Moving my Emergency Fund

After listening and then pondering Episode 66 of the ChooseFI podcast, Big Ern got me thinking about my cash emergency fund. Big Ern outlined how to pay for an emergency in the event your emergency fund is not sitting under your mattress (essentially). Ok. Ok. He didn’t mentioned storing your cash under your mattress but with the current savings account interest rates, it’s basically the same thing.

I have been living out on my own/with my husband for 16+ years.  And during those 16+ years the biggest emergency was a busted up water heater.  And a new water heater costs about $500.  Which could first be paid via a credit card and then one of the following would happen next:

  1. Reduce savings temporarily to pay off the credit card before the credit card payment is due.
  2. Sell stocks/bonds/investments aka convert investments into cash to pay off the credit card before the credit card payment is due.
  3. Withdrawal part of my personal contribution to my Roth IRA (penalty free) to pay off the credit card before the credit card payment is due.

To be fully transparent, Mr. BMM and I have a joint emergency fund and we each have our own separate emergency fund.  We are independently responsible for our own vehicles.  Now if something major happened we would certainly help each other out.  But I don’t see the point keeping my emergency fund under my mattress in the event my 2 year old car had something happen. 

Am I in a fortunate position?  Absolutely.  My road here was not paved in gold or was anything close to being sunshine and roses.  I worked very hard to put myself in my current position.  This article is written to make you question your own emergency fund.  Is your emergency fund where it needs to be? 

I put mine into a Vanguard Pennsylvania Long-Term Tax-Exempt Fund with low expenses, year over year steady returns greater than a savings account, and the tax exempt status was appealing. This fund is only for Pennsylvania residents.  But I’m sure there has to be other funds for your state. 

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