Why You SHOULDN'T HAVE An Emergency Fund (You Will Lose $250,000)
Vložit
- čas přidán 13. 07. 2021
- Saving an Emergency Fund is one of the most popular bits of financial advice.
Almost every CZcamsr and finance guru including Dave Ramsey himself will tell you that building an emergency fund is the best thing you can do with money.
And yet I don't have an emergency fund.
And I actually think that if most people thought about it, they'd probably choose to not have an emergency fund either.
An emergency fund can feel like the sensible thing to do - it can help you navigate through expensive emergencies or pay your bills if you lose your job.
But the truth is that keeping the money sat in cash can cost a person on an average wage $250,000 over their working life.
Suddenly the idea of keeping a few thousand dollars sat in a bank account for the rainy day doesn't sound as appealing.
Although the problems of needing access to money urgently do exist and sometimes life will throw you lemons, an emergency fund is not the best solution to those problems.
Most people can navigate those same issues through a combination of using credit cards and cashing in on their investments.
And at first those options sound really bad. Getting into debt and selling off investments is not sensible, right?
But when you work the numbers, you realise that using your credit card to bail you out when you need it will be 15x cheaper than keeping an emergency fund.
And that is a startling realisation that is worth thinking about when you're deciding how to manage your finances.
💵 GREAT INVESTING APPS I USE
👍 SUBSCRIBE TO MY CHANNEL
czcams.com/users/SashaYanshi...
DISCLAIMER: Some of these links may be affiliate links. If you purchase a product or service using one of these links, I will receive a small commission from the seller. There will be no additional charge for you.
DISCLAIMER: I am not a financial advisor and this is not a financial advice channel. All information is provided strictly for educational purposes. It does not take into account anybody's specific circumstances or situation. If you are making investment or other financial management decisions and require advice, please consult a suitably qualified licensed professional.
Some food for thought...
I came to this realisation about a year ago, but I wish I'd got there earlier. I've missed out making on a small fortune, because everyone told me I needed six months' expenses in cash (earning a pitiful 0.5% in a cash ISA). Eventually I questioned this advice and found it wanting, but too late.
Mathematically, you are right. An emergency fund doesnt make sense.
BUT, from a living a sensationally peacefull life, i cant explain the importance of having one.
The emergency fund for most people is the peace of mind aspect. Alot of people would sacrifice potential gains for peace of mind.
Why not have both? You can always liquidate it easily in an emergency even if it’s in an asset.
@@BlacksmithBets Because it's another step to getting out of a stressful bin which also serves to add to the stress, and not an immediate one either. Liquidating assets takes time. Sudden car repairs are an immediate problem for most people.
@@TyfuzzleCharge the car repair to a credit card, and then you have a full month to liquidate your assets before the bill comes due. I have mine mostly in stock-based index funds, and in my experience, liquidating them and transferring to my bank account takes about 3 days. Problem solved.
Totally agree x
Some of us are old enough to remember everyone doing something similar to this back in the 1980s. When the big downturn came they got burned.
The most extremely rare scenarios happen all the time to people that aren't financially stable. People also have a tendency to lack discipline. The above video should have a disclaimer: This is the IDEAL situation. Unfortunately suffering seems to be unfairly distributed so if you aren't super rich you will need an emergency fund - what I've learned from being around rich people is this:
1. NEVER sell off your assets.
2. Borrow only what you can easily pay back. Meaning if you don't have at least £5-6k sitting in your bank account already, do not borrow the £8k emergency money
Super disappointed in the video. Only follow if you have daddy's money to fall back on
Edit: people who earn an average salary and below have less line of credit. It is highly unlikely they will be allowed to borrow such a high amount
Some bills cannot be paid with a credit card (such as mortgages and most things that go via direct debit). If you haven't got emergency cash to use have a plan to shift you spending, so these bills are paid with the cash you have and everything else (food, fuel, etc.) is paid on credit cards. If you have an overdraft limit make sure this is only used for cash/direct debit bills so you have the facility for longer.
My main critique to this is, if you don't see having an emergency fund as prudent then you sure as Heck won't have cash on hand either. What do you do if the market offers a quick fire sale? Think a few month 30%+ drop? You'd surely only have that months pay, any dividends paid to you and whatever non stock assets you can sell/piling that months expenses on credit card.... That's not dry powder...
also,my plan is when i run out of cash i can borrow from my credit card to buy cheap stocks.And then pay back my credit card when i get my salary.
Agree to disagree. High-yield savings account?
I think that an emergency fund is a psychological tool to get you away from a scarcity mindset. I built up an emergency fund and then invested most of it. As I made more money, I created a positive emergency fund. I have just as much as my old negative emergency but it will be to buy the next big dip in the market
this is so stupid. Predicting the market for your emergency defeats the whole purpose of "emergency" any fund that can fluctuate so heavily like having it in the market will be a waste of money by the time a random emergency happens.
I love you you dare to challenge the common wisdom and beliefs. Few people do that.
It doesn't make too many friends, but I'm literally just sharing my own opinions here to try and stimulate people to think a bit deeper. I don't need everyone to agree with me :)
It is why this is an excellent channel. It always good to hear alternative opinions, no matter the topic.
An emergency fund isn't just some dillusional idea that your cars going to randomly fail or your pipes are going to burst. It's for the guarenteed unexpected expensive thing you need to pay for thats beyond your monthly income during the year which can happen to ANYONE. A friend out of nowhere asks you to come on vacation, a family member gets sick and you need to take care of them or a random person gets married. Random health issue where you need to take off work. Why the hell would you put yourself in a situation where you that have to stop your money snowball or you have to uncomfortably run up a credit card with large interest payment. Your "plan" is guessing the markets "AVERAGE" return. The markets average return could be 5 years of negative returns and 5 years of crazy bull runs. Nothings guaranteed with an average.
Great video Sasha! As always great content.
Thanks Azeez!
Great insight! I hadn't thought of it that way.
For me it's not solely about missing out on growth, I've always felt that the effect of inflation is a double whammy and on keeping that emergency fund topped up as wages increase.
Very good points, Sasha..I agree with you personally and luckily I now have the privilege of being able to do what are suggesting, but I think for many people having an emergency fund is more about reducing current stress and anxiety, especially if you already have too much on your mind rather than thinking about potential long-term gains from investments. Have been in that situation before and having a "backup" reduced some of the stress. But you are mathematically correct, imo, and it is good that people can learn new ideas and have the choice.
Great based advice! What do you think about instead having an emergency fund and using it for bargain shopping when the stock market goes on sale? (once you do that, you rebuild it back from regular income). This way you will probably not earn quite as much return (although buying low can be powerful) but you are also less likely to get in debt, so it might balance out.
Doesn’t work for retirement though where you need maybe a couple of years as a cash buffer, to cover the average length of time a market crash might last and to avoid drawing down by selling any assets in your pension. And if your main investments are in full-on risk funds, like the s&p500, you might even want another buffer of a less risky investment to keep you from drawing down from the riskiest funds. And you probably won’t be able to get a loan to cover the gap.
Great video, interesting view on the emergency fund .
Thanks Andy!
True words and sound advice, as always.
Another great video 👍
Thank you!
It's not just for emergencies that you should have money but for unexpected opportunities that arise and sometimes it's not a good time to sell your long term investments neither to finance your ambitions with debt.
Interesting approach... but like many have said below, the 'discipline problem' is a heck of a lot bigger than the 'emergency fund problem'.
Thanks for the videos Sasha 👍 Been subscribed to your channel for a number or months now and love the content. Quick side note, are you still optimistic about Ocado going forwards? The share has had a bit of a pullback of late and looks like a good bet (been keeping an eye since your video recommending it). Thanks
Hi Sasha, I anticipate I will need to replace my car in 4 years time. Do you think that it is a good idea to keep investing my spare cash in my stocks and shares ISA and then sell some assets at the time when I need the cash to buy the car? Or should I put the money to one side in a bank account. Many thanks in advance.
More and more I'm thinking about this. I think one thing to have in consideration is your position, how long it would take to find a job, etc. Sitting at a big pile of cash on eventuality that things might go south can indeed have a significant impact on your returns.
I do like though the approach of maybe investing the full amount of your emergency fund on something safer like bonds. Which bond index fund you would put the money on?
I believe a dividend paying IBC style whole life policy with a mutual company is a better approach. You get all the added benefits and protection of the insurance, plus tax free growth on the same level as bonds, with even less volatility and 2-3 day liquidity. You get the security you need in a true emergency fund unlike the high risk and liquidity concerns in the market, but also take advantage of tax free growth (if done properly) and insurance protection.
Smart thinking 👍🏽
Thank you!
Nice vids!
Thanks!
Hehe..its still an emergency fund, only its saved in a place with high returns 😂
You might be undervaluing the peace of mind of knowing you’re covered for almost any emergency without worrying…
Also, having at least a 1K emergency fund builds discipline, and will cover a lot of the mundane but still unexpected emergencies…
And there are better options than
Um, the problem is you never know when the emergency happens. It could happen at the bottom of the markets.
Thanks for the ideas. I’ve been on the fence about having a EF. I’ve reduced my EF greatly to 1k. Would you consider they still to be high? I don’t expect it amd
5k is plenty. 1k would barely cover car maintenance if you need to replace a clutch or timing belt. If you lose your job it wouldn't even cover 1 month of expenses.
I have a months wage in a easy access ISA and for me that’s all I need. Enough to cover unexpected bills but not too much for it to be going to waste.
I guess a month reduces the cost a fair bit and brings it closer to the wire.
Everyone needs to do what they are comfortable with - living on the line is not for everyone :))
@@SashaYanshin it’s definitely nice to have a little buffer for bumps in the road but I never subscribed to the belief that you need 3-6 months worth.
@@joshwilson7295 yeah same here. Keep about 3 weeks of my wages in emergency savings but I always had my overdraft on top if anything ever gets too bad. Would just feel a waste seeing half my salary in a bank account
In addition to a shares ISA. Is a General Investment Account better than a SIPP.
What are your thoughts about CDs as emergency saving to counter act the loss? I have 12 CD's all above inflation rates (5-5.5%) all with a month worth of expenses maturing every month. This should be the equivalent of a years worth of emergency funds without the complete loss of investment potential?
Definitely food for thought, I’ve been reevaluating the purpose of my emergence fund, and even the idea of investing it instead. Then drawing on it if things go wrong. Vid given food for thought for sure.
Vanguard LifeStrategy funds have been around for ten years. How about doing a video about the returns of each fund.
Very good video. I started investing February 2022 and have since reduced my emergency fund from 4 months worth to 1.5 months to invest the difference.
There are always things that one has to consider for himself however. I have 2 children that depend on me and a mortgage. On the other hand my wife still has an emergency fund that could cover 4 months of her expenses and living in Norway provides pretty hefty social security net (I could get 66% of my previous wage for 2 years as an unemployment support and 1 year of 100% in case of sick leave) but it might take a month or two to access it. I think I'll try to persuade my wife to reduce her emergency fund too.
Good video, but I think it is retrospective instead of prospective - does anyone really know when they will get the next job after being sacked? It is the behaviour that needs to be managed during this phase and having a cash cushion will prevent stress.
Also, how do you roll over debt in this case? You need to have some income to pay the minimum payments on a credit card.
Very interesting theory! Never thought.... I honestly have both going on... might tilt it towards the total market found instead! Thanks 🙏
My thoughts exactly, I invest every month and have no emergency fund at all. If I need more money some month then I pause the investment for that month. I try not to though but sometimes it’s needed - Christmas/holidays/insurance premiums for example.
This is what I do.
I have got an emergency fund but I max out my Isa limit each year. Where would you recommend investing the fund if isa limit is maxed out?
I have investments in regular invest accounts over and above my ISA allowance.
Nah, it’s always good to have liquid. You can always invest later.
Can you do a video on uk student finance please? And advice for people who have just started repaying it? Thanks!
I agree with what you say but I would counter and say it would be safe to put about 2k away somewhere
I fully agree! I think you’re forgetting one thing though. Most people don’t like mathematics. Most people who are on the same wavelength as you on this point won’t ever need an emergency fund!
Well I hope that I reach that small number of people who think differently and get to look at it from a different angle so that they can decide for themselves which way they want to go.
Hi Sasha. Great video! How do you manage the % of your position (investable money)? Do you always invest 100% or keep some "cash" aside when you are expecting a market correction? The problem with keeping some cash aside is obviouly losing the growth on those cash, is there a better way of keeping funds available in case there is a "sales"?
I personally don't hold cash for a correction. I know there is a large number of people who advocate it but on average in the long term the maths shows that it works far better sitting in the market than waiting for a correction. Especially if you are investing in companies where long-term valuations are driven by their fundamentals rather than macro market effects.
@@SashaYanshin I agree, Sasha. Using margin prudently in an account could work as having "cash". We have always maintained a small position of margin, say, 1-2%. The interest expense helps to defer the paying of some tax until later.
I also agree with your assessment of dividend paying stocks that you outlined in another video. I've tried to point this out to a friend for years, say, 20.
I personally like the peace of mind of an emergency fund. I do bank transfers to my landlord and my credit card really hates withdrawals.
With interest rates as they are right now (chase:4.1, wise:4.5*)... I think theres even more of a reason to keep a few months in easily accessible cash
Nice food for thought. I think you live in the uk, with free medical care and social services for unemployment. In the usa a lot of people have emergency funds to pay for medical emergencies.
Totally. This won’t even work in Nigeria as well. Emergency fund is mission critical as credit isn’t a mature industry.
Intresting take thanks! I keep my fund in premium bonds which isnt much better then bank account
What credit card interest did you assume for the $16k interest cost? Because CC rates can go up to 35%.
The point of CC interest is to never have to pay it. Just pay off the whole CC invoice, after having exhausted the interest free period. I cycle credit cards and often get "24 months no interest on purchases". Etc. Just have to pay the whole credit limit in one go after that 24 months, otherwise you pay interest through your nose.
Anyway, what rate did you assume? 35% p.a., or lower?
Lol yup
Great advice. Having good financial habits and discipline pretty much eliminates the need for an emergency fund. Also avoiding emergencies helps!
If only we could control the emergencies! :)))
I don't mind getting into debt, we go into debt then pay it off all the time.
However, spare dosh in the bank is still helpful if your local garage doesn't accept credit card. Not sure £8000 is required however.
Good to know
I've just stuck my emergency fund into GME 🚀🧑🚀 - when lambo?
Seriously though, thought provoking and informative content as always. Much appreciated 👍
Ok, I'm listening
There’s some very recent examples of why investing your emergency fund can bite you hard. Neil Woodfords fund was A+++ and beyond reproach until one day when it wasn’t any more! I know people who had to wait over 6 months to get any money out of that fund. Also worth looking back to the last real downturn when many funds simply stopped allowing withdrawals. Lots of people favour cheap ETFs but it’s worth noting they have never been tested in a downturn and given their contribution during the two flash crashes it’s safe to say they don’t benchmark when the market makers up sticks.
Most of the big ETFs were around during the last Financial Crash and they are set up in a completely different way to some of these private/mutual funds.
I never recommend those anyway because of some of the reasons you listed and then some.
If your on the fence can always put the emergency funds / some or all of it into a bond allocation in your portfolio. That way you are getting better than the crappy “instant” access accounts but getting some returns. Okay it’s not going to blow your socks off like equities would, but hey that’s life and you get to sleep better at night.
Indeed, that is probably a sensible solution. Better than a regular savings account anyway
Well shares are my emergency fund. If I need cash then I can sell them or I can borrow money and wait for dividends to pay off the usually very cheap debt I took out.
I use 0 % interest credit card when things get tough than I sale some assets at some point so i dont pay the interest or if i can afford it during my weekly income ill just pay it first thing pay day.
Great Video Sasha. I am a passive property and Equities investor. 100% of my living income comes from rental income, I leave my stocks to grow. As you say it's about human behaviour rather than simple number crunching. I think having working Capital rather than an emergency fund is the same approach but the terminology can be quite different in practice. I ensure that I always have enough in my Bank accounts to pay my commercial mortgages and Tax obligations, leaving a small buffer of a few thousand pounds for other expenses. I adjust this accordingly when I know Holidays etc...are coming up. So ultimately a little " working Capital" is required, but not 3-6 months living expenses I would say. Paying off Bad debt is essential but good low interest debt on appreciating assets , should never be paid off!! That's what the Musks and Bezos' of this world do, they just borrow against their assets!
The musks and bezos do this to avoid paying the tax they should be paying. Nothing to do with debt being a good idea. They would rather pay money at say 3% rather than tax at say 20% and leave making up the short fall to the rest of us plebs who don’t get a choice.
I had to use my emergency fund when I went on disability for two months. Disability doesn’t pay squat!
..but in a video you did earlier this year (I watched it last week and left a comment :) ), you said the first bit of money to allocate out of an investment portfolio is to an emergency fund and to have no more than 2 months worth of cash (the rest is in credit and liquid assets). Nonetheless I still agree with this and am working out working out what to do with the cash I have saved up
Slightly different angles and different audience + definitely not anything like the 3-6 months that people talk about. 👍
@@SashaYanshin okay that makes sense and yeah the principle is consistent.
Can you please make sections/categories in your videos its easier to understand
i love the middle finger cactus!
Emergencies are essentially a cash flow problem. The source of the cash can vary but essentially consists of borrowing or using the sale of a current investment. That investment can be stocks, bonds, or savings account typically. The sale of an investment always has a tax consequence. Sasha did not cover that aspect. If you do not have sufficient money invested when the emergency occurs, then borrowing is the requirement not even an option. So, I suggest you focus on your savings rate. If you have a substantial savings program, then an emergency is not going to be a problem regardless of where you have invested your "emergency fund". If you do not save enough, then you will encounter repeat emergencies, and your choice of investments will not save you. First, get the savings rate right.
In most countries, the equivalent of a small emergency or even an $8k sum pulled out of investments would not incur capital gains or only minimal capital gains - there are tax advantaged accounts and 0% tax brackets (eg £12k/year in the UK on gains and that’s gains only).
Those are not really in any way material to the topic so I didn’t talk about them.
And yes - I agree with almost all of your post. I talked in very similar terms in the video.
Thanks for the video and was interesting to consider. But this isn't for me, I have the will power and rather only invest what I can afford to leave alone for multiple decades.
Sasha's point, however, is that you can still follow your idea and not have an emergency fund. Build up your funds in a margin account. Just keep enough for monthly cash flow. If an emergency occurs, borrow against the margin account at a rate of prime plus 1% that you can't get anywhere else as cheaply. That way, you are keeping your margin in tact and are free to pay off the loan at your leisure (which you would likely do as fast as you can, anyway). Meanwhile the margin is producing 10 to 20%. This CAGR is not impossible. Our margin has a CAGR for the last 9 calendar years of 34% plus. Yes, we have been very lucky as few investors would have those returns. But if we have done this, it's possible for anyone to replicate or even best it. I haven't computed it for the last 2+ months because I don't want depress myself with the recent downturn in the stock market, but I would estimate the return is still well north of 25%. I would guess about 28%. It wouldn't have been a smart move to give up 28% compounded annually just to maintain a healthy emergency fund.
People say that it is necessary, psychologically, to have an emergency fund. These people just have to change their psychology. As the margin prospers over the years, any psychological apprehensions will disappear. It is even possible to make the interest expense on the loan, from the margin account, tax deductible.
Trust the mathematics. It's on your side.
Much of Dave Ramsey's advice doesn't make much sense. He advises people to prioritise his early steps to the point of not even funding 401(k) plans (the American equivalent of defined benefit pension plans) to the level of taking advantage of a full employer match, which amounts to being so cash-hungry as to reject an important portion of one's employee compensation package, with substantial detriment by the time of one's retirement. (Moreover, 401(k) assets are normally beyond the reach of creditors until withdrawn from such accounts, unlike savings accounts.)
There’s aren’t a lot emergency unless you break your leg I use credit card or save £1000 in index fund as a back up.
It's interesting how many people disagree though - sitting on a large pile of cash for decades vs. using your credit card for a month maybe 6 times seems like a no brainer decision to me.
@@SashaYanshin I guess it’s different in America where job security is more risky. I’ve been redundant once before which paid around £4000. Worst case scenario anybody in uk should be able to get a blue collar agency work within 2 weeks at Amazon. That’s why I name it “break a leg fund” 😆
Finally someone who thinking outside the box.i have been doing this since 2019 and no emergency so far.i have earned money on my cash instead of loosing it to inflation sitting in a bank....
I have 2 cheque accounts one for fixed other for variable expenses. Part of me would just like to put 6 month emergency fund in fixed expenses account. You know like very large cheque account buffer. But that's not smart. Might sleep better at night knowing how large that account is.
The S&P 500 is said to be overvalued, if emergency fund is put into equities and if there is a crash the money may lose a lot of value. How can one protect their money?
Put it in a global index then
@@simonfetwi vanguard global all cap. 6000 plus holdings.
High yield savings is over 5% now, not bad to have small amount in a HYS or some 3 month tbills
I have my 3-6 month in a HYSA making about 4% interest. I also have $5k in a brokerage making double that % which is paid back to me in dividends.
You view not wrong but I keep 3000 cash and rest I put in my Roth IRA because if I never need it will grow part my retirement but if I do I can withdraw the money I put in tax free. I’m USA I do a hybrid way of doing it and on the cash I get 7 percent interest.
I will also point out that once you have saved for your emergency fund you could just then start to invest the same amount again in the market.
Yep. But that is exactly why I am only talking about the emergency fund amount in this video to compare apples with apples. Investments over and above the emergency fund will be equal on either side of the debate. 👍
but does this mean you have $0 in the bank then? i have 3 bank accounts and all of them need a minimum sum of about $500-1000 inside..
I don’t have $0 because I use those accounts to pay bills and spending. But I don’t hold months’ worth of cash in there.
If you don't invest your otherwise "emergency fund" in stocks/ETF by a CD instead with the most advantageous interest rate term and renew consistently. Most banks will let you pay a penalty to get the money out before the term is over.
This advice reminds me of Dave Ramsey, in that I don't trust advice from people who believe in extreme methods.
I agree wih the logic but also think it depends on personal circumstances. I occasionally have to show proof of funds maintained over a fairly long period (for legal reasons), so keeping cash in a traditional bank with formal account statements helps wih that admin planning. Another way I look at it is that my emergency fund also serves as cash reserve to buy after market crashes, given that it's unlikely to have an emergency and a market crash around the same time.
Those are good reasons, and you can do all that plus more by keeping your cash in a custom IBC style whole life policy. I prefer that option over a bank account because of all the added benefits that come along with it.
I have two years of cash sitting in the bank. Not a good financial move I know but it makes the wife happy and thats worth a lot for me, a happy wife is a happy life. Although if the market does crash (stock or housing) I would invest most of it.
Time in the Market not Timing the Market has been proven to work much better!!
What about if your a digital nomad living abroad? Would that change your mentality
I posted on the P24 forums about this, and thought like you the the baby £164 I have in my emergency fund would be better spent in the S&P 500 where it would be growing.
I had a 21% return in my investments (mixture of S&P 500 +US government bonds) before I sold them
You can use credit cards if the 💩 really hits the fan
Sasha, have you read The Black Swan?
Nope. I am guessing I should?
@@SashaYanshin I mean its pretty good, you strike me as somebody who might have.
It’s not that you should, certainly not on my recommendation but check the reviews if you have a minute to spare, it might float your boat if you’re a reader.
I watch various prepper channels and I'm convinced that a strictly-cash emergency fund is needed -- in case of a real societal calamity. A vast majority of people cannot function without a steady flow of electricity and any number of plausible events can disrupt that flow. This is when 4-6 months could be needed to restore from hardened backups in order to "access" your assets and then cover your pressing needs in the now. Or let's say that major sovereign countries announce they're no longer buying US treasuries and that'll be blamed for the US dollar collapsing in rapid succession. Regular people, resisting change, will still transact in cash in hand while card and ACH networks are non-functional. And they *definitely* will not be privy to transacting in pre-1965 silver coins (or alternatively, "P2P half-duplex CB/HAM radio bitcoin") -- at least not until local price discovery is established...in several months. See where I'm going here? Any notion of "retirement" will be completely out the window when you need to transact for food, water, gas, Rx, and ammunition *now.* Am I wrong?
I know some people without an emergency fund. And they got screwed big style during this downturn. Businesses falling by the dozen.
How are you going to barrow 8k with no income if you lose your job? No bank is going to give you a loan of you do not have income
No
31k average salary? What year are you living in?
Holy crap you're right. I'm not going to delete this. I accept being a fool here
Just make a larger emergency fund and invest it in an ETF. It will go up and down but it's very unlikely to drop below your intended target. And if it's hard to get the money fast enough, just use a credit card and pay it back the moment your ETF money clears.
I split my emergency fund between 2 ETFs SGOV & JPST both are extremely stable and built for cash preservation using short term Government and corperate Bonds. Even when the world crashed during the pandemic JPST only went down 2% for a short time while paying a 5% dividend annualized. This method is just to stave off inflation IMO.
Thanks for this comment. I have stocks that I have invested in, within my brokerage; however, I have a hard time finding bonds. I may buy some of each of these just to have a counterpart to my stocks. I have a highly volatile ETF like OARK (40%+ yield) and JEPQ. It would be nice to counter JEPQ with JPST.
Always full throttle! Pedal to the metal, baybeee!
No buffer between you and the world, when we crash we crash HARD!
The only thing missing from this rubbish is a laugh track.
I don't have an emergency fund for this exact same reason. Every bit of spare cash every 2 weeks goes to paying down my mortgage and investing
in theory emergency fund of £8k could like u say potentially make you 250k in 40 years BUT like you also said, everytime emergency happens you might have to dip in this investment and take money out for emergency or stop investing while you are paying of debt. So emergency fund makes investing more steady and consistent. People that have it are usually more organized and plan ahead better so that usually translates in having more money for investing.
You could die before those 40 years. lol
One of the worst advice I heard on CZcams. Invest your emergency fund and go into debt in case of emergency. Scenario with market crash combined with lose of job is not very rare. It happend 2 times in last 12 years - 2008-2009 and 2020.
I would rather keep one month of expenses in cash and put rest of my emergency fund into government bonds that pays above inflation to keep it's value. Then I can invest my other funds knowing that in case of emergency I will not have to sell my assets at loss. I prefer buying assets after market crash rather than selling - you know, buy low, sell high.
Exactly what I was thinking. I can't even understand what he is saying. I personally keep several thousand in cash in my checking account at all times, then the rest of my emergency fund in CDs and bond to account for inflation. For me, I am not worried about earning high interest on 3 to 6 months of emergency savings. Everything above that, yes. Never put yourself in a situation of using credit cards or loans during emergencies. You'll just digging a hole for yourself.
Instructions unclear.
Bought $8000 worth of dogecoin
My emergency fund is in assets. People whine that you don’t want to liquidate your assets but I’m only liquidating assets that I’d never have anyway had I instead had an emergency fund so at least I’m making a return on my money in the interim before o need to use it.
I like having an amount in gold and silver so I know it’s going to our pave inflation and I can liquidate it for a fair price in 24 hours.
You also didn’t consider. The extra interest in the 16k credit card payment is money you didn’t invest because you didn’t have an emergency fund!
Hi Sasha just came across you video regarding Emergency Funds. Your assumption about the share market return is vastly inflated. Also share markets can be very volitile and are extremely hard to use as an asset class at full value if you were to say buy a house/appartment for investment purposes. Alternately If I buy a Govt backed Bond and Say i bought it at 75% face value the bank values it at its full face value for collateral purposes. I have done this routinely and its like getting a capital growth without the tax implications, I only pay tax on the intrest each cycle
Inflated how? I literally use the average of the stock market over the last 120 odd years. I get that they are volatile, etc - I am guessing I mention this in the video too (it's been a while since I made it).
At the end of the day I am sharing an alternative take to prompt people to think outside the box. You can buy bonds if you want. Other people can do what they want.
@@SashaYanshin Averages are great but they can never be considered a great show off future performance which is and will always be my biggest gripe with people like Dave Ramsay who cheerleads indexFunds without explaining the risks. I firmly believe if you were to do a fundamental analysis of the shares available 50% would be for zombie companies and another 30% are between 3 and 5 times their actual value. I am fully expecting a Int Rate rise between a 0.25 and 0.5%points in the US and a 0.1 to 0.25% rise in australia which is going to have to contract both of those markets substantially. The holiday is over, and now its time for the mess to be cleaned up. I am with the wolf of wall street this will be worse than 08 maybe even worse than the 80's crash
As others have said emergency funds are valuable for the psychological benefit, even if it’s not the best investment mathematically. This is why my emergency fund is in premium bonds, satisfying the other part of my monkey brain that wants me to win 1 million pounds at the same time.
my emergency fund is in stake, 4 stocks, monthly paying, O stag sjr pba, dont need to lose money from useless banks or inflation cash always available and constantly growing :)
Sounds familiar :)
9% in the UK?
You’re allowed to invest in US/Global markets while living in the UK 👍