, and my fear of that kind of thing adds to my obsession with saving. 

We're fortunate not to carry credit card debt anymore, and no auto loans (knock wood --- my car is 10+ years old now).  Our life insurance is limited to employer-provided plans.  Since we don't have children, and we both work and could provide for ourselves if suddenly left alone, we haven't looked into additional policies.

mrstjohnson

DH jokes that I am worth more dead than live LOL

 

LOL I know I am!  My term life is 2x my salary.  Right now that's all we have, term life through our employers (and my employer also covers DH) but when we have kids I can see that changing.

My salary is small but I'm lucky that my employer already contributes 10% to my retirement even without any voluntary contributions.

Once we pay off our student loans we can easily set aside almost 75% of our monthly income into savings, retirement, etc, or pay the house off early or both.  Can't wait!....

We have a little bit of CC debt from some problems about a year an a half ago (a bad string of car repairs and health problems) but haven't used the CC since other than charging something small and paying it back to keep contributing to our credit.  DH is beyond frugal and I'm careful with budgeting so luckily we didn't get into that CC debt trouble like a lot of youngsters.  It's DH's card, I don't even have a CC card just my debit card.

Right now I have a car loan that's less than some people's cell phone bills and is almost paid off.  I wanted something really specific and was willing to pay for it.  DH drives junkers we get for less than $500 and then sell for scrap when they break down.  He'd like to ride the bus but currently it stops a few miles out from where he works.

 

Liesje

 my employer already contributes 10% to my retirement even without any voluntary contributions.

Holy mackeral!  That is almost unheard of these days for private employers -- especially the parts I put in bold!  Do they have any job openings in the accounting department?  I might have to consider applying! 

tacran

Liesje

 my employer already contributes 10% to my retirement even without any voluntary contributions.

Holy mackeral!  That is almost unheard of these days for private employers -- especially the parts I put in bold!  Do they have any job openings in the accounting department?  I might have to consider applying! 

No kidding!! When I worked for the feds, they matched up to 5% but you could contribute 10% pre-tax, so I did. I wasn't making much either but by the time I left, I had about $50K saved up and hadn't really missed it in my paychecks. I 'd love to even have matching contributions these days.

I know it's awesome isn't it?  I'll tell you how I found out, this is kind of embarrassing b/c usually I'm on the ball with this stuff.  I *thought* that after two years they would match voluntary contributions up to 10%.  So, after the 2 years passed I made an appointment with one of the local reps.  He starts talking about how I already have X-amount socked away for that year.  Turns out after two years they contribute 10% *and* you can make voluntary contributions (and they may even match another percentage, I'm not sure).  The rep looked at all my finances and told me not to make any voluntary contributions but pay off my student loans and then get back to him.  I work for a private college and could make double doing the same job in the public sector almost anywhere else in the country, but the benefits cannot be beat.  However my salary is crap so the retirement money might just be a marketing scheme, lol, anywhere else I'd make a ton more money and probably contribute at least 10% on my own, but it's nice to not really have the choice.

We usually like to keep a few thousand in savings. I have a CD with a lot of money in it from my mom (she died a few years ago) that I don't intend to touch except maybe for the mortgage when it's time to move again. We're in a sticky situation and I dislike it. We're not poor, but a great deal of our monthly income goes to bills/debt. Some of our older friends live with much lower monthly mortgage payments than us and no car bill.

What we're trying to do is get the car paid off, then focus on dive bombing the mortgage. The student loans are only about $10k and they can wait. My fiance bought this townhouse before we were seriously dating, under the impression that it'd be his "bachelor pad" of sorts (no thoughts of family or serious relationships in the immediate future). Now we're quickly outgrowing it, and because it's one of those fancy brand new town homes it cost the same as some single family homes around here cost. If he'd waited an extra two years we would be in a much better position right now, but it is what it is. I've made an oath to myself that our next house will have at least $400 less per month for the mortgage.

We're pretty set for emergencies, it's just the debt we're worried about. Luckily we have no credit card debt, just the typical mortgage/car loans/student loans. I usually recommend having at least a thousand dollars in the bank and if you need to pay off debt, focus on that afterward. My dad always told me to have one year's salary in the bank but I don't see that happening until we have a lower mortgage. I like to focus on one thing at a time rather than juggling debt/savings.