Fundamentals of FI: What Is An Emergency Fund & Do You Really Need One?

In this episode, we delve into the concept of an emergency fund and whether or not it is truly necessary. Brad challenges the traditional notion of a stagnant emergency fund sitting in a savings account and instead explores the importance of building assets and maximizing net worth. Join us as we discuss the nuances of financial independence and the role of an emergency fund in achieving long-term financial goals.
Read the full transcript and takeaway here: www.choosefi.c...

[@vulpixelful]

"Getting laid off in a bad job market for my sector" is definitely an emergency, and what the "x months of expenses" fund is for. "Flat tire" is not an emergency, it comes out of a sinking fund for repairs.

[@situated4]

A “sinking fund” is money that you save each month towards a one-time or irregular predetermined expense (e.g., new roof, overseas vacation, new car, hot water tank, furnace, etc.). In short, you plan to spend sinking funds, and you hope you’ll never have to spend emergency funds. Emergency funds are reserved for just that - emergencies. You have no idea when they present themselves and you have no control over the amount of money they demand from you. They are, by definition, unexpected, necessary and urgent. With sinking funds, however, there’s no element of surprise. You can anticipate, estimate and plan for the upcoming expense.

[@amancioescuderopicker358]

Mostly agree, you don't want to have a huge amount sitting around doing nothing but
I still keep some money in a money maket fund ( about 5% yield right now ) in case there is : market crash + I need money now. Don't want to have to sell assets on a 20% drawdown.

[@seriousfaith]

I agree…I wouldn’t want $25k sitting around at 0.01% APR, but there’s a lot of merit to some funds earning a risk free 5% now that you can get it. Not the majority of a portfolio, but some percentage of it to cover your bases.

[@MichaelHCook]

Just a comment Brad. This video seems to be panned totally to the left. Or, the right stereo channel of your audio is not working.

[@FiredtoFreedom]

Well said Brad. I've always questionsed the wisdom of the widely acclaimed emergency fund. What exactly are these "emergencies" where someone might need immediate access to several thousand dollars cash within a day or so? I mean other than a kidnapping ransom type situation, most of life's unplanned expenses can be handled with a credit card that can be paid off in 30 days. I do think it's useful to keep a modest cash buffer in your checking account for the more realistic unplanned need for a couple hundred dollars cash that might arise. A buffer of maybe 3K works well for me.

[@seand99x]

Hey Brad, great video, very eloquently stated! However, what happens to your idea since nobody knows what the markets gonna do in the future say you live life without an emergency fund and you all of a sudden are laid off of your job for 6 months because we have a situation like what happened 2009-11. So now you’re forced to sell your assets at what is a significant loss. Obviously keeping Emergency fund in the account that’s not earning any interest is not the best idea but in today’s market where you can get 5% back on on cash it only.Makes since it seems to have some money set aside

[@AJ-vy9hc]

Love you Brad and Jonathan

[@Jeff321]

Hi Brad please upload in 1080p and get rid of the forced subtitles. Otherwise good to see you doing more on CZcams!

[@michaelswami]

You can get 5% online. Why put money in a volatile asset if you might need it on 24 or 48 or 72 hours. Usually bad things happen in tandem. Lose your job and the market tanks, same time. So cash in a HYSA is needed.