Emergency Savings

[Anonymous]

With negative real interest rates you are losing money for every dollar you have saved in an emergency account. Far better to obtain a home equity line of credit or have credit cards with high limits you could fall back on rather than excessive savings.

[Anonymous]

Anonymous wrote:OP here: My plan is so stay with a federal career my entire career. I enjoy public service and it has been a fulfilling career for me for the most part. My father has also made it his career, and set a great example for me in that aspect. So I do plan to have the pension piece, and will retire between ages 57-60 (30-33 years of service). So that does factor into my retirement planning to an extent. The health insurance component of it is also an attractive benefit...

In my entire time with the federal govt., (10 years) I have not seen one person laid off. Demoted, yes. Fired, no. My father has seen a handful of people fired, but again, not let go. So I feel fairly confident, short of mass RIFs, that my job is fairly stable, so I am not so worried about having cash in case I am laid off. Is it possible I could be fired? Sure. But I would have to massively screw up somehow for that to happen.

The STD does component does concern me. I do have some leave banked, but know I could add more as it accumulates. I've never been majorly sick, nor has DC (knock on wood). But maybe that makes a strong case to grow my emergency savings to 6 month in case of some medical emergency, then start adding more to my TSP. I know that the monthly contribution I put into emergency savings now would pretty much equal the monthly portion I would need to add to my TSP contributions to reach the yearly max.

But I do like the idea of adding a vangard fund to supplement my emergency savings, since it is fairly liquid. I just hate that my savings sitting somewhere and actually losing value since it's not keeping with inflation. I get the point of needing emergency savings, I just want to make the money work for me if I can.

It's not that hard to get loans from TSP, so if you want you could consider TSP as part of your emergency fund. Or even plain EE savings bonds will pay 3.5% IF you hold onto them for 20 years (otherwise they pay 0.2%).

When we had less money we definitely considered things like home equity line of credit as part of our emergency fund. On the other hand, they say the sure sign of a bull market about to crash is when everyone is putting all their money into stocks, so be sure you are investing for the long term and comfortable with whatever volatility and risks you are taking on in exchange for greater expected returns.

[Anonymous]

Would you prefer to have DC pay for some of college? If you would prefer to foot the entire bill, I would focus on that. If not, disregard. Maybe go to 6 months and then consider splurging here and there. A nice vacation, some pampering, etc. I think its great to save but equally important to enjoy your money today as well because you might not see retirement.

[Anonymous]

Anonymous wrote:Yeah- big ticket items, health-wise, are covered. Have an HSA with a few thousand in it.

Car- I just purchased a gently used car last year. Didn't pay in cash, but payments are reasonable and interest on the loan is low (under 2%).

Home- I rent- paying below market rates for a close-in location in a good school district and only a 15 minute commute. Good arrangement with landlord, and no plans to sell it on the horizon. Could buy, but have a hard time wanting to pay 350K-400K, minimum, for a small, 1000 square foot 2-bedroom condo, which would also add another $500-700/month or more in expenses between the mortgage, upkeep, taxes, and homeowner fees. Plus I hate the idea of having to deal with any issues that comes up; in my current arrangement, if the water pipes break or the A/C unit dies it's not my problem to fix. So don't plan to buy unless I get married or move out of the area.

College- on track to have about $50K by the time DC leaves for collge. Pushing for a state school since I made the mistake of going to a private university and have the loans to show for it. Figure between my 529 savings, loans (DC's), student-work and maybe a scholarship or grant, am okay there too. My parents have been adding about the same to a 529 as well for DC, which will help. Of course, have no idea what a state school costs these days, but figuring 15K/year?

Guess I could always put more into retirement, or just invest; hate the idea of just tying up almost all my savings in only a retirement account. I just don't know much about investing in mutual funds, but I guess I could read a little up on it first. But since I'm not hurting, I suppose I should beef up my emergency savings first. To get to six months should only take another year or less. Just doesn't seem right to have a lot of money sitting around and making little to no return right now, especially with the interest rates being so low and the stock market doing so well.

You answered your own question, OP.