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do i need an ef?

March 16th, 2018 at 12:46 am

Years ago we ran so lean that every penny had to be accounted for so we didn't overdraw on anything. Our credit cards functioned as float but we basically ran it as a check register. No extra pennies anywhere. We squeezed dollars till they screamed.

But the things got easier for awhile and then we had kids and went down to one income and it was tight again for awhile. Then we decided time to get serious again and we started saving hardcore looking back we were at 50% savings again. We had made a plan in Christmas 12/2012 for 6/2016 that we were going to save 1 year of living expenses and move without jobs. We bumped it up to 6/2015 and we saved more than expected.

Anyway we lived on our savings (ie spent it the horror!!!), then knew we wanted to buy a house so we kept a lot of cash on hand for 2 years from 6/2015 to 6/2017 and then even after. We paid 100% cash out of pocket for our $75k renovations this year. No debt. We also bought a car and put down $8k.

But it appears we are unsure what to do about our saving again. We are back to having a "normal" EF of about 8 months cash. The problem is my DH I think feels insecure now and talks about having 1 year sitting in cash. I think not a good idea.

Second, I think that maybe we should start running lean again and have 1 month cash on hand and the rest we invest in something.

I'm struggling because I do think the stock market is high and I'm not sure I want to invest more in stocks right now. Second I'm really becoming interested in investing in real estate as a diversification in our overall portfolio. Not something we fall into but a real investment and bought solely with cash flow in mind.

But the the housing market seems red hot right now and I'm not sure it's the right time to plunk down cash. I mentioned the duplex a co-worker is selling that I've considered. It wasn't enough of a return to generate making it worth investing right now.

But if we are serious about getting into RE i think we need the cash to put as a down payment so investing it in stocks doesn't seem wise either. Nor does running with a lean EF. We probably should have a fully funded rental EF.

For people who invest in RE what's the wisest decision? For people not invested in RE is it because of the entry barrier in cost? Too much time? Too much risk?

I have been pondering this for awhile actually. What we should do regarding our Emergency Fund and whether to invest it for now or to wait and perhaps buy a property.

6 Responses to “do i need an ef?”

  1. Carol Says:

    Can't help about rentals-- I just don't know. I was going to suggest laddering some CDs for the cash. Rates are getting better.Then your husband gets his "security " feeling ( which I totally relate to) and the cash is there when you want it.Make sure the penalty for breaking the CD early isn't too horrible.

  2. ceejay74 Says:

    Even though we own two rental properties, I'm no expert. But it feels like RE is an investment you really have to hustle to make it pay off. In terms of time and headache, and since you guys are kind of sitting pretty moneywise, I'm not sure why you'd go for that. Unless you're looking for a more hands-on project. It doesn't seem like you need the money, so CDs would probably get you the return you need on your cash savings.

  3. PatientSaver Says:

    Having just one month in cash for emergencies doesn't seem like nearly enough. The unexpected happens when you least expect it. Don't overextend yourself.

  4. rob62521 Says:

    We have more than a year's emergency money and anything beyond that, we are laddering into CD's.

  5. livingalmostlarge Says:

    The 1 month cash is just cash sitting in the bank. We'd have more money just invested around somewhere. I'm also toying with paying down our mortgage but my DH said no.

    Ceejay I just was thinking RE maybe as something to increase our potential return. I also want to be comfortable in retirement. I think we're there but this would maybe help us get there faster.

  6. Amber Says:

    For me rental properties are a headache. One bad tenant can make your life hell and I've had three back to back lately. But if you have the time, and can get a good tenant you can pull it off.
    I agree with Patient Saver, one month in savings seems a bit low to me.

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