How many months of living expenses do you keep as a liquid "rainy-day" fund?

[bsd43]

Financial advisors recommend 6 to 8 months of living expenses available in cash or cash equivalent accounts. But, it's hard to achieve. How big of a cushion do you keep around, especially in these uncertain times?

Edit: For those who've been able to manage to save a substantial amount, any advice?

[Sport-Touring]

[Rude_Rydah]

For the first time ever, we have a savings account with an amount that can weather an appliance or vehicle crapping out on us, or make a couple of house payments (depending on which one of us loses a job).

Of course, Christmas will wipe out a lot of that savings, but this will be out first year financing 0% of Christmas, we'll keep direct depositing every pay day and get it right back where it was.

[Baron Samedi]

Ohgoodgrief-wanna buy my house?  

[UFO]

Fortunately Amy is a teacher.  That profession is recession proof.  Her paycheck can pay the majority of the big bills.  So even if the tech industry goes to shit and I'm somehow 100% jobless we're mostly covered.

[Avigar]

For those who've been able to manage to save a substantial amount, any advice?

Looking into reducing your monthly expenses will be the key.

1. Check your cell phone package to see if you're allotted additional minutes more than you normally use. Perhaps bring it down to the next level.

2. Check your landline/cable/internet package to see if there are savings available. Just like above, bundle packages and prices change frequently depending on demand and competition.

3. Do not go grocery shopping when you're hungry. You'll end up buying more than you really needed. Create a list before you go and stick to it.

4. Reduce the amount of credit card accounts you have open. Keep open at least 1 open (MC, Visa, or Amex) for expenses. It keeps the monthly payments simplified rather than spreading it out between multiple accounts. There are web sites dedicated to finding the right credit card for you depending on if you keep balances or pay off the entire balance every month.

5. Avoid making purchases on a whim, especially large ticket items. Step back and think if you really need that extra or new something or other.

6. Plan, cook, and eat your meals in more often. Bring a bag lunch and snacks to work whenever possible. Snacks are just too expensive from the vending machines.

7. Force yourself to contribute more into your 401K and savings account. That 3% raise can be put toward the 401K for your retirement. Some companies even match your minimum contributions. It's like free money! Technically, it's additional funds you've lived without for the year until it was given to you. You won't miss it.

The savings, no matter how small or large, all add up eventually. I'm sure there are more suggestions out there.  

[maddjack]

One year ,if I would not reduce my expenses,which of course I would if my income stopped

[bsd43]

One year ,if I would not reduce my expenses,which of course I would if my income stopped

I did the calculations a little bit ago... And I found that I really can't cut that much. I mean, cable and netflix and things like that is only maybe a few hundred dollars a month. (Can't cut the 'net bill, y'know... ) Still gotta pay the mortgage and all the house bills, which is the vast majority of our expenses...

[highside]

Months?  

[Stray Cat]

I have enough money to live comfortably the remainder of my life.



















If I die in two weeks.  

[Wilbur]

Edit: For those who've been able to manage to save a substantial amount, any advice?

Quit buying sh*t you don't need.

[greench440]

Edit: For those who've been able to manage to save a substantial amount, any advice?

Maybe this is a little more useful.  Save something every month, even it its' only $100.  Then get used to increasing it a few dollars every couple of months.  It takes a few years but next thing you know, you're sitting on a nice pile of security and peace of mind.

[cultureslayer]

Edit: For those who've been able to manage to save a substantial amount, any advice?

It's not about having a large amount, it's about being able to cut your expenses down and eliminating debt beforehand.  For me, the best way is to get a part time job so I'm too busy to spend money.  

I've been working on cutting expenses.  I've been spending a little more on food the last couple weeks, but I'm to the point that I can just buy the crazy cheap stuff and use what I've got for a while.  Everyone is getting gift baskets for Christmas, most expensive part will be the basket to put all the stuff in (probably a reusable shopping bag) and some tissue paper.

[stefrrr]

I have enough money to live comfortably the remainder of my life.



















If I die in two weeks.  

  Now that's a positive attitude!

[doodah man]

Absolutely none.  I put all my money into my mortgage and RRSP (unused contributions) to pay the mortgage down and get caught up in the RRSP as soon as possible- no point having savings if you still have debt.  If a rainy day hits, I have access to a $50,000 credit line at 5.25% and an additional $10,000 at 5.95%.  That would last me well over a year.

[maddjack]

I did the calculations a little bit ago... And I found that I really can't cut that much. I mean, cable and netflix and things like that is only maybe a few hundred dollars a month. (Can't cut the 'net bill, y'know... ) Still gotta pay the mortgage and all the house bills, which is the vast majority of our expenses...

I understand,I have no mortgage anymore,only a car payment and I am ahead on that.I can cut about $120 a month of expenses easy ,doesn't sound like much but its $1200 over 10 months,that would pay something,like my monthly electric bill which is $80 average.I follow the put something away deal and have for years,its amazing how 25 bucks a pay adds up over time if you shove it into some type of savings (I use an online bank).

[cultureslayer]

I understand,I have no mortgage anymore,only a car payment and I am ahead on that.I can cut about $120 a month of expenses easy ,doesn't sound like much but its $1200 over 10 months,that would pay something,like my monthly electric bill which is $80 average.I follow the put something away deal and have for years,its amazing how 25 bucks a pay adds up over time if you shove it into some type of savings (I use an online bank).

Yup, it really does add up.  Saving $15 or $20 a week just by taking your lunch to work with you can really add up if you put it away instead of spending it on something else.

[1moreroad]

Financial advisors recommend 6 to 8 months of living expenses available in cash or cash equivalent accounts. But, it's hard to achieve. How big of a cushion do you keep around, especially in these uncertain times?

Edit: For those who've been able to manage to save a substantial amount, any advice?

Don't carry any short term debt.  This is primarily credit cards.  I have not paid off credit cards in full 5 or 6 times in the past 13 years (and was always shocked at the cost of finance charges).  In the extreme, don't carry debt on any depreciating asset, although most people choose to by large ticket items like cars.

After that watch your cash flow like a hawk.  Have more money coming in than going out every month.  That **IS** saving money.  How you allocate it is a whole other thread.  One reason to have a rainy day fund is to cover unplanned expenses like an A/C failure or water heater failure so you don't have to pay for home repairs on credit.

Those two guidelines have enabled me to save.

Other -- Have a budget.  Know where every dollar you spend will go before you spend it.  Track expenses, cash flow, etc. in Quicken.  I can account for most dollars spent for 11 years now.  Periodically check where your money is going (or better yet, use that budget).  Knowing your expenses means that you know exactly how much 6 months or 12 months of expenses will cost (we maintain 9 months).

Absolutely none.  I put all my money into my mortgage and RRSP (unused contributions) to pay the mortgage down and get caught up in the RRSP as soon as possible- no point having savings if you still have debt.  If a rainy day hits, I have access to a $50,000 credit line at 5.25% and an additional $10,000 at 5.95%.  That would last me well over a year.

So what do you do if your air conditioning unit goes out?  Or you have a motorcycle crash and run up $10k in medical bills that insurance doesn't pay?  Just wondering how other people approach this.  And good for you for aggressively paying down debt.

[Elseanno]

I did the calculations a little bit ago... And I found that I really can't cut that much. I mean, cable and netflix and things like that is only maybe a few hundred dollars a month. (Can't cut the 'net bill, y'know... ) Still gotta pay the mortgage and all the house bills, which is the vast majority of our expenses...

Only met you a couple of times, can't remember if you're single or married.... Based on what you've posted, there a couple of things you can do if you haven't already:

1) Get a roommate. There are a lot of other folks right now who probably would like/need to cut expenses too. That should be good for a nice chunk of motgage payment.

2) sell or store at your own house ANYTHING you have in storage. Even a small space is $100/month=$1200 year if it's a big space $300/month...

3) Cook & eat at home. Bring your lunch to work and on rides. I'm not kidding. Let's pretend you eat 3 times a day. let's pretend you only eat burritos & drink cokes. Let's say $5 for burrito $1 for coke 3 times a day, that's $18/day. $18/day x 30 days = $540/month. That's only eating cheap food. You can eat like a king for $300-$400 a month. The gf & I eat very nicely for +/- $500/mo for both of us combined.

4) Don't use credit/debit cards. Only pay cash. Give yourself a descretionary budget say $100/week for movies, drinks/dinner out gas for pleasure rides on the bike etc. When it's gone it's gone until next week.

5) Don't pay interest on bikes, cars, toys, dinners, vacations etc. Can't buy that VFR or GS cash? You can't afford it. Period. Yeah, I know there are some guys who buy stuff that way because they make more on interest on thier investments than they pay on the toy, but if you were one of those guys you wouldn't have posted in the first place.


I used to have 3-6 months in the bank, things are a little tight due to job change/moving/etc... Now down to a single month.   Working on rebuilding the cushion.


Elseanno

[armedandhammered]

I have about six months worth of funds in my chequing account but I believe I could stretch it to a year if I had to.  I don't have very expensive tastes, I have no debt at all and I find it easy to pare down expenses when necessary.  For instance, when I broke my ankle this spring, I hardly spent anything for two months.  I ate half as much as usual because I wasn't working like a dog, and it was awkward to go out in my big manual trans truck, so I just bought books on amazon, and stayed in and read a lot.

Then I spent all the money I saved, but that's besides the point.  I get paid about 50% more than it costs me to live so I can save fast if I want.  The best tip I know of is this: get paid more money!  I found it very hard to save at 40,000 a year.  It's not hard at all at 90,000!

Of course I am also motivated by the knowledge that I am quitting work to do school again soon, and I need money!

[bsd43]

Good points, Elseanno...

(Personally I'm actually doing well in the "rainy-day fund" and expenses area, but I threw the questions out there to help others...)

Only met you a couple of times, can't remember if you're single or married.... Based on what you've posted, there a couple of things you can do if you haven't already:

1) Get a roommate. There are a lot of other folks right now who probably would like/need to cut expenses too. That should be good for a nice chunk of motgage payment.

2) sell or store at your own house ANYTHING you have in storage. Even a small space is $100/month=$1200 year if it's a big space $300/month...

3) Cook & eat at home. Bring your lunch to work and on rides. I'm not kidding. Let's pretend you eat 3 times a day. let's pretend you only eat burritos & drink cokes. Let's say $5 for burrito $1 for coke 3 times a day, that's $18/day. $18/day x 30 days = $540/month. That's only eating cheap food. You can eat like a king for $300-$400 a month. The gf & I eat very nicely for +/- $500/mo for both of us combined.

4) Don't use credit/debit cards. Only pay cash. Give yourself a descretionary budget say $100/week for movies, drinks/dinner out gas for pleasure rides on the bike etc. When it's gone it's gone until next week.

5) Don't pay interest on bikes, cars, toys, dinners, vacations etc. Can't buy that VFR or GS cash? You can't afford it. Period. Yeah, I know there are some guys who buy stuff that way because they make more on interest on thier investments than they pay on the toy, but if you were one of those guys you wouldn't have posted in the first place.


I used to have 3-6 months in the bank, things are a little tight due to job change/moving/etc... Now down to a single month.   Working on rebuilding the cushion.


Elseanno