Do I have a Stealth Emergency Fund?
I use to believe that I didn’t have an emergency fund, and I’ve commented on other blog sites stating that I don’t. But really I do, but it’s not formally called such a thing in my portfolio!
I estimate that I have over $15,000 that can serve as an emergency fund if the need arises! These funds wouldn’t include my primary brokerage account!
So what is my Emergency Fund comprised of?
- “Checking Account Buffer” – I keep $6,000 in my checking account as a buffer just in case I have a bad month that I need to use more money than normal. Usually in December, my credit card bill is higher than normal and I dip a bit into this buffer the help pay off my credit card balance in full. This amount would be used as my first line of defense against an emergency.
- Contributions to my Roth IRA – I my previous post called: Roth IRA Contributions versus Roth Investment Gains, and in the article I explain how you can withdraw your contributions at any time, up to the total that you deposited in your Roth IRA. So while not a desirable action to take, if a true emergency is experienced, that money is available.
Of course, there is money in my brokerage account too that can server as a fallback to the emergency money that is identified above. In fact, any amount that I have in cash in my brokerage account would be used before both my Checking Account Buffer and my Roth IRA.
So in conclusion, I don’t have a traditional Emergency Fund, but I have enough in other money pools that they can serve as a sort of “Stealth Emergency” Fund.
I’m very happy with my current financial portfolio, but do you think I should still create a formal Emergency Fund, and why? After all, I’m willing to bet that my stealth emergency fund is more than 70% of the population’s normal emergency fund…
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