Emergency Fund

Latest blog post from ordinarydollar blog. I do find this guy’s posts quite interesting at times.

Emergency funds belong in your offset account (or the stock market) – Ordinary Dollar

 

If you have funds in an offset account, you may have liquidity but as soon as you start to use it you go into negative net funds even if you weren’t already negative because the offset wasn't 100%.

Being the super cautious fella, you know that I am, I’m not sure 'negative emergency funds' are the way to go. You can never be too safe, ten times, nope 100 times on second thoughts 1000 times ERNs recommended level seems pretty sweet to me.

I would rather sell assets than build debt in an emergency.

In all my SOR data analysis cost from a low withdrawal rate in draw down are nearly always less than opportunity costs of holding a cash buffer.

If your withdrawal rate is high – that’s a different matter.

 

We’ve got an offset account 100% matched to the loan. It’s not there as a deliberate emergency fund but just what is. I suppose it’s an alternative to selling shares at a BAD time if in need of quick cash. That said being an extra conservative type (10,000 times ERN recommendation) we also maintain a cash buffer which could be used for smoothing asset income or doubling as an emergency fund in the unlikely event it’s ever needed.

When I research SORR etc I’m forever grateful that our withdrawal rate is low enough that we can easily live off less than the natural yield of the portfolio. It removes a heck of a lot of stress around such things.

Which given the most frequent emergency that arises here is when I dive into our sometimes cold swimming pool resulting in screaming, panic, hyperthermia I might lash out and buy an electric heat pump for the pool. Just keep thinking the outlay and running costs will reduce my annual investible Funds a little. But I love swimming in our own pool which offers privacy, convenience, is urine free, absence of other swimmers / kids kicking me in the head as opposed to using a public pool. Decisions, decisions.

 

CBA now allows borrowers to link their transactional account with the variable loan as offset 100%. So this option seems safer than the traditional offset account. Will have to confirm with my banker.

 

Interesting article, thanks. It really helped me as I frequently struggling with the temptation to invest the offset funds.

 

I certainly have what I view as surplus cash to cover contingencies but no offset or anything like that. I suppose if push comes to shove, I can access cash from the SMSF despite it being fully in accumulation (age has a benefit) or even revert a portion to pension mode.

The there is the Salvos, Vinnies, etc.

 

I wish my wife would live by that concept ... .

 

CBA changed from their old MISA account a while back - the only type you can get now is a transaction account linked as offset.

 

So it’s her that has expensive taste in wine?

 

This keeps the Emergency Fund Busy

 

Yep, she buys and I do the right/honourable thing and drink it .

 

Know the feeling.

Wife brews and I do the right / honourable thing and drink it.

What good husbands we are. Our wives don’t realise how lucky they are.

 

I've seen smoke wafting slowly from a credit card searing from overuse. The acrid and sour smell along with the astronomical balances bringing tears to the eyes. Spending unrivalled even in the modern day of pay pass where I've witnessed enough taps in a 2 hour period to create an electromagnetic field that distorts the earth's magnetic poles.

Where spending $10k at an outlet store in the Arizona desert can be translated as, and with no wording or meaning modified "we spent $10k, but we saved $15k, so we actually just made $5k". Being a petulant fool I almost told her she should go and make the family another $5k, before realising she would have.

My biggest obstacles to FIRE: Labor policies and my wife's spending.

My greatest joys in life: wife, kids and family.

I think I've been off the wagon too long.

 

To me it sounded more like Dry February is well and truely over in your household. If not then should we be worried?

 

Some lovely prose there, but I fear you may well blow a fuse. The Yoda-esque pieces railing at ALPs franking policy were another cry for help, but I can feel the pent up fury in the “credit card searing” reaching a crescendo of torment. You are one traffic jam from a Michael Douglas (Not Hamish) style “falling down” rampage.

I propose a counseling session in Avaricious April !

 

Have you ever estimate how much as a financial asset she is eg. Her income divided by 4% then you might encourage her to help the economy a bit more

 

Haha, one Saturday morning many years ago when what was then called bank cards were a new thing my other half went out to get a haircut. He came home with a haircut, a chest freezer and a television set because he walked past the shop and they were on sale!

 

I'm feeling left out! Have to get me some vices and/or expensive hobbies to fit in with others.

Gone are the days of going to Bunnings to buy tap washers, coming out with a MIG welder and then having to go back because I forgot the tap washers.

It's in those circumstances Emergency Funds - the subject of this thread - are necessary.

 

I can’t see what the issue is. If it’s VICES you want then Bunning’s has plenty of these as well:

 

Nice one or possibly someone failed spelling at school.