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  • nicholascrawford
    replied


    It has everything with where you live and where in life you are. With 2 kids in SF, that's a month of spending. As a single person in Wisconsin, I survived on $10k/year, living with my parents. There's no set amount that works for everyone.


    My question above is more about being able to scale down expenses rapidly when the bottom drops out. I think this is where people go from comfortable means to bankruptcy after losing their income stream.

    Leave a comment:


  • BYC
    replied


    I think it's a balance of both. Keep in mind if you have a mortgage you have a limit on how much you can scale things down. My plan was to save up enough in an emergency fund to pay my mortgage and live a scaled down life (calculating in unemployment) for 6 months. I saved hardcore and hit this goal in a year and now i'm investing my emergency fund and slowly adding to it. Thanks to some good stocks i've now got enough to live without scaling back or unemployment for 6 months. I'm very happy with my job but its a great feeling to know you have the savings to live for half a year jobless (or even better to have the power to take a risk and follow your dreams).

    Leave a comment:


  • hornsup84
    replied


    I've gone back and forth on the optimal emergency fund size, but I think I'm somewhat of a middle ground person. (Pardon the 'whizzing contest' info, but it relates to my debate position) I think the issue is compounded for me personally given the fact that I'm (1) living in Manhattan (relatively high expenses/COL), (2) make a very good salary (thus the mos earnings x "ideal # of mos" = ridiculous amt in emergency fund) and (3) large monthly payment on student loans (law school).


    Relatively speaking, my job is pretty safe (knock on wood) for as long as I can stand working like a dog. Due to 1 & 2, the "ideal" emerg fund size under most normal metrics (x mos of salary or expenses) is a ridiculous amount of money. The fact is, were I to lose my job, after a few months of looking while staying in NYC (and living much more cheaply than I do now, at least in terms of food/booze/shopping costs... my rent and student loans are fixed in the short term), I'd probably leave NYC and go somewhere cheaper, be it back home or to a different city. I could also defer my student loan payments for a few months too, if push came to shove. Also, it's most likely that I'd get some sort of severance package... probably a month or 2 of full pay at the last, so I can take that into account for what I need for emerg fund (~$10-20k net, conservatively).


    That being said, I'm aiming for ~$20k in my emergency fund ideally. Tough to see cash sitting there when I have a ton of student loans accruing interest though (high rates at that, since I went to grad school in the last few yrs), so honestly my goal is to fluctuate between $10-15k and use $5k of it each year for my backdoor Roth IRA contributions. The rest of my savings go toward my loans currently.

    Leave a comment:


  • nicholascrawford
    replied


    What do you guys think about this:


    Do you think it's more important to have 4-12 months of savings stashed OR to quickly scale down your spending when something happens like losing your job or some other financial emergency?


    I believe having savings helps smooth out momentary blips with unexpected bills or a temporary delay as you switch jobs and have a lag between paychecks, etc. Being able to quickly restructure your spending from $100k to $15k/year would be far more powerful if that blip turned into a long stretch as perhaps getting a new job proves difficult or the medical bills pile up before the disability checks arrive for only 40% of your income.


    How do you vote? Have you seen this play out?

    Leave a comment:


  • adivvela
    replied


    Websites and tools I use for my finances:


    http://www.iwillteachyoutoberich.com/blog/ : Good for tools and base level advice on managing your finances, as in my earlier post I recommended his book as well.


    https://www.mint.com/ : good site for tracking your finances, instead of having to look at 10 different sites for your credit cards, loans, retirement and bank accounts. Mint will consolidate it into one interface, highly recommended and to echo hornsup84, it is secure.


    http://www.fightingchance.com/ : read the articles on this site (on the left bar) if you are considering buying a car, read them even if you are not. Good, useful info in there.


    https://www.billmonk.com/ : for those of us who have not quite grown up yet (myself included) and still have roommates this is a great site for splitting bills. I have never had an argument with any of my roommates over money due in large part to this site.


    https://www.schwab.com/ : my recommended bank, easy to set up a checking account, Roth Ira and other investing accounts. Perks include refunds on all ATM fees charged by other bank ATMs, unlimited checks and an iPhone/Android app where you can take a photo of a check and it will be deposited.


    If you prefer a "brick and morter" bank, I suggest credit unions, avoid the "big" banks at all costs, they will screw you with fees.


    Take Care!

    Leave a comment:


  • hornsup84
    replied


    @BB -- I give Mint an overall great score. Some sites work with it better than others (some banks, particularly with student loans in my experience) don't work as well. It's great for tracking expenses and such, but it isn't perfect. Definitely safe (it's owned by Intuit, the guys who do TurboTax), and a great service for the price (free.99).

    Leave a comment:


  • nicholascrawford
    replied


    Mint is great. Like any tool, it's only worth it if you use it!

    Leave a comment:


  • BB
    replied


    Does anyone here use Mint to track spending, set budgets, etc? Is it helpful? Safe?

    Leave a comment:


  • pkansa
    replied


    I'd also say make sure you have a budget. You can allocate your income against expenses, and measure how you're doing. With a good tool, you can start targeting money for specific savings (ie, clothes, car, etc) without specifically having a separate savings account. In that regard, I've really grown to liking the YNAB software.

    Leave a comment:


  • bvaghela
    replied


    really nice posts - definitely good motivation to stop thinking about saving and just start getting into it. I will be picking up the little book of common sense investing and i will teach you to be rich. any other recommended reads?

    another site i check from time to time is 20somethingfinance.com. the author posts good articles for beginners and he has some good saving strategies. he also has a budget template on there for those that are looking for one.

    Leave a comment:


  • Weng
    replied


    http://www.getrichslowly.org/blog/

    And if you're a doctor: http://whitecoatinvestor.com/

    Leave a comment:


  • the new transported man
    replied


    My financial strategy for retirement: Marry the woman you love, wait for her to inherit millions, go back to playing Halo.

    Leave a comment:


  • hornsup84
    replied


    @aglass -- I personally wouldn't bother with putting your remaining cash in money market funds instead of keeping the cash in a savings account. MMFs aren't making any cash right now anyway, no need to fully tie that up.


    First, I would start contributing more to your 401k, since it sounds like you have more cash on hand than you need. You don't get matching, but its still tax advantaged (i.e., if its a traditional 401k, you're putting in pre-tax dollars and deferring income tax on such cash; alternatively, you could possibly opt for a Roth 401k, if you think your tax bracket now will be lower than in retirement when you take money out). Definitely put $5k per year in a Roth; compared to using a taxable brokerage account, essentially you just get all your profts tax-free instead of paying tax on it (i.e., a no brainer). I wouldn't put any in taxable investments at this point. Essentially use your savings now to live off of while upping your 401k contributions (on a net basis, effectually moving your savings into the 401k indirectly). The rest, I'd stick in an ING savings account (or possibly in a waterfall of CDs with different quarterly re-up dates (i.e., have them be 1 yr CDs (if the interest rate makes sense relative to a reg savings account), with 4 CDs, one of which re-ups each calendar quarter).


    That's a lot, probably confusing too. My bad.


    EDIT: Runner guy is correct -- my above strategy is purely for retirement savings planning (401k, Roth, etc.); wouldn't be good if you want to use the cash before retirement.


    @zero -- no worries, happy to help if you do have questions.

    Leave a comment:


  • runner-guy
    replied


    @aglass - Your strategy really depends on the time frame that you need your money. If you need money within 10 years for a large purchase, like a down payment on a home, you are better off keeping it out of the stock market. As a side note, if you do buy a house try your best to save enough to put 20% down to avoid paying PMI. For long term, putting money in a Roth IRA is very smart. You'll have to pay taxes up front on your 2012 returns, but you can withdraw it tax-free after you retire. Also, index funds are good for long term investing in a non-retirement account.

    Leave a comment:


  • zerostyle
    replied


    @hornsup: I was to figure out the answer to one of my questions. Just reading about the ROTH backdoor strategy now.

    Leave a comment:

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