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oxsnard posted:I hear that. Except I would've gone to a marginally harder degree in ChemE. Problem is ChemE has very limited job prospects outside certain regions. It's not as clear cut as the "Engineering will get you a job" crowd wants you to think.
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Mar 1, 2015 06:39
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Inept posted:If (when) the economy goes south again, you can lose your job and a large chunk of your portfolio at the same time. My thinking is yes, my portfolio would go down regardless if I lost my job, but if I have a balanced portfolio I just sell assets to rebalance instead of buying to rebalance which I would normally do. That way I'm still selling the assets that are relatively high. I haven't done an analysis of historical market data, but I think it's conceivable this strategy could perform better than holding an emergency fund in cash.
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Mar 1, 2015 07:51
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Mantle posted:My thinking is yes, my portfolio would go down regardless if I lost my job, but if I have a balanced portfolio I just sell assets to rebalance instead of buying to rebalance which I would normally do. That way I'm still selling the assets that are relatively high. I haven't done an analysis of historical market data, but I think it's conceivable this strategy could perform better than holding an emergency fund in cash. What's your strategy for timing the optimal selling point?
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Mar 1, 2015 08:18
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My friend's wife is bad with money. She ran up a 10k bill on her Amex (Platinum) charge card and couldn't afford to pay it off, so he had to pay it off for her. Apparently some of the expenses were business expenses but she couldn't be bothered to actually expense them? He also mentioned that she "needs" a new Mercedes GLK350, because she occasionally drives clients around for her job at a brand reputation firm. Also, they don't live together because both make a lot in their respective careers and he lives on an island, but they are going to try and have kids soon. 
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Mar 1, 2015 17:28
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I just found out my grandmother recently turned in her leased car with 20,000 miles over the mileage limit  My grandmother is bad with money
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Mar 1, 2015 18:42
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Maybe you should visit her so she doesn't have to drive to see you? Maybe you are bad with grandmas.
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Mar 1, 2015 18:59
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Why would you invest time and money in something that has such a small window of returns?
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Mar 1, 2015 19:09
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Where's the Pew Trust's study on average liquid grandma days?
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Mar 1, 2015 19:20
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pig slut lisa posted:What's your strategy for timing the optimal selling point? There is no timing strategy. Say my ideal balance is 50/50 equities/bonds. When I lose my job and the market crashes, the balance is at 40/60 equities/bonds. I sell bonds until the portfolio is rebalanced at 50/50.
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Mar 1, 2015 19:24
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Mantle posted:There is no timing strategy. Say my ideal balance is 50/50 equities/bonds. When I lose my job and the market crashes, the balance is at 40/60 equities/bonds. I sell bonds until the portfolio is rebalanced at 50/50. Thank you for setting up a good paper trail for when you come back in this thread someday in the future and talk about how stupid you were.
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Mar 1, 2015 19:26
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AbsenceVsThinAir posted:My friend's wife is bad with money. She ran up a 10k bill on her Amex (Platinum) charge card and couldn't afford to pay it off, so he had to pay it off for her. Apparently some of the expenses were business expenses but she couldn't be bothered to actually expense them? I can kind of see why she "needs" a new car if her job involves wooing clients, but in that case why doesn't the company provide one? Sounds like she just wants a new luxury car
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Mar 1, 2015 19:26
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Mantle posted:There is no timing strategy. Say my ideal balance is 50/50 equities/bonds. When I lose my job and the market crashes, the balance is at 40/60 equities/bonds. I sell bonds until the portfolio is rebalanced at 50/50.
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Mar 1, 2015 20:05
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HonorableTB posted:I can kind of see why she "needs" a new car if her job involves wooing clients, but in that case why doesn't the company provide one? Sounds like she just wants a new luxury car
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Mar 1, 2015 22:08
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cowofwar posted:A lot of companies don't provide cars but there is social pressure and expectation inside the company that employees have a very nice personal presentation. It's not cool because they are not formally compensated for these informal expectations. It's just expected that you eat all those dry cleaning and car costs. LOL at companies reimbursing dry cleaning expenses. That's pretty funny. I get that this thread is all about min/maxxing your personal finances but there are some costs you just absorb, particularly if you are trying to get ahead.
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Mar 2, 2015 03:13
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Phrasing posted:Why would you invest time and money in something that has such a small window of returns? Grandma equity
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Mar 2, 2015 04:21
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canyoneer posted:Thank you for setting up a good paper trail for when you come back in this thread someday in the future and talk about how stupid you were. How about you explain instead of name calling? AgrippaNothing posted:Please tell me how you are calculating your annual returns on your bond heavy portfolio and if 10 years pans out against a 20% stock market tumble when you could need to draw out your 6-9month expenses and the market is continuing to tumble an additional 20-30% within those 6-9 months. A lot of people faced this in 2008-9, yours truly included and I'm horrified by the neuvo-exuberante market cheerleaders saying you don't need liquid savings. A freakish amount of whom probably are selling stock advice services. That weighting was just for illustrative purposes. Say I need $12,000 to survive for 6 months without income. I either hold that $12,000 in my retirement portfolio which I can liquidate within 3 days (option A) or hold it in a laddered GIC (option B). Either way it is not strictly cash, but it is liquid enough to help if I need to draw on it immediately. Option A: If I assume growth of the $12,000 is 7% per year, then after 3 years I have approximately $14,700 which is a return of 22.5%. Option B: I grow the $12,000 by 1.8% per year, then after 3 years I have approximately $12,660 which is a return of 5.5%. Here is a matrix of outcomes where I lose my job with the winning option listed at the intersections: code:Another situation where it makes sense to do Option A is where your income far exceeds your living cost. For example, if I net $5,000 per month after tax but only need $2,000 per month to live and legislation requires I get 2 months notice before being laid off, I know I will be able to net $10,000 (5 months living expense) from the time I am given notice of losing my job. Therefore I do not need to carry an "emergency fund" outside of my retirement savings if my risk tolerance doesn't need me to carry more than 5 months of "emergency fund".
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Mar 2, 2015 04:24
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Mantle posted:For example, if I net $5,000 per month after tax but only need $2,000 per month to live and legislation requires I get 2 months notice before being laid off It would have been better if this had been your intro. Still, the fact that you're posting this question in the Bad With Money thread instead of the other possible relevant threads should tell you something about your own question. I take it you work for the government? Private businesses can shutter their doors with zero notice. It happens all the time, especially during recessions.
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Mar 2, 2015 04:45
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MrKatharsis posted:It would have been better if this had been your intro. No. I reject the idea that everyone should have an emergency fund that is separate from retirement savings and showed my analysis. There are cases where it is not a blanket recommendation and much like the myth of "throwing away money on rent", requires analysis. I wanted to stimulate a discussion and expected some thoughtful responses, but all I see are name calling, while my thesis remains unchallenged. quote:Still, the fact that you're posting this question in the Bad With Money thread instead of the other possible relevant threads should tell you something about your own question. I see a lot of ad hominem but no argument. If you think it's bad with money then show me why. quote:I take it you work for the government? Private businesses can shutter their doors with zero notice. It happens all the time, especially during recessions. No I work in private sector. But the fact that you raise government jobs shows that my thesis is not an edge case-- lots of people do have high employer security and even if they don't work for government, large, stable corporations can also have high termination notice requirements.
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Mar 2, 2015 05:39
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Mantle posted:How about you explain instead of name calling? Who the gently caress cares about a difference of 2k over three years? Either your emergency fund represents a significant portion of your assets and you shouldn't risk it or the rate of return on it has little impact on your bottom line.
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Mar 2, 2015 05:41
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SmuglyDismissed posted:Who the gently caress cares about a difference of 2k over three years? Either your emergency fund represents a significant portion of your assets and you shouldn't risk it or the rate of return on it has little impact on your bottom line. This should be the advice then-- if your emergency fund is a "significant" portion of your assets then don't risk it in the markets. Not: "Keep 6-9 months of emergency funds" 3 years was just illustrative-- I said Option A wins more as time increases. Over 30 years that $12,000 becomes over $90,000. If you blindly follow the advice to keep 6 months emergency fund for your 30 year working career you're giving up $78k in growth.
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Mar 2, 2015 05:53
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Mantle posted:This should be the advice then-- if your emergency fund is a "significant" portion of your assets then don't risk it in the markets. Until you have an actual emergency and realise your emergency fund has halved in size just at the time when you really need it.
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Mar 2, 2015 06:14
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Rudager posted:Until you have an actual emergency and realise your emergency fund has halved in size just at the time when you really need it. But the point is that you have an investment portfolio that is much bigger than an emergency fund would be. So even if it halves, you can cover emergencies by selling off the portion of your assets that weathered the storm (probably Treasuries).
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Mar 2, 2015 06:20
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Series DD Funding posted:But the point is that you have an investment portfolio that is much bigger than an emergency fund would be. So even if it halves, you can cover emergencies by selling off the portion of your assets that weathered the storm (probably Treasuries). You have money in treasuries? I just plugged some numbers into a compounding calculator and you are going to be missing out in 30 years.
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Mar 2, 2015 06:30
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Mantle posted:If you think it's bad with money then show me why. Because you assume that your portfolio will gain over the three years before you get poo poo canned instead of a crash or bear market or both which is when a lot of people who lose their job will need a good sized reserve while they are competing with a bunch of other assholes that got flushed into the job market with them.
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Mar 2, 2015 06:35
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Series DD Funding posted:But the point is that you have an investment portfolio that is much bigger than an emergency fund would be. So even if it halves, you can cover emergencies by selling off the portion of your assets that weathered the storm (probably Treasuries). Great - but if you've got enough money that you can weather a major downturn in the stock market (which is what Mantle's talking about with 7% returns), and still come out with six months of living expenses, you're seriously loving rich. At that point, great, you don't have to play by the same rules as the rest of us, because you're rich. If you're not in the very-wealthy set, then you have to look at the actual downside of a personal emergency during a market plunge. It's not just "oh, I lost some money, boo hoo." In the very worst case, it's possible to end up totally destitute and homeless. Even if you set aside the fact that life sucks as a homeless person and view it in dispassionate dollar terms, that's hundreds of thousands or millions in missed earning potential. The more likely scenario is that you have to take the first job that comes along, regardless of the pay or career development opportunities - over your working lifetime, that's going to cost you a ton of money. At some point, the numbers do tilt towards just stuffing all your liquid assets into comparatively risky investments with lots of growth potential, because the amount of investments a person can own ends up much, much larger than the amount required to support them for six months (or a year, or a lifetime). But, that doesn't happen until the numbers get very large. For the vast, vast majority of people in this thread (probably, all of us!) it's not a good idea.
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Mar 2, 2015 06:43
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Space Gopher posted:Great - but if you've got enough money that you can weather a major downturn in the stock market (which is what Mantle's talking about with 7% returns), and still come out with six months of living expenses, you're seriously loving rich. At that point, great, you don't have to play by the same rules as the rest of us, because you're rich. Yeah a lot of people in BFC are FI-heads who manage to save significant portions of their incomes, I think for people like that, Mantle is right. It's definitely a fair point that this doesn't describe everyone.
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Mar 2, 2015 07:30
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Dear thread, I am sorry I said to let you eat cake.
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Mar 2, 2015 07:58
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Mantle posted:No. I reject the idea that everyone should have an emergency fund that is separate from retirement savings and showed my analysis. There are cases where it is not a blanket recommendation and much like the myth of "throwing away money on rent", requires analysis. I wanted to stimulate a discussion and expected some thoughtful responses, but all I see are name calling, while my thesis remains unchallenged. I think for most people though they will actually tap that fund semi-regularly. Whether it's a sudden health cost, or household expense or travel expense for a surprise wedding/funeral, having it invested in the markets is just not a good idea. If you have a huge line of credit though then go bananas and invest it.
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Mar 2, 2015 13:18
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Mantle posted:Dear thread, I am sorry I said to let you eat cake. Do you have kids and/or potential dependents? How's your health? Do you live in an area prone to disasters? I mean, if you're a single dude in good health with the bank of mom&dad to fall back on, you probably don't need as much of an emergency fund.
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Mar 2, 2015 13:19
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I'm in the house + dependents category, and we've started aggressively building our emergency fund because while the "oh we'll just use investments and credit" mindset worked fine for me for a while, once I got married and had kids my minimum monthly expenses started creeping up, and my ability to be flexible went down. When I was single and renting I could just move for a new job opportunity, but now anything like that is much more complicated. Losing that flexibility was starting to cause me to get spooked by current events, which was leading to bad investment decisions. Having an e-fund is making it much easier to stay in the market, because I'm not constantly worrying about the market tanking when I might need to cash some equities out. That wasn't an issue when my absolute minimum expenses didn't include day care and groceries for four.
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Mar 2, 2015 14:13
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Dik Hz posted:No offense, but you sound like someone who has never had anything bad ever happen to them. You're treating personal finance like a high score, and you really don't understand why people advocate so strongly for an emergency fund. None of this actually matters if you factor in potentially loses and increase the size of the invested amount. I wouldn't advocate that anyone invest their emergency fund because I think people irrationally react to market changes and most people won't be able to handle a large loss, but I think if properly done then the added risk is negligible. I'm not certain if the the return is actually that large though, I might try to setup a simplistic model later.
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Mar 2, 2015 14:23
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cowofwar posted:I am guessing that you are young, don't own a house, don't have a family and that your emergency fund is a significant amount of your net worth so you feel the need to chase returns. Hm. We don't really follow the recommendations here so I've usually stayed out of these debates about emergency fund liquidity. I do think that people in general have different ideas about what an emergency fund is. We have an 'unexpected expenses' fund which is nowhere close to 6-12 months of living expenses which is used more like what you've described (sudden health costs, vet costs, trips, etc). We're honestly not comfortable sitting on 6-12 months of living expenses because a) both our jobs are very secure, and if we do lose our jobs, b) we both have financially stable, extremely supportive and helpful family, and c) both of us are successful in our respective fields both with extremely low unemployment. To us, the probability for a-c to all fail is so minuscule, we see no reason to not have our actual emergency fund as investments in taxable accounts. Even if we have to withdraw on it in a market downswing, it would not make much of a difference in our savings barring a catastrophic collapse of the US.
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Mar 2, 2015 15:44
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Well of course "I can get money from my family" destroys all risk/reward conventions  That's not very common and so shouldn't be factored in to general advice.
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Mar 2, 2015 15:51
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Nail Rat posted:Well of course "I can get money from my family" destroys all risk/reward conventions My wife once went to this garbage dentist who told her she needed $8k of work done. We were both full time students, and made barely anything. She burst into tears in the office, because it was so stressful. His advice? "Just ask your parents for some money"  Best part is that she went to another dentist, and he disagreed with about 80% of the diagnosis, and the work ended up being $1200.
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Mar 2, 2015 16:28
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Nail Rat posted:Well of course "I can get money from my family" destroys all risk/reward conventions I'm not sure why you're rolling your eyes at me. Like I said, we don't follow the guidelines for specific reasons and that's why I don't normally talk about it when it comes up. In this particular case, I do not feel like it was discussing general advice but was talking about special case scenarios where an index fund may be appropriate. My post was mostly pointing out that cowofwar's 'emergency fund' seemed to be our 'unexpected expenses fund' and that this is a key difference in how they should be treated and talked about in different situations. In cowofwar's situation, in no circumstance does it make sense to put it in an index fund. Besides, I don't even agree that the family part is the primary reason we do not feel it is appropriate to keep a large 6-12 month emergency fund. If we had different careers or jobs, I'd revert to a larger cash emergency fund. Each of the 3 points I made are somewhat rare, and together makes us very very lucky. Rurutia fucked around with this message at 16:51 on Mar 2, 2015 |
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Mar 2, 2015 16:46
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What does having kids or living in an area close to natural disasters have to do with how much of an emergency fund you keep in cash? Index funds are really liquid, it's not exactly a huge deal to have to sell some. Yeah, if you lose your job during a market downturn, it will have a larger downside than if it was cash, but hopefully it will still be a small portion of your portfolio until you find another. It's not like SPY is going to go to 0 and you'll have much bigger problems if it does. That situation has nothing to do with earthquakes or kids though. It's not really about chasing returns, the discussion started about what to classify as "liquid assets". How are index fund shares not liquid?
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Mar 2, 2015 16:50
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Jeffrey of YOSPOS posted:What does having kids or living in an area close to natural disasters have to do with how much of an emergency fund you keep in cash? Index funds are really liquid, it's not exactly a huge deal to have to sell some. Yeah, if you lose your job during a market downturn, it will have a larger downside than if it was cash, but hopefully it will still be a small portion of your portfolio until you find another. It's not like SPY is going to go to 0 and you'll have much bigger problems if it does. That situation has nothing to do with earthquakes or kids though. I agree with you but I think the more important point the folks here are trying to make is that an emergency fund should have low-to-zero exposure to market risks, in addition to being liquid. When my roof needed to be replaced I busted out the cash-back credit card and then I took some money out of my taxable brokerage account to pay off the CC. It took a few days for the broker to send me the funds but it didn't matter because I just paid up front with a CC. I don't foresee too many extreme situations where you need legit paper money cash on hand to pay for something. If the SPY loses 50% and then you lose your job a month later then you're hosed and you'll have to go on foodstamps and hit up the welfare/unemployment office for a bit. But let's be honest, if there's another depression or "recession" you're going to need more than 6-12 months living expenses, so there's that to think about.
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Mar 2, 2015 17:39
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"I have so much money, that the risk of losing double digits on my emergency savings when I need it most by keeping it in an index fund doesn't outweigh the opportunity cost of keeping it in cash. In other words, I have such a favorable spread between earnings and expenses that I probably would never need to withdraw it anyway. I don't understand why this is a bad idea for the other 95% of the population who earn less than I do and/or have homes or families to support"  Hey, if that's what your risk profile looks like and it bothers you to have more in your checking account than you plan to spend in the next month, go for it. Here's a bad with money: I know a guy who took a huge student loan disbursement, and used the money to start some online business (SEO or advertising or something). The business ended up not doing well, and he ended up losing all the money. He also didn't maintain minimum enrollment in school, and had to pay back all the student loan money. You can see where this becomes a problem. He got convicted of student loan fraud, and went to prison for two years with another 5 years of probation following. As part of his probation (I think), he was barred from using a computer to earn an income. He got a prison job, making something like 30 cents an hour. 100% of his earnings had to go back to the gov't. So he toiled away in prison for probably less than $1k to pay back towards his debt. He ended up getting released into some halfway house type thing, which means he could hold a (crappy) job and make real money. But he had to pay something like $500/month for the privilege of living at the halfway house, and that took away most of his paychecks. So, playing investor with your student loan money is a terrible idea. Now he can't get financial aid ever again, can't work in his industry of choice, has a criminal record, and greatly diminished earning potential.
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Mar 2, 2015 18:54
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The hell? That's illegal in the US? Wow. Well I don't know about starting a company though, but you are for example, perfectly allowed to put all your student loans in to the stock market if you want to in my country. So what was his crime exactly, that he started the business while studying or that he didn't attend school while taking student loans?
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Mar 2, 2015 18:59
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canyoneer posted:He got convicted of student loan fraud, and went to prison for two years with another 5 years of probation following. Man, I get that you have to 'punish' people for illegal gently caress ups, but our criminal justice system really does gently caress all to rehabilitate or get people back in a position to be able to support themselves. They're doomed to become an expensive drag on society.
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Mar 2, 2015 19:02
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