This method of budgeting has really worked for me. I'm 71 and on Social Security which because I am relatively healthy I was able to delay until 70 so maxed out the amount I am eligible for which covers all my bills and sinking funds. House is paid for. Car is paid for. No credit card or other debt. My 'emergency fund' is in a HYSA but is budgeted out six months in YNAB including the major expense catagorie you mentioned: Car maintenance, home maintenance, and medical expenses. I also have an off budget account for car replacement and a joint account that I gave my son access to that I call my 'burying money' so my children don't have to wait for death certificates or anything else to do what ever they decide to do after I'm gone. I appreciate y'all and have really enjoyed following your channel over the years. Your videos have really helped me with YNAB and budgeting. Thank you.
Amazing! Thanks for sharing. Sounds like you’ve worked very hard to put yourself into a good situation. Love to hear that this has worked well for you. Thanks for watching and following along!
Thank u for sharing these details. I am going to start my “burying” fund. I have life insurance thru job but have considered getting another. I definitely don’t want my kids to have to come up with money for my Burying expenses. Starting in two weeks to fund. Thank u❤
This meant everything to me. Congratulations on getting it all figured out. Happy for you. I have some of these as goals still. I will definitely be using YNAB for the long term as well.
Interesting take but will respectfully disagree on this approach for my sake; I'm usually one for the nerdy numbers games but this is way too micromanaged for my liking. I have 6 months of expenses saved in one checking account and we only pull from it whenever an unexpected event happens that we cannot fit in our monthly budget (i.e. storm takes a fence down, roof damage from a storm, replacing an engine in our son's car b/c he wasn't checking the oil, etc); we then budget the next month or two to replenish it with what our budget gives us. Other things like new tires for a vehicle we budget that in the following month or temporarily add to the emergency fund as a sinking fund to use in 1-2 months.
Sounds like you have a higher disposable income than the average person and are able to cash flow a lot of items if you’re able to replenish those examples quickly. That’s great! This advice may not be for you, but I appreciate you watching, I’m glad you’ve got things covered!
I agree. I have a budget that is highly detailed and a portfolio that is highly analyzed and planned for...but this is excessive. It is simply impossible to know in advance what any of those costs will actually end up being (especially considering supply chain shortages, inflation, random problems that cannot be foreseen, medical issues, etc.). If a person can start saving towards a traditional emergency fund (read income loss) I recommend after all other debt obligations and expenses have been satisfied investing disposable income into assets that produce income (think Rich Dad, Poor Dad). A great example might be something like SPYI ETF (or other income ETFs) Dividend Stocks, BDC's, REITS, etc. Rental Units, Bonds, Intellectual Property, etc. The ultimate goal should be to replace our current income with assets. That way you can reinvest that income to build further income or use it if needed.
I suggest that you put that savings or a large portion of it into CD's, Money Market, or other accounts that are a little harder to tap if someone hacks your identity or your account. I suggest you figure how much you want accessible via ATM versus having to go into the bank. For the instances which will hold for 3 days (ie a 3 day week-end) figure out how soon you will possibly need it versus the penalties for early withdrawl. If your checking account gets tapped, all too often it can often be 3 months for the quarterly reconciliation before the dust starts to settle. If its an account you don't refer to often, it could take a while to discover and then other nasty realities begin to hit.
I classify emergencies into 2 tiers with 2 accounts. A Level 2 emergency is more traditionally called sinking funds. I use that for unexpected car maintenance (water pump, blown tires), medical bills exceeding medical savings, etc. A Level 1 emergency fund includes things like unexpected major house maintenance, funerals, income loss.
Totally. It's very individual. Also, it depends on season of life and how many thing you own that require maintenance and upkeep. Typically midlife folks with 2 - 3 kids, who own a home and a couple vehicles need to plan for that separately outside of the income loss fund.
I call it a cash reserve,i am retired and have 5 years worth,to replace my investment income only for down markets.Pension income is a constant stream of income.Having said that,your cash should still be working and not under your mattress.When i was working,i had 2 years of cash,that would completely replace my income,plus term life insurance.I was self employed so those last two were important for my family.
It's pretty much another word for sinking funds and the envelope system. It looks complicated but actuality is very simple and empowering. By budgeting this way, you give yourself permission to spend in those categories when something comes up. Because I am still building the habit, I currently take out 30% of my paycheck to live off until my next payday, I budget that into my non discretionary expenses. And even in that 30% 1/4th of it is going towards some sort of savings. I like this approach.
I disagree. For some people three months is overkill, for others is way to little and doesn't near cover all of the things that could go wrong - especially if you own an older home and older vehicles, and have multiple kids with a high deductible health insurance plan. Lot's more to plan for than just 3 months! But I do appreciate you watching!
My emergency fund is for 2 things: income replacement (i used it before for that purpose) when I get laid off, and funeral expenses for a loved one. For psychological reasons I don’t dare to have a separate category in Ynab (now transiting to Actual Budget by the way) for the second. So i just use the generic Emergency fund category
I have $5K in a HYS that I call my Unexpected Significant Expense Fund which would be for three of the categories you mentioned. I also have an HSA with $4K for a medical/dental expense that isn't catastrophic. I will be contributing more to this soon. I budget at least a year in advance so I have an upcoming vacation, Christmas, birthdays, regular car maintenance and a potential rent increase already accounted for. As for a loss of income, that is a different situation. I am confident of continued employment and even if the worst happened, my employer has been generous with severance in the past. It is a bit of risk not saving more for that, but I'm willing to take it.
Ahhhhh I had heard this called "sinking funds" before your vid. That you would setup a "bucket" and put money in that "for a rainy day". Your explanation is much better IMHO
I like hearing your perspective but I have a traditional emergency fund with parameters for withdrawal. I incorporate your idea into my sinking funds. Love the discussion, thank you.
We have a separate bill payment account just for bills & the house payment. We direct deposit straight to that account and all bill payment's are automated. This is also where our emergency fund is. If it's an "emergency" that doesn't involve the bills or house payment, this money isn't used for it.
having just been laid off, and it taking over 8 months to find a new job I have started to prioritize my "Income Replacement" category I have a group called "Emergency Funds" and in there is Income Replacement, Puppy Care, Dental, Deductibles, Unexpected Replacements
This is why I like Ally. Ally accounts allow you to create buckets to save into the inside of a savings account. I'm bad about not spending if it isn't an emergency. So i set up a bucket for travel. When i reach my goal, i'm allowed to book a trip. I have buckets for property taxes, car maintenance, vet bills, home improvement/ maintenance, gifts, and general emergency.
I think it depends on the person and if it sticks it sticks. To me it makes sense to put everything in one area so that I don't have to micromanage funds. Then I just don't touch the emergency fund if its not an emergency. I don't dilute the definition of emergency so maybe that is why it works for me. I can see why others might need to make a more definitive budget so that they can hold themselves more accountable.
We are paying the bills by or at the beginning of the month, low spend during the month, then effectively budget the left overs at the end of the month. This has helped us pay for unplanned expenses. We have a checking with attached savings. Each has a spending buffer which can be tapped for an unplanned expense, an honestly great deal, and each spending buffer could get us through 2 weeks of spending (plus if bare bones). If we use either or both, the expectation is to reduce the upcoming month's spending to replentish what was used; this is an organic stop to spending it most often. Each account also has an account buffer 4 times larger than the spending buffer. The account buffer is used like many people's emergency fund. Beyond that we have some targeted sinking funds (may they not be needed), revolving funds, and fairly liquid "real" savings.
Where do you keep your emergency fund and how liquid does it need to be? I move most of my emergency funds into 3-12 month CDs which in an emergency I can cash by forfeiting 2 months interest, which is still far better than the savings account rate. Generally checking account has the months pay check roll through it plus 2k for spontaneous purchases. I have a 5 figure HSA account i save into every month so medical emergency is covered.
We worked like the devil to accumulate 10 months expenses in a HYSA and called it our "emergency Fund". We are starting to view it as more of a middle bucket where we put money into it at a slower pace and have increased our contributions to our 401K as we are maxing out those and still have some money left we put some in our brokerage account, we might put it in our HYSA or maybe buy some gold or silver. But I agree sort of with you defining an emergency is often difficult and we have never had an emergency that costs 1000s of dollars. We do have sinking funds for car and home repairs. We really do not have difficulties saving and investing but that wasn't always the case. We just had 7 trees cut down it cost $5K we had the money set aside but even today 2 weeks later I'm still processing the cost.
Love it all! I will be reallocating my EF into the big 3 sinking funds ( am retired and not worried about income loss). Ironically I have frequently asked myself when would I use EF money since I have MANY other sinking funds. You convinced me to make the change. Thanks
What happens if you need more than you had budgeted for for a certain category? which other budget head the extra amount comes out of? Should one keep on adding 1% of current market value of their house to the fund each year? When is it large enough to stop contributing?
Really clear thank you! What about unexpected expenses which are not emergency, for instance "your group of friends organizes a getaway next month". Do you handle that with a general "surprises" category, for leisure?
I always thought about if the government could cover emergancies for us, the people could reinvest that emergency fund in the economy and would make for a better world.
Thanks, this is essentially the way my current YNAB budget configuration has formed the past few years. $3,000 basic, undefined small emergency budget, only used when some sinking fund just wasn't enough. Otherwise, sinking funds for either expected expenses such as vehicle replacement or maintenance, or funds with a floating balance to ensure something is covered, such as medical expenses. My only concern is, since I'm now retired and able to draw upon retirement accounts, that I would have been maybe better off with the sinking funds delineated in a retirement account earning a better rate of return rather than placed in a high interest savings account (brokerage settlement account). In the end, though, it's worked well: I haven't yet drawn from the retirement account but only from the lower earning high interest settlement account.
In my YNAB, after so many years of using it, I’ve encountered several “emergencies “….so, over the years I have set up very specific budget line items, from cars to appliances to home to health. But I also have a nebulous “emergency fund”, too. I have a big chunk of cash in the fund…I draw out of it to populate specific sinking funds when something comes up unexpected and to cover any shortfalls.
Thank you for this, because I don't think people realize this. For myself, I'm currently building my emergency fund, with about two months saved so far, aiming for six. This is strictly for covering bills in case I lose my income. I also have a short-term savings fund for unexpected expenses, like when my headphones broke last night-pulling from that instead of my emergency fund. Im also working on a medical fund and future car expenses along with a tech fund (😅 the tech fund didnt have anything in it as im still working the budget out)
That strategy also applies to life, period! I see people working like dogs, saving a bunch of $. When asked what is it all FOR...? They go blank. I'm extremely cheap in certain areas and very generous in others. Define your "rich" life.
$18k air conditioner out in the south in the middle of July is an Emergency. $1,500 water heater $400 garage door repair All of these happened at once. That’s not vague
Those are all covered under “home maintenance” fund. If own a home, set aside 1% of your homes value into an account for these expenses that will happen. These aren’t “emergencies” these are all the added costs of home “ownership” So: $250,000 home, set aside at least $250 a month for maintenance of your home. $3,000 a year
Totally agree, that's why I have a home maintenance category and for larger homes, I break out each major expense (like the HVAC) into their own separate category and plan for each. Thanks for watching!
Yes, i have about 20 sub accounts at my credit union. I put money in every account for each bill on payday, And yes, I have an emergency fund too. Another sub account!
Hi Nick, I have been following you for a while and you helped me setup my YNAB budget through your videos. I noticed in the video you still have a Savings account. I do have a Savings account with just $300 in it. This is just to keep the minimum balance (or get hit with a fee). I do contribute when I have some money add to it...but are you saying we shouldn't have a Saving Account and add budget categories to the checking account. This way we would have dedicated amount of money for the these categories
Hey Jim, great question. I do use a savings account - but only for interest. And it's not actually "connected" with any specific category. I use the categories in my budget to help me determine what we have where. If you want a detailed deep dive on this, watch this video on savings accounts: ruclips.net/video/N4SQzxTZ1uQ/видео.htmlsi=po8AiGS1lx_Wqz2J I personally use method #3 as it's the most flexible and helps me earn interest because I use a high interest savings account at Ally.
Boiler breaks down, car needs a large repair... ya know, emergencies (unforeseen large expense items). The fund is there to stop you having to sell equities at potentially a bad time in the market cycle.. What am I missing?
@@PaulB-q3d totally agree. Did you watch the video in full? That’s exactly why I made this. The generic advice of 3-6 months emergency fund is woefully inadequate. Instead you should think about your specific scenario and the common emergencies that could arise and plan accordingly. Most emergencies are predictable and can be planned for. But most people don’t think about them, and therefore end up unprepared. Hope that makes sense!
I keep 6 months of bills in a savings account, in case I’m out of work. I don’t touch it unless I’m out of work. I pay as I go on any repairs or other needs. I don’t save anything else, as soon as I have an extra $3-$5k I’ll go another trip somewhere. I’m not saving anything for a rainy day. No debt and travel as much as possible is my motto.
Sounds like you do exactly what I’m talking about! A dedicated account for income loss and manage the other items with your cash flow. That’s great. Thanks for watching!
Love this video, being specific about what you're saving for is great advice! The four emergencies you list are predictable enough to be True Expenses. If I'm permitted a word of feedback, why so many categories? No brain can balance that many priorities.
Some of us are more detailed than others. I’ve had as many as 95 categories and recently skinnied down to 75. This makes my brain happy. Do what works for you though!
Personal preference. We have about 80 categories in our current budget. But I’ve had clients with 20. And clients with 120. It all depends on the situation. Sounds like you’re good with lesser categories, but I don’t think that means it doesn’t work for anyone. It’s just not what works for you - which is great! That’s the whole point of personal finance, it’s personal :)
Provocative title, and this idea resonates with me the whole time. I like that you place importance in critically thinking the purpose and parameters of the emergency funds. First time viewer, but in a way I already follow your system. I especially appreciate the example of the stable and single 20-something having 1mo savings + invest the extras. It seems also that you are implying that for one year, I can do this; then the year after, adjust as things come into my life. Segmenting life to more than just whole decades, like a savings account has more than one segment.
Totally. The use of an emergency fund is not something that remains static. It should change with your life as the seasons of your life change. Glad you liked the video!
Resume of the video: Don't have an emergency savings account, but have save money for when things break. Hahahaha, so have an emergency savings account.
Of course! Did you actually listen to why? I’ve seen tons of clients raid their savings accounts and one of the ways we can combat that is to get more specific and less vague about what that savings is for. Wish you all the best!
So sorry you’ve had trouble! There’s an unsubscribe link in the bottom of every email. You can unsubscribe anytime you like :) But if you have issues, you can also just hit reply on and email and let us know. And we can unsubscribe you. Wish you all the best!
I totally disagree with this system! You only need one emergency fund! He recommends splitting it up in different categories: auto maintenance, house maintenance, and medical costs; you can do it this way, but you don't have to! Everybody's financial situation is different! This is just an option! I highly recommend starting with one emergency fund for starters! That's all you really need! Overall, the video is good but it is an alternative for budgeting.
Oh, right. This is why you do not take advice from random guy on youtube. Young lad, never lost a job, has unexpected illness in family. No kids either
Did you watch the video before commenting? I literally talk about planning for each of the items you mentioned and specifically how we have had multiple unexpected illnesses in our family.
This method of budgeting has really worked for me. I'm 71 and on Social Security which because I am relatively healthy I was able to delay until 70 so maxed out the amount I am eligible for which covers all my bills and sinking funds. House is paid for. Car is paid for. No credit card or other debt. My 'emergency fund' is in a HYSA but is budgeted out six months in YNAB including the major expense catagorie you mentioned: Car maintenance, home maintenance, and medical expenses. I also have an off budget account for car replacement and a joint account that I gave my son access to that I call my 'burying money' so my children don't have to wait for death certificates or anything else to do what ever they decide to do after I'm gone. I appreciate y'all and have really enjoyed following your channel over the years. Your videos have really helped me with YNAB and budgeting. Thank you.
Amazing! Thanks for sharing. Sounds like you’ve worked very hard to put yourself into a good situation. Love to hear that this has worked well for you.
Thanks for watching and following along!
Thank u for sharing these details. I am going to start my “burying” fund. I have life insurance thru job but have considered getting another. I definitely don’t want my kids to have to come up with money for my Burying expenses. Starting in two weeks to fund. Thank u❤
This meant everything to me. Congratulations on getting it all figured out. Happy for you. I have some of these as goals still. I will definitely be using YNAB for the long term as well.
@@libbysworld7649 So glad to hear it Libby, thanks for watching!
Interesting take but will respectfully disagree on this approach for my sake; I'm usually one for the nerdy numbers games but this is way too micromanaged for my liking. I have 6 months of expenses saved in one checking account and we only pull from it whenever an unexpected event happens that we cannot fit in our monthly budget (i.e. storm takes a fence down, roof damage from a storm, replacing an engine in our son's car b/c he wasn't checking the oil, etc); we then budget the next month or two to replenish it with what our budget gives us. Other things like new tires for a vehicle we budget that in the following month or temporarily add to the emergency fund as a sinking fund to use in 1-2 months.
Sounds like you have a higher disposable income than the average person and are able to cash flow a lot of items if you’re able to replenish those examples quickly. That’s great! This advice may not be for you, but I appreciate you watching, I’m glad you’ve got things covered!
I agree. I have a budget that is highly detailed and a portfolio that is highly analyzed and planned for...but this is excessive. It is simply impossible to know in advance what any of those costs will actually end up being (especially considering supply chain shortages, inflation, random problems that cannot be foreseen, medical issues, etc.).
If a person can start saving towards a traditional emergency fund (read income loss) I recommend after all other debt obligations and expenses have been satisfied investing disposable income into assets that produce income (think Rich Dad, Poor Dad). A great example might be something like SPYI ETF (or other income ETFs) Dividend Stocks, BDC's, REITS, etc. Rental Units, Bonds, Intellectual Property, etc. The ultimate goal should be to replace our current income with assets. That way you can reinvest that income to build further income or use it if needed.
I suggest that you put that savings or a large portion of it into CD's, Money Market, or other accounts that are a little harder to tap if someone hacks your identity or your account. I suggest you figure how much you want accessible via ATM versus having to go into the bank. For the instances which will hold for 3 days (ie a 3 day week-end) figure out how soon you will possibly need it versus the penalties for early withdrawl. If your checking account gets tapped, all too often it can often be 3 months for the quarterly reconciliation before the dust starts to settle. If its an account you don't refer to often, it could take a while to discover and then other nasty realities begin to hit.
Why not use a high yeild savings account though, same idea except your getting at least 4%, hate to let inflation win
@@kevinj2334 The accounts I mentioned require an in-person appearance, Id, and the likelihood of a camera to liquidate.
I classify emergencies into 2 tiers with 2 accounts. A Level 2 emergency is more traditionally called sinking funds. I use that for unexpected car maintenance (water pump, blown tires), medical bills exceeding medical savings, etc. A Level 1 emergency fund includes things like unexpected major house maintenance, funerals, income loss.
Interesting take, but I have a 6 months emergency fund in a HYSA and never withdrew it for "flash" sales. I guess it depends on the individual
Totally. It's very individual. Also, it depends on season of life and how many thing you own that require maintenance and upkeep. Typically midlife folks with 2 - 3 kids, who own a home and a couple vehicles need to plan for that separately outside of the income loss fund.
I call it a cash reserve,i am retired and have 5 years worth,to replace my investment income only for down markets.Pension income is a constant stream of income.Having said that,your cash should still be working and not under your mattress.When i was working,i had 2 years of cash,that would completely replace my income,plus term life insurance.I was self employed so those last two were important for my family.
Totally. It’s also a very different thing when you’re in retirement vs during your working years. Thanks for sharing, and I appreciate you watching!
I have my budget set up this way, and it's very stress free.
Glad to hear it. I totally agree.
It's pretty much another word for sinking funds and the envelope system. It looks complicated but actuality is very simple and empowering. By budgeting this way, you give yourself permission to spend in those categories when something comes up.
Because I am still building the habit, I currently take out 30% of my paycheck to live off until my next payday, I budget that into my non discretionary expenses. And even in that 30% 1/4th of it is going towards some sort of savings.
I like this approach.
BUDDY, IT'S THE SAME AS HAVING A 3 MONTH EMERGENCY FUND, LOL
I disagree. For some people three months is overkill, for others is way to little and doesn't near cover all of the things that could go wrong - especially if you own an older home and older vehicles, and have multiple kids with a high deductible health insurance plan.
Lot's more to plan for than just 3 months! But I do appreciate you watching!
@mappedoutmoney Well I feel good with my $20k Emergency fund, I sleep like a baby 👶
My emergency fund is for 2 things: income replacement (i used it before for that purpose) when I get laid off, and funeral expenses for a loved one. For psychological reasons I don’t dare to have a separate category in Ynab (now transiting to Actual Budget by the way) for the second. So i just use the generic Emergency fund category
Totally get that, it makes good sense to me.
Thanks for watching, and for sharing your thoughts!
I have $5K in a HYS that I call my Unexpected Significant Expense Fund which would be for three of the categories you mentioned. I also have an HSA with $4K for a medical/dental expense that isn't catastrophic. I will be contributing more to this soon. I budget at least a year in advance so I have an upcoming vacation, Christmas, birthdays, regular car maintenance and a potential rent increase already accounted for. As for a loss of income, that is a different situation. I am confident of continued employment and even if the worst happened, my employer has been generous with severance in the past. It is a bit of risk not saving more for that, but I'm willing to take it.
Sounds like you’ve got it covered Jay. I’m glad to hear it. Thanks for watching!
Ahhhhh I had heard this called "sinking funds" before your vid. That you would setup a "bucket" and put money in that "for a rainy day". Your explanation is much better IMHO
Well thanks! I’m so glad this helped you.
Emergency Fund / Sink Fund == I want to quit my job for a year fund
Totally, that’s a perfect example
I like hearing your perspective but I have a traditional emergency fund with parameters for withdrawal. I incorporate your idea into my sinking funds. Love the discussion, thank you.
Glad you found the discussion helpful, thanks for watching!
There is such a thing as over-thinking the exercise. Whatever floats your boat.
We have a separate bill payment account just for bills & the house payment. We direct deposit straight to that account and all bill payment's are automated. This is also where our emergency fund is. If it's an "emergency" that doesn't involve the bills or house payment, this money isn't used for it.
having just been laid off, and it taking over 8 months to find a new job
I have started to prioritize my "Income Replacement" category
I have a group called "Emergency Funds"
and in there is Income Replacement, Puppy Care, Dental, Deductibles, Unexpected Replacements
Sorry to hear about the layoff. I know that’s brutal. I’m glad to hear you’ve got your emergency funds setup though. That definitely helps.
This is why I like Ally. Ally accounts allow you to create buckets to save into the inside of a savings account. I'm bad about not spending if it isn't an emergency. So i set up a bucket for travel. When i reach my goal, i'm allowed to book a trip. I have buckets for property taxes, car maintenance, vet bills, home improvement/ maintenance, gifts, and general emergency.
Totally, I've been with Ally for 10 years. Big fan.
I think it depends on the person and if it sticks it sticks. To me it makes sense to put everything in one area so that I don't have to micromanage funds. Then I just don't touch the emergency fund if its not an emergency. I don't dilute the definition of emergency so maybe that is why it works for me.
I can see why others might need to make a more definitive budget so that they can hold themselves more accountable.
We are paying the bills by or at the beginning of the month, low spend during the month, then effectively budget the left overs at the end of the month. This has helped us pay for unplanned expenses. We have a checking with attached savings. Each has a spending buffer which can be tapped for an unplanned expense, an honestly great deal, and each spending buffer could get us through 2 weeks of spending (plus if bare bones). If we use either or both, the expectation is to reduce the upcoming month's spending to replentish what was used; this is an organic stop to spending it most often. Each account also has an account buffer 4 times larger than the spending buffer. The account buffer is used like many people's emergency fund. Beyond that we have some targeted sinking funds (may they not be needed), revolving funds, and fairly liquid "real" savings.
Useful points. I definitely could not answer "what is my emergency fund for?" I'm going yo be restructuring that...
So glad it was helpful for you!
Where do you keep your emergency fund and how liquid does it need to be? I move most of my emergency funds into 3-12 month CDs which in an emergency I can cash by forfeiting 2 months interest, which is still far better than the savings account rate. Generally checking account has the months pay check roll through it plus 2k for spontaneous purchases. I have a 5 figure HSA account i save into every month so medical emergency is covered.
We worked like the devil to accumulate 10 months expenses in a HYSA and called it our "emergency Fund". We are starting to view it as more of a middle bucket where we put money into it at a slower pace and have increased our contributions to our 401K as we are maxing out those and still have some money left we put some in our brokerage account, we might put it in our HYSA or maybe buy some gold or silver. But I agree sort of with you defining an emergency is often difficult and we have never had an emergency that costs 1000s of dollars. We do have sinking funds for car and home repairs. We really do not have difficulties saving and investing but that wasn't always the case. We just had 7 trees cut down it cost $5K we had the money set aside but even today 2 weeks later I'm still processing the cost.
Love it. Thanks for the thoughtful comment, and for taking the time to watch.
I started doing something similar. B/c I agree "emergency" is way too vague.
Glad to hear it!
Love it all! I will be reallocating my EF into the big 3 sinking funds ( am retired and not worried about income loss). Ironically I have frequently asked myself when would I use EF money since I have MANY other sinking funds. You convinced me to make the change. Thanks
So glad to hear that this was helpful for you!
Good tips. Thank you.
What happens if you need more than you had budgeted for for a certain category? which other budget head the extra amount comes out of?
Should one keep on adding 1% of current market value of their house to the fund each year? When is it large enough to stop contributing?
Really good video. I am double saving - need to tweak my approach. Thanks Sue 😊
So glad you liked it Sue!
Really clear thank you! What about unexpected expenses which are not emergency, for instance "your group of friends organizes a getaway next month". Do you handle that with a general "surprises" category, for leisure?
Great to see you here. You are best.
Thanks Lisa! Appreciate you watching.
I always thought about if the government could cover emergancies for us, the people could reinvest that emergency fund in the economy and would make for a better world.
What are your qualifications to be able to help clients? Just curious if a CFP is necessary.
Thanks, this is essentially the way my current YNAB budget configuration has formed the past few years. $3,000 basic, undefined small emergency budget, only used when some sinking fund just wasn't enough. Otherwise, sinking funds for either expected expenses such as vehicle replacement or maintenance, or funds with a floating balance to ensure something is covered, such as medical expenses. My only concern is, since I'm now retired and able to draw upon retirement accounts, that I would have been maybe better off with the sinking funds delineated in a retirement account earning a better rate of return rather than placed in a high interest savings account (brokerage settlement account). In the end, though, it's worked well: I haven't yet drawn from the retirement account but only from the lower earning high interest settlement account.
In my YNAB, after so many years of using it, I’ve encountered several “emergencies “….so, over the years I have set up very specific budget line items, from cars to appliances to home to health. But I also have a nebulous “emergency fund”, too. I have a big chunk of cash in the fund…I draw out of it to populate specific sinking funds when something comes up unexpected and to cover any shortfalls.
Love it. I’ve found the more specific you can get in planning for these unexpected items the better.
Thanks for watching!
Thank you for this, because I don't think people realize this. For myself, I'm currently building my emergency fund, with about two months saved so far, aiming for six. This is strictly for covering bills in case I lose my income. I also have a short-term savings fund for unexpected expenses, like when my headphones broke last night-pulling from that instead of my emergency fund.
Im also working on a medical fund and future car expenses along with a tech fund (😅 the tech fund didnt have anything in it as im still working the budget out)
"Is this a brand where, whenever I take it in the shop, it's going to be $1000 every time?"
So, you mean any car then. ;-)
Haha unfortunately that seems to be all of them these days! Maybe I should’ve said $2k every time ;)
That strategy also applies to life, period! I see people working like dogs, saving a bunch of $. When asked what is it all FOR...? They go blank. I'm extremely cheap in certain areas and very generous in others. Define your "rich" life.
$18k air conditioner out in the south in the middle of July is an Emergency.
$1,500 water heater
$400 garage door repair
All of these happened at once.
That’s not vague
Very wise video. Excellent content
Those are all covered under “home maintenance” fund. If own a home, set aside 1% of your homes value into an account for these expenses that will happen. These aren’t “emergencies” these are all the added costs of home “ownership”
So: $250,000 home, set aside at least $250 a month for maintenance of your home. $3,000 a year
Totally agree, that's why I have a home maintenance category and for larger homes, I break out each major expense (like the HVAC) into their own separate category and plan for each. Thanks for watching!
Yes, i have about 20 sub accounts at my credit union. I put money in every account for each bill on payday, And yes, I have an emergency fund too. Another sub account!
thanks for watching, glad this works for you!
Why can't I still save my 6 months emergency fund and then after invest in the market?
Hi Nick, I have been following you for a while and you helped me setup my YNAB budget through your videos. I noticed in the video you still have a Savings account. I do have a Savings account with just $300 in it. This is just to keep the minimum balance (or get hit with a fee). I do contribute when I have some money add to it...but are you saying we shouldn't have a Saving Account and add budget categories to the checking account. This way we would have dedicated amount of money for the these categories
Hey Jim, great question. I do use a savings account - but only for interest. And it's not actually "connected" with any specific category. I use the categories in my budget to help me determine what we have where.
If you want a detailed deep dive on this, watch this video on savings accounts: ruclips.net/video/N4SQzxTZ1uQ/видео.htmlsi=po8AiGS1lx_Wqz2J
I personally use method #3 as it's the most flexible and helps me earn interest because I use a high interest savings account at Ally.
Boiler breaks down, car needs a large repair... ya know, emergencies (unforeseen large expense items).
The fund is there to stop you having to sell equities at potentially a bad time in the market cycle.. What am I missing?
@@PaulB-q3d totally agree. Did you watch the video in full? That’s exactly why I made this. The generic advice of 3-6 months emergency fund is woefully inadequate. Instead you should think about your specific scenario and the common emergencies that could arise and plan accordingly. Most emergencies are predictable and can be planned for. But most people don’t think about them, and therefore end up unprepared.
Hope that makes sense!
I keep 6 months of bills in a savings account, in case I’m out of work. I don’t touch it unless I’m out of work. I pay as I go on any repairs or other needs. I don’t save anything else, as soon as I have an extra $3-$5k I’ll go another trip somewhere. I’m not saving anything for a rainy day. No debt and travel as much as possible is my motto.
Sounds like you do exactly what I’m talking about! A dedicated account for income loss and manage the other items with your cash flow. That’s great. Thanks for watching!
I have been thinking about this after hearing Rachel Cruz (Ramsey's daughter) talk about it. Kinda makes sense. Big thing, be ready!
Absolutely, glad you found it helpful!
Love this video, being specific about what you're saving for is great advice! The four emergencies you list are predictable enough to be True Expenses.
If I'm permitted a word of feedback, why so many categories? No brain can balance that many priorities.
Some of us are more detailed than others. I’ve had as many as 95 categories and recently skinnied down to 75. This makes my brain happy. Do what works for you though!
Personal preference. We have about 80 categories in our current budget. But I’ve had clients with 20. And clients with 120. It all depends on the situation. Sounds like you’re good with lesser categories, but I don’t think that means it doesn’t work for anyone. It’s just not what works for you - which is great! That’s the whole point of personal finance, it’s personal :)
Provocative title, and this idea resonates with me the whole time. I like that you place importance in critically thinking the purpose and parameters of the emergency funds. First time viewer, but in a way I already follow your system. I especially appreciate the example of the stable and single 20-something having 1mo savings + invest the extras. It seems also that you are implying that for one year, I can do this; then the year after, adjust as things come into my life. Segmenting life to more than just whole decades, like a savings account has more than one segment.
Totally. The use of an emergency fund is not something that remains static. It should change with your life as the seasons of your life change. Glad you liked the video!
THANKS very useful video !
@@abee5776 glad you liked it!
Resume of the video:
Don't have an emergency savings account, but have save money for when things break. Hahahaha, so have an emergency savings account.
Of course! Did you actually listen to why? I’ve seen tons of clients raid their savings accounts and one of the ways we can combat that is to get more specific and less vague about what that savings is for.
Wish you all the best!
Good idea to budget for the deductible(s).
Glad you liked it!
Sounds like you are talking about sinking funds
So instead of 1 savings account, just have 4 😂😂😂 nothing new here
Wish you all the best!
Whatever you do, don't subscribe to his mailing list. No matter how many times you try, you cannot unsubscribe
So sorry you’ve had trouble! There’s an unsubscribe link in the bottom of every email. You can unsubscribe anytime you like :)
But if you have issues, you can also just hit reply on and email and let us know. And we can unsubscribe you.
Wish you all the best!
@@mappedoutmoney I’ll have to try the reply. I can’t swear to it but I’m pretty sure I’ve tried that. I know I’ve tried the unsubscribe many times
@@gordonb1737 just hit reply, I read every email. If you ever need to unsubscribe just let me know and I’ll take care of it no problem.
I totally disagree with this system! You only need one emergency fund! He recommends splitting it up in different categories: auto maintenance, house maintenance, and medical costs; you can do it this way, but you don't have to! Everybody's financial situation is different! This is just an option! I highly recommend starting with one emergency fund for starters! That's all you really need! Overall, the video is good but it is an alternative for budgeting.
Thanks for watching!
Did u work in Springfield ?
Nope, I have not ever worked in Springfield.
no, no, no, no, noooooo
Best of luck!
Oh, right. This is why you do not take advice from random guy on youtube.
Young lad, never lost a job, has unexpected illness in family. No kids either
Did you watch the video before commenting? I literally talk about planning for each of the items you mentioned and specifically how we have had multiple unexpected illnesses in our family.
💙💛
Appreciate you watching!