Keeping The Reins Tight….

Just how much is in A’s Emergency Fund (as asked by Krystal)?

$7,200.

Despite having a stable job (and side jobs), I need to have six months set aside ‘just in case’. The longest I should ever be between jobs would be 3 months (the length of summer vacation) but the extra cushion lets me sleep better at night.

The funds are allocated in the following hierarchy:

Green boxes are ‘filled’ funds, yellow boxes need more money.

As of today (05.06), I’m 86.11% towards having a complete Emergency Fund. On Saturday, the percentage will drop to 75% when a set of new tires will wipe out the ‘car emergency’ money.

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The Series I Bond bug just bit me on the butt.

If I invest half of my emergency fund in iBonds before the end of April (and leave them there for at least 14 months), the money will compound at a rate of ~4.04%. The other half, left in my HSBC account, will 3.05% until the Fed decides to cut it’s rates again.

Assuming no rate cut, my emergency fund will have an average interest of ~3.45% for the next year. I could raise my net interest rate by laddering the non-bonded in CD’s. But alas, I don’t have that big of an emergency fund and I’d like to keep some of the money liquid.

Update: For an excellent primer on Series I Bonds, check out I bonds take off with Interest @ The Financial Engineer or Series I Savings Bonds @ My Money Blog.
Both are excellent primers / explanations of Series I Bonds and interest calculations.

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I just raided $2,000 from my emergency fund for Roth contributions.

The raid increased my federal tax return by $400. A quick, easy and guaranteed 20% return on the investment!

Unfortunately, this is a one time deal.

Some unique circumstances made this situation possible. Based on my 2007 income, I qualify for the saver’s credit, I have a sizable emergency fund, my job is secure, and I plan on maxing out my 2008 IRA contributions. I will still contribute $5,000 to the IRA,  the contributions will be split between the 2007 and 2008 tax years.

Despite the possible ‘recession’, my recent car troubles, and not having a full six months in the emergency fund, there was no way I could pass on this opportunity.

A guaranteed 20% return is unreal and I doubt I’ll ever have this opportunity again.

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“I’m down instead of up
I’m red insteaf of black
I’m taking one step forward
And two steps back”

Thanks to an electrical overload, my truck needs a new alternator, fuse box, and battery cable. I do not have the time / tools to do the repair; thus, I’ll be paying the local Goodyear $550 to fix the problem.

Instead of wiping out the ‘car expense fund’, I’m going to pay for the repair out of the true emergency fund. Until the car fund can handle such an expensive repair bill (this repair bill would put the car account $150 into the hole), I have to use the emergency fund.

The whole situation is a bummer, I was stashing away loads of money into the emergency fund and finally crossed the 50% funded mark. I’ll be able to repay the emergency fund with my next pay check, but the account’s balance will have pretty much stayed the same for a whole month.

This is completely unacceptable!

I did find a silver lining in this situation, paying $550 as needed for car repairs is much cheaper than the $250+ I would be paying for regular car payments.

Technorati Tags: Budget, Car Expenses, Emergency Fund

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