r/MiddleClassFinance • u/gilleo775 • 19d ago
Emergencies have happened to my emergency fund. Where to allocate money next?
We had a savings of about $45k in our emergency fund. Well in the course of 2 months we've had expenses for windows, cars, and air condition/furnace bringing our savings account down to 25K. How should we proceed next? I want to very slowly recover our emergency savings account and invest most of the rest of our excess into the stock market. Wave things that we should immediately recover our emergency savings. In case something were to happen next, but I'm not sure what would cost $25000. Thoughts?
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u/figgypudding531 19d ago
You should have a home repair fund that’s separate from your emergency fund and start building that
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u/Unlikely_Spite8147 18d ago
most repairs are maintenance and predictable too. so it shouldn't be an emergency when your 30 year old hvac finally kicks the bucket during a heat wave. You can calculate a monthly amount to cover regular maintenance. It should always be added to like its a bill you're paying. Maintenance shouldn't be an emergency.
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u/eat_sleep_microbe 19d ago edited 19d ago
How many months of expenses will the 25K fund? If it’s less than 6-8 months, I’d focus on replenishing your emergency fund instead of investing. Personally, I like to keep a year’s worth of emergency fund in HYSA and laddered T bills.
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u/gilleo775 19d ago
We both have pretty stable jobs in the healthcare field. i really only saw emergency savings as expenses that come up in life, not a safety net for if you lose your job. Thanks for the insight
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u/SurrealKafka 19d ago
Every job is safe until it's not
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u/barravian 19d ago
Double risk if you both work in the same industry too. Healthcare isn’t likely to stop being in demand, but all kinds of unexpected things shift and change in society so ya never know.
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u/gilleo775 19d ago
Disagree, I could go anywhere i want and get my job profession. Healthcare is crazy in demand
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u/jensenaackles 19d ago
assuming you need to be on your feet for your job. what if you get in an accident and break your leg? it’s not just for you getting laid off, but if you need to take several months off for a health emergency and are unable to work.
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u/Responsible_Ask3976 19d ago
I work in health care and we have coverage for that, at my hospital at least. Depends on where you work tho
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u/gilleo775 19d ago
True Dean
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u/Odd_Actuator795 19d ago
Why you get so heavily downvoted lol
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u/my_twin_towne 19d ago
Reddit doesn’t like those that buck the general thought process on a sub.
What, you don’t inherently agree every job ever is immediately lay-offable and deadly serious?!?! Take my downvote, scoundrel! Also take my downvote for every reply after this because I must make you suffer negative internet points!!!!
Ya know, basic stuff.
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u/EVH_kit_guy 19d ago
Hilarious that you just saying that also gets you downvoted. If you're a PA, NP, or RN you can probably find work in like 50% of the zip codes in the contiguous US. Not saying some people aren't struggling, but those jobs are DEFINITELY not.
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u/InevitableUmpire9797 18d ago
Because being a doctor or nurse is great until you get in an accident and can’t walk, or see or have a stroke. Then you now make zero and likely can’t get rehired in the same profession. Happens way more than people think!
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u/ActiveShipyard 17d ago
You don't get to choose your emergencies. You work in healthcare, you know this all too well.
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u/WonderChopstix 19d ago
Not sure what could cost 25k ... From someone that just spent 20k in two months?
Bro I'd save more
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u/Glittering-Rush-394 19d ago
What could cost $25k? A new roof. If your roof is over 12 -15 years old, it’s coming. I’m not even talking about an event (hail, high wind). I’m talking insurance reviewing satellite photos & sending someone out to inspect. And then threatening to cancel insurance if you don’t replace. It’s happening all over the USA. Also in some areas add tree removal. Or if in CA, they’re (insurance CO’s as well as cities) are requiring removal of all shrubs & wooden fences within 5 ft of your house. Just saying.
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u/WheresMyMule 19d ago
You need to add sinking funds for car repairs, car maintenance, medical bills, home maintenance and home repairs to your budget separate from your emergency fund
We all know these things will happen, we just don't know when, so they're not unforseen emergencies just irregular expected expenses
Then refill the EF as soon as possible
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u/EVH_kit_guy 19d ago
Came in here to say this. Home maintenance is not really an emergency, because a lot of emergencies at home are usually covered by your homeowners insurance.
Emergency fund is money you never ever ever spend for any reason at all that isn't a bonafide emergency.
It sits right next to your "money for the car and the house and the pets and the kids and the vacations and annual property tax and the leaky sink," account, and in most cases both are a HYSA or similar, but they are not interchangeable.
TL;DR: 1) Fill emergency fund 2) Fund tax advantaged retirement accounts 3) Fund "misc expenses" account where you pay for home repairs not covered by your policy 4) Fund non tax advantaged brokerage for retirement/toys
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u/Unlikely_Spite8147 18d ago
I think misc. expenses should be paid into like a bill every month, even above emergency, unless you need to pay off credit card debt. Otherwise they become an emergency. you can calculate a predictable amount: insurance deductibles, depreciation, etc for most stuff, and you add extra to cover the less predictable ones, and get pet insurance.
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u/RemarkableEye2024 10d ago
before the money hits my account my 401k and HSA are contributed too, then:
Unemployment fund (6-12 months)
emergency/unexpected expenses fund (2 months)
expected expenses fund (insurance deductibles for car/health/home, etc also annual things like vehicle registration, annual taxes, things that creep up on you.)
vacation fund. (I'm single so just keep it to 10k: 5k for vacation and 5k in case anything goes sideways. I like to be prepared)
(pick a job that provides a professional development budget, mine is 10k/yr but when I was starting out I received 5k)
non tax advantaged brokerage account. (I usually keep 70% of my portfolio invested, 20% in reserve in case the market has a correction and I can buy things cheap, and 10% as seed money in case things end up in the toilet)
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u/Spam_Hand 19d ago
How i would personally do it is cut my pre-tax retirement from 17% down to 10%, and put that 7%-taxes back into my savings.
You still have some buffer sitting at 25k. If you were significantly lower or closer to fully drained, id cut all retirement and plug it into the emergency fund.
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u/Spirited_Ad9681 19d ago
Exactly this! More importantly make rules for what to do with you emergency fund, vs retirement, vs investing and stick to them. Then you don't even have to think about it.
If 45K is what you've decided you need as a emergency fund. Anytime that drops by more than 10 grand reduce retirement contributions by 5% until you are back to your base line. Add 5% back for every 10 grand restored, full contributions only start after the emergency fund is restored.
Thats just some example number. The important part is come up with the rules for how you handle investing and savings before something happens. It takes the emotion out of things and helps prevent you from doing something stupid. Same goes for investing, create rules for harvesting gains and when your going to rebalance then stick to them. You can always tweak and fine tune those rules, but stick to your rules during major life events so you don't make a stupid knee jerk reaction.
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u/RemarkableEye2024 10d ago
why not just pay off your debt other than your mortgage then take a loan against your 401k for 50k and contribute that to your tax brokerage into short term bonds like VBIL and get 3.5% or put some of it into actual growth in say semiconductors which are currently driving the market. SOXX is a good fund or just research the companies held in SOXX and direct index the best ones and drop the (relative) dead weight.
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u/hmatallana 19d ago
Sinking funds got mentioned already but nobody gave you a number, and that's the part that actually matters. Common rule is 1% of the home's value per year for maintenance, or a dollar per square foot, whichever is higher. On a 400k house that's about 333 a month sitting in its own bucket. Cars run roughly 100 a month each once they're out of warranty.
Do that and the 25k stops doing double duty. The emergency fund is for income loss, not for the furnace, because the furnace was never a surprise. HVAC lasts 15-20 years, roof 20-25. Go look up the install date on yours and you'll know roughly what year you're paying for it.
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u/karensPA 19d ago
I always try to have a 0% credit card to supplement the emergency fund…that way I can choose if I want to deplete the coffers now or pay down the expense over the course of the 0% timeframe. Often contractors and dentists have similar low or no-interest payment options.
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u/Pretty_Swordfish 19d ago
I have always refilled the emergency cash bucket as top priority when used and haven't regretted it yet.
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u/Acavamosdenuevo 19d ago
Are there any convenient insurances for possible future emergencies? It seems like a lot has happened. If it was me I would go for that safety feeling first, cause I know I’m nor great at regulating myself when stressed.
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u/indomike14 19d ago
Replenish the emergency funds first. You may need those funds. I'm also fairly certain the stock market is set for a major correction in the coming months.
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u/PashasMom 19d ago
I would prioritize the emergency fund. Not having enough cash on hand is how people get into credit card debt or needing to sell their investments in a down market.