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Posted by jIM on December 8, 2006, 9:18 am
Afterwards Hilarity Ensued wrote:
> This question has come up a couple times the last few days and it's confused
> me....
>
> Here is my situation:
>
> I live on 50% of my take home pay meaning I have 50% (this includes after
> some luxuries and entertainment and some disposable splurging)
>
> I have 0 debt. No credit card debts, no car loan, no school debts.
>
> I do have a $20 000 line of credit that is at 9% interest If I wanted. I
> have $8000 in available credit card credit that is 19.5% and a grace period
> of 19 days. My balance owing on both the credit account and the credit
> cards is $0.00
>
> I have no kids no mortgage and rent and utilities are little less than 20%
> of my take home pay.
>
> I am 30 years of age so lets say retirement at 60 and home ownership at 35.
>
> I am in Canada so health insurance is not as big as of a concern as it is in
> the USA. We are covered for major illnesses and emergencies up here, as
> least medical bill wise.
>
> Now I have about 10 months living expenses saved in high interest savings
> accounts. but since I am living on 50% of my income, this emergency fund
> grows equally with my expenses.
>
> Should I take ALL of my emergency fund and invest it and rely on my credit
> as insurance for what it's and rebuild the emergency fund? I can use as my
> investments as the emergency fund of sorts, as long I didn't pick losers.
>
> With my current savings rate of 50% (which I don't see changing for another
> year or more, knock on wood) I should be able to pay off debt quickly should
> an emergency arise. Am I saving too much money in emergency funds? With my
> income and expense status, my age, and retirement far off am I being too
> conservative in keeping savings? I just started investing a few months ago
> with a financial planner but I only give him about 40% of my monthly
> savings. I still have 60% of my monthly savings to do my own investing.
>
> One other thing I do not have parents or other family members to help me out
> if something happens. I'd be on my own if a financial emergency came up.
>
> I have no idea what to do with this emergency fund, how high or low to keep
> it. It's earning 4.10% interest yearly, taxable at approx 30%. At what
> point do you stop contributing to an emergency fund and jump into investing
> towards your goals? I have researched a number of mutual funds and think I
> have a possible portfolio I would like to work on. I have decided my risk
> tolerance so I think I know what I can lose without crying...
>
> Sincerely New Investor.... :)
My suggestion is 2 months expenses in cash accounts.
How much would a house cost, and what would expected downpayment be?
The house down payment might be wise to have in cash as well- being
that this purchase is 5 years away.
I think 2 months expenses at minimum in cash is expected... as the
average comment from most responses you will get. Some might suggest 6
months expenses in cash. A few others might suggest no cash-invest it
all.
======================================= MODERATOR'S COMMENT:
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