Emergency Fund Wisdom from a Wise Reader.

This post is from a loyal reader (anonymous) who commented on my emergency fund post.  This one's for you (whoever you are).

Anonymous said... Good post! Have you noticed how the financial experts disagree as to how much of an EF you should have? I've seen most recommendations ranging from 3 months, to a full year.Some "experts" have even bumped up their recommendations considering the fact that, when laid off, the average American takes something like 9 months to find another job lately. ("in this economy" - are you sick & tired of hearing that phrase lately, or what?) We've got 9 months of "required expenses" in our EF. I've got ours broken down into "required expenses/bills" and "optional expenses," realizing, like you, that we can eliminate certain expenses if we need to. In the "optional" column, we have one cell phone bill, $200 of the grocery bill (family of 5), the extra mortgage payment we make each month, IRA contributions, and $400 of other items (but not church giving - that stays in the required column!). Placing the IRA funding in the optional column bugs me. I would never want to stop contributing the full amount to our IRAs, but realize that, if faced with a true emergency, we might cut back on that and revisit our retirement plans when/if emergency is over. What are your thoughts on retirement contributions? Make them "required" or keep them "optional"?

We have, however, decided to take $3,200 from the EF to pay off the car this month, since there are only 9 months left on our car payment. Why keep the car payment when we've already got the money sitting in the EF that's been designated for the car payment should we find ourselves in an emergency? ;) We've decided several times before that we were going to pay it off earlier, but each time we said "OK, pay off the car with the next car payment," we had a true "mini-emergency" come up before the next car payment (like a $1,000 plumbing bill!). So I started to think we were jinxing ourselves every time we said "hey, let's pay off the car this month!" I know, that's silly...but still.... Well, now that we are down to the 9 month mark on the car payment, we have no excuse!

Now - on to the mortgage, which is now below $58K and at least two-thirds of each payment we make is now applied to principal (not interest!) - woohoo! We get to watch that mortgage balance drop like our 401K/IRAs did in 2008! hehe - bad joke, but sometimes you have no other choice than to find the humor in the situation ;) that year sucked, eh?

I love reading your stuff - will try not to stay gone for so long again ;)

Thanks Anonymous!  I hope you have a blog of your own because you have some great stuff to say.
The Committed One.