August 2006 Weddings
2Vermont
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
NER: How much cash in bank?
What is the suggested amount of money that one should have saved in their account in the event that one loses/leaves their job? I thought I heard 6 months' worth of salary, but in this uncertain economy I would think it would be more than that.
And so I say to you, you are Peter, and upon this Rock I will build my Church, and the gates of Hell shall not prevail against it.
Re: NER: How much cash in bank?
The generic answer on MM has been minimum of 6 months' worth of expenses for your emergency fund. You know your industry better so you should adjust it from there.
As far us, we try to keep 12 months' worth of expenses in a high yield account. However, we got lazy in allocating our money after the wedding in May and kept everything liquid. I have never been so damn proud of being lazy since we earned at least 3% interest compared to the -25% or more that my friends have lost in the market. Even after adjusting for inflation, we are just at 0 gain.
Dave Ramsey says 3-6 months of expenses, which is presumably less than your actual salary.
I'd say the higher the percentage of your expenses that are necessary (rent, food, etc.), the closer to the 6-month mark you need to be. If there are a lot of fun expenses you could cut out in the event of an emergency - eating out, elaborate cable package, lots of shopping, etc. - you could probably have closer to the 3-month mark. I would also think homeowners might want to have more than renters - not paying the mortgage has much more significant long-term consequences than not paying the rent. Also, if your job is very insecure, you might want to work on having more than 6 months. If you have high job security, then 4 months might be fine.
Those are guidelines that should be adapted to personal circumstances.
We have saved our bonuses and stashed them away and we try to say half of DH's salary every month. Our industry is so damn volatile, we need a large chunk of cash sitting around. Some of our friends took two whole years before they could get another job in the last downturn.
my read shelf:
Yeah... it's a lot easier when you have an annual bonus that's more or less equal to your annual salary.
We have ours (not at the 6-month mark yet, we're a two-student oink household, afterall) in a high-yield savings account, but we can't lose money in it, we just get a better interest rate than in our checking or a regular savings. I'd say we're at about 2-3 months of expenses at the moment....but we've only been saving <1 year...and at the moment our expenses are low b/c we could technically use student loans for everything. We don't, but we could in an emergency.
Don't buy a house and don't have kids
?
Joking... sort of. Since the savings rate in this country is pitiful, basic expenses keep growing and salary growth is puny or non-existent, I don't see how a great number of people could have that much money saved up. The Nest demographic is definitely unique compared to the rest of the US.
ditto. We live off one income.
Our overal goal for investments is in thirds: 1/3 in property/house(s), 1/3 in the bank, and 1/3 in the market. That way you are never screwed when something like this happens to the market, or to banks, or to property values.
Yeah, we have 6 months expenses in the bank and once we get my house sold we will/can live off of Jflute's teacher salary and save all of mine.
We honestly probably have 2 months' living expenses right now. Rent is the biggie, of course.
I'm totally impressed anyone living off of one paycheck. I can't even begin to imagine. Our rent is more than my paycheck or DH's paycheck. At least we each get 2 a month.
Hmm, okay that makes it slightly better! We still couldn't do it, but we might be able to get close if we really scrimped and saved.
lol yeah it sucks some times, but we just literally dont buy anything we don't need. Actually, living over here is the first time we are buying *wants* of any sort because we are traveling a bit. But before that, I literally never spent money on non needs. It was hard to save living on just a teachers salary, haha. But its possible!
When you say wants, do you also include meals out? I assume yes, but I wanted to make sure!
Thanks for the budget help offers. We still save money every month, so I'm not sad or anything, I'm just wondering how to have 6 months living expenses at any given time. I think we're still too in loan/car loan paying mode to do that. I know my 60 year old parents don't have it either, and my dad is in his second career as a consultant, meaning he has his military retirement pay on top of everything!
I guess you can't be too careful when the economy is bad.
I never once ate out in my two years in Baltimore, unless my parents were visiting. (I did eat out when I was visiting then FI in NC though). I always cooked at home or ate at friends'.
We eat out every once and awhile here. We are trying to experience things unique to London. But, we only do it once every two weeks or so. All other meals (lunch, breakfast, dinner) are eaten here or we pack them for work.
I realize I/we are cheap. but, we are young and living in an expensive city. Having at least 6 months e fund on top of our long term saving and retirement is important to us. Plus, I hope to be a SAHM for a few years so IMO if we can't live without my salary now, we are screwed later....even if he is then making much more money.
BB, there are a lot of ways people can do this. Some people come out of school with no car payments, no student loans, and get money from their parents every month. Some have extreme restraint and make savings a priority. Some people choose careers because they are lucrative jobs. Some people are extremely frugal. Some inherited money. Some don't care about designer clothes, or do care, but prioritize their emergency fund. It's hard to compare yourself to others, because no one is in your exact situation.
You're young and you're both just starting out. I woudln't stress too much yet. If you have 2 months expenses in savings, I think you're doing better than most early 20-somethings.
Ditto exactly.
When I first started hanging out on MM 2 years ago or so, I thought this sounded insane too. We started paying off our CCs and putting $ in savings. Since then, we've paid off over $10K in CC debt and Mr.P's car, and had a couple raises each. Every time we pay off a debt or get a raise, that extra goes straight into savings. We haven't increased our spending despite making about 25% more and having about 1/3 less debt. We certainly didn't start out living on one salary, and we won't be once we have a mortgage, but for right now we are.
The great thing is, once you save that sum, you don't have to save as aggressively unless you use up some of it.
I think 3 months expenses or 12 months salary, or whatever you decide in between depends on your individual situation. When we were renting and spending far more than necessary with very stable jobs, 3 months expenses was fine. Now that we'll have a mortgage, I'd feel a lot more comfortable with 6 months.
ETA: I'm also not convinced that this giant sum of money need be in a cash account. If we had a money market account or something where we could get the money out w/in a month, I'd be willing to use credit cards in case of an immediate hugely expensive emergency. The chances that you need $15K in cash on any one day are extremely slight.
ETAA(again): Provided, of course, you have no dealings with the mafia.
If you are paying off debts, it won't happen as fast. The general Dave Ramsey guidelines are: save $1,000 emergency fund, pay off all debts but mortgage (we include student loans in this), save 3-6 months expenses, then start investing and paying off the mortgage early. We currently only have the $1,000 in savings, but we are going to finally pay off the last credit card NEXT MONTH!!! We have no car payments, so that helps. Once the CC is paid off, it will free up a freakish amount of money that will start going into savings. I believe our monthly expenses are somewhere in the neighborhood of $2400, and we should around $10k saved by the end of next year. We could have more saved, but we are going on a fairly pricey vacation in March.
Kepp focusing on debt payoff - once you get it done, it's amazing how quickly you can save!
We live in Jflute's house that he bought for cheap in D.C. long before the boom back when you couldn't stand out on the porch cause you might get hit by a stray bullet. Now the neighborhood is gentrifying and he has a small mortgage because he never pulled out equity only refinanced once to get a lower interest rate. And we don't have school loans or car notes. (Or kids. Sigh.) You'll get there.
Bunny, if it makes you feel better, we have 4 months of expenses, and we only got there from keeping some of my condo sale profits. It's hard in this area where housing often takes up more than half of your take-home pay, but you've got to make it a priority before other financial goals. I think 6 months is a little exaggerated-what are the odds you BOTH lose your jobs? How much debt do you have? Those are the sorts of questions you need to ask to assess what's best for you, but I do think some safety net is necessary. I am starting to wonder about the value of keeping it liquid though, as we never seem to need more than 10% of it at any given time. Seems like the rest should be working harder for us...
Thanks!! I won't stress it. We can probably tighten a bit more.
RE: keeping the whole sum liquid. i'm torn on this too. we have 6 months expenses in a savings account that used to have a decent interest rate. these days, not so much. is it wrong to put some of it in a CD or something else?
p.s. please don't send me to MM for this question, lol!
Laddering CD's is a good way to get a little more out of it while minimizing risk I think. This is a good how-to:
http://www.thesimpledollar.com/2008/10/05/creating-a-cd-ladder-for-your-emergency-fund-or-other-savings-to-earn-a-better-safe-return/
This is exactly right. Until about six months ago, we were not in the comfortable situation we find ourselves in now. Out of grad school, we weren't struggling, but we didn't have much saved. We went into savings mode big time the year before we moved and started the business. Now our expenses are MUCH higher than they were when we lived in the DC area, but we are also bringing in much more, thankfully.
You can put everything in tiered CDs if you want. Basically, divide the entire 6 months of expenses into, say 3 different CDs. Put 1/3 of the money in a 3 month CD, another 1/3 into a 6 month CD, and the last 1/3 into a 9 month.
Go to bankrate.com since I believe they will show you who has the best CD rates around.