Emergency Funding

We are enjoying our new found freedom due to the refinance and dumping most of our savings into paying down the mortgage for the refinance. Our current mortgage equals $82,658. New Mortgage on the refinance paid down to $75,000 even. We have trashed our $13,500 savings and put $7,000+ towards paying the refinance and the remaining $5,000 we are using as our own personal savings. Now a couple days ago, I was in a quandary in which I had $5,000 cash in my hand after taking out of the checking account. I placed it in an envelope and stuck it in a safe place (not earning interest). I have made an "emergency fund".

The Emergency Fund. I plan on not touching the fund and thought, well if I'm not going to touch it but I want its liquidity, I might as well take it as cash. Then I thought wouldn't it be better if I put it in a money market account with checking priviledges?? I mean it might as well be safer than sticking it in a safe place, right? Well thats the point where I am in the emergency fund. The spouse wouldn't mind the emergency fund being bigger. I think 6 months worth of expenses, which means approximately $10,000 should be enough. Im guessing thats the amount that would make me feel safer too. Emergency funds are meant to be SAFE and LIQUID. Period. From a personal standpoint, I'll never be satisfied with an emergency fund because I'll never feel comfortable with a certain amount..... As I'm writing this I'm deciding to do an exercise.

Monthly expenses are as such (minus IRAs and Savings contributions): - $975.00 total. Approximately $1000. So if we were to both lose our jobs, $6,000 should be enough. At the worst we can always throw ourselves into the depths of hades, ie: credit cards, 2nd mortgage. I say when we are at our worst moments, I DO NOT want to have to dig deep or put any more money into debt. Why? Because deep down it scares me to have to lose the house or to find my family living on the street somewhere. $6,000 doesnt cut it in real life. I have to figure that $20,000 should be enough AFTER all debt has been paid (monthly at that time will drop down to $500). The emergency fund should sustain for more than 2 years with a family.

Our next worry... purchasing our 2nd home. posted by The American Dollar at 8:19 PM