. . .into our savings account! We deposited another $900 today into our E*Trade savings account with money from my wife’s “extra” third check this month. This deposit puts our total E*Trade savings account balance at $10,918.89. The funds in this account are a combination emergency fund/future house downpayment.
Category Archives: Emergency Fund
Chasing Savings Account Rates
When we first opened our Emigrant Direct savings account ~1 year ago, the APY was 5.15%. Since then, the APY has been reduced multiple times, and is currently at 3.60%. Emigrant Direct has worked well for us, but we’ve been disappointed with how much the APY has dropped over the year.
Today, my wife saw an E*TRADE ad on television mentioning their 4.40% APY savings account. After checking out their website, we decided to apply. Like Emigrant Direct, E*TRADE does not have minimums balances or account fees and is FDIC-insured up to $100,000.
The new E*TRADE account will be opened within a couple of days, at which time we will begin moving our $6,051.84 Emigrant Direct balance to the E*TRADE account. We understand the futility of switching banks everytime rates drop a bit, however, we feel it’s worth it to go from 3.60% APY to 4.40% APY.
Southern California Wildfires
Many of our friends have been evacuated because of the Southern California Wildfires. We are far enough away that it is unlikely our neighborhood will be evacuated.
However, I’m flying to the east coast tomorrow for a business trip so we prepared my wife just in case the fire heads in our direction.
Here’s what we packed in a suitcase in case there isn’t time to fully load up the car:
Water
Food / Dog Food
Extra clothing
Family Photos
Legal Documents
Insurance Documents
Emergency Cash
Checkbook
Toiletries
Flashlight
Lighter
Knife
Hand Gun
Pen & Paper
It’s unlikely she will be in a survival situation, even if our area is evacuated. There are many evacuation shelters available. However, worst case scenario, she and our puppy can get by safely staying a night by themselves in the car. In addition to the items above, she would also have her purse, cell phone, computer, and chargers with her.
Balancing Act
My wife and I are trying to find the balance between long term investing (retirement) and short term savings (emergency fund, house, etc.).
I tend to focus too much on investing for retirement, and am eager to put all of our spare money into either our Roth IRA’s or 401(k). The power of compounding is amazing and time is the most important element. The more money we can invest now, the better off we should be later. This simple table demonstrates that a person who invests early and for just eight years will have more money at 65 years old than will someone who starts late and invests for nearly 40 years.
My wife, on the other hand, reminds me that we can’t keep all of our money tied up in retirement accounts. We want to buy a house in a few years and need to save for a down payment. We also need to have cash on hand for unexpected emergencies. We had a real world example of why this is important when my wife was recently laid off. The value of an emergency fund, even the smallish amount we had in our savings at the time (~$3,000), provided a great deal of peace of mind. Thankfully, my wife found a new job within a week, and we did not have to dip into our savings.
Like most things in life, we have to find a balance. Currently, our retirement investments represent 78.30% of our total liquid assets. We’ve agreed to work on increasing our savings, but not at the expense of fully funding our Roth IRA’s. In fact, we have already added another $1,300 to our savings this month, while simultaneously investing another $200 in my wife’s Roth IRA.
Real Emergency Fund
I think it’s great to have an emergency fund for unexpected events, such as sickness or job loss. However, if there were ever an emergency that took out the power for a long period of time, such as a major earthquake, it is likely that we would be unable to access our saving accounts or use our credit cards.
My wife and I rarely have more than $20 in cash on us, because we try to charge most of our expenses to our cash back credit cards. This puts us in a tough position if we needed to buy water or gas during an emergency. That being said, we decided to take $150 out of our savings so that we have cash available at home. We requested small denominations ($100 in one dollar bills and $50 in five dollar bills) so that we do not have to worry about getting change.
The money will be hidden in our condo and hopefully never used. We plan to buy a safe within the next year for my wife’s jewelry, important documents, and this emergency cash.
$25 For Opening An ING Direct Savings Account
One of the simplest ways to get your money working harder for you is to open a high yield online savings account. We use Emigrant Direct and ING Direct because I have read many good things about both banks in online forums, and have been very happy thus far. These banks are FDIC-insured and pay a much higher interest rate that your typical brick and mortar bank.
If you would like to receive $25 for opening a high yield ING Direct savings account, send me an email and I will forward a referral link to you.
Full disclosure:
- You have to fund the account with an initial deposit of at least $250.
- I will get a $10 thank you bonus for referring you.
- To qualify for the $25, you must use the link in the email.
Stong Financial Foundation
Simple ideas for a strong financial foundation:
Live below your means
I believe this is one of the most important steps to a strong financial foundation and, for me, one of the hardest. If you try to keep up with your rich looking friends and associates, you may end up like most of them: lots of nice stuff, but a low net worth. Every dollar that you save is worth more than an extra dollar earned because the extra dollar earned is taxed.
Start an emergency fund
Job loss, health issues, and expenisve repairs are financial blows that can affect us all. Open a high yeild savings account (Emigrant Direct, ING, etc.) and start saving for the unexpected.
Aviod credit card debt
Credit card debt is the path to financial ruin. Been there, done that. Believe me when I tell you that digging the hole is very, very easy and climbing out is often a long, hard fought battle. The only thing we use credit cards for now are monthly bills because we get cash back from our Citi credit card. Don’t do this if can’t pay off the balance in full each month.
Track spending / create a budget
It’s easy to overspend if you don’t know what you’re spending. Track spending for a few months and use this information to create a budget. The budget will help keep you on track and hopefully help you find areas where you can reduce spending.
Learn all you can about investing
Most financial planners are more interested in their commission, rather than what is in your best interest. If you educate yourself, you can save A LOT of money and probably do just as good a job, if not better.
Invest at least 10% of your gross income
The future is coming whether you want it to our not. The magic of compound interest can make your consistent contributions grow into a large nest egg. Take advantage of tax sheltered retirement account such as a 401(k) and/or Roth IRA. If your employer offers a 401(k) with a company match, take advantage of the free money.
Emergency Fund
We keep our emergency fund in a high yield (5.05% APY) Emigrant Direct savings account. We currently have a whopping $1,541 in the account; our goal is $12,000.
Most financially savvy people recommend having enough money in your emergency fund to cover 3-6 months of total expenses. I personally do not want to tie up that much money in a savings account. I’d rather pay down debt or invest the money. Our goal of a $12,000 emergency fund represents 2 months of total expenses for us. If we have an emergency that goes above that amount, our credit cards would then be used. In addition, I have 2 weeks of vacation saved up that can be cashed out for about $2,000, if needed.
Monthly deposits of our ‘extra’ cash will be made into the emergency fund. In addition, we will deposit $302/month for condo taxes and roughly $630/month for funding our Roth. Our condo taxes are due in December and April each year, and the Roth money will be used to open Vanguard Roth IRA accounts for my wife and me once we have $3,000 (minimum required for Vanguard 500 Index Fund). These monies are not really part of the emergency fund, but will provide some short term cash if needed, and gain some decent interest before we actually need them
We’ve got quite a ways to go, but my wife’s commission checks and our annual tax returns will help us get there.