I have seen enough companies to suddenly reduce staff by a significant amount, get acquired, roles outsourced, or reorganized that I have no illusions about any employer’s goodwill or loyalty. It can happen to anyone in any company. How you deal with it is then highly individual and depends on the industry and circumstances.
I guess I’ve kept a high cash reserve because for a couple of years we were not certain if we would stay in Switzerland. Things seem more stable now so we feel more at ease with having less liquid assets. Also, a ”war chest” is nice to have during market crashes.
Be careful here. The corporate world is not a meritocracy.
Very well spoken.
I have seen people survive layoffs and then wish they had been kicked out, too. Because they were the ones left to deal with the mess. And if they wanted to get out: no garden leave, no severance payment, no retaining of restricted stock units. They got their contractual notice period of three months, lost part of their bonus, and that’s it.
I was literally the golden boy for the management one day, negotiating a raise and a promotion, to become one of the “potential for cost reduction” in a matter of a couple of weeks, thanks to Covid. After 5 months on unemployment I just started a new job, but with about 18% loss of salary compare to before… at least it should be a bit more secured job.
And it trigger me to start my FIRE journey (finally at 40) so I keep looking at the bright side.
I had about 5k EF that I managed to not touch, but I had this cash reserve for less than a year. It helped me sleep better at night for sure. Before that I was totally careless…
in couple, 2 kids, both working (and now she’s having a better salary than myself, again )
I also have an EF because I’ve just start my professional career and because nothing is granted in professional life.
Here is my experience: I’ve been employed the 12th march 2020 as a Junior Legal Officer in a Management company for International Mobility Employee. The company had a solid experience in this field ans they were growing fast and had the objective to start growing in Asia. Unfortunately the covid had other plan… I was a good element especially being able to adapted myself quickly to the job despite the fact I’ve seen my colleague only one day before the lockdown. After a great test period and lot of compliment I was fired for the end of July 2020 because the company was struggling due to the covid and because I was new.
Now I’m struggling to find another job Fortunately I already have a frugal life so I live peacefully with the unemployment benefit and don’t have to touch my EF. But it’s a welcome security.
I do agree that you don’t need a 3-6 months emergency fund in Switzerland. I still like to keep a 1-3 months buffer just in case something happens.
I also agree with what has been written that, as your liquid investments grow, the need for an emergency fund goes down. At the start of our investing career, though, it seems to me that starting by putting together a cash buffer, then investing in stocks is the safer way to go.
I still ascribe to the concept coming from Buffet, I think, that a real emergency fund is not a checking or savings account but cash in an envelope. To me, CHF 1,000.00 in an envelope somewhere at home is a smart buffer to have no matter our net worth.
Totally agree. There can be times when banks are closed and payment operators are down. There even is the concept of banking holidays to avoid a cash run on banks as a result of loss of trust in liquidity. Happened in Cyprus a few years ago.
I used to have an EF of 10k cash which was totally sufficient. Now I bought a new PC and land in Bosnia and used it up completely. So what would you do?
Wait for the next bonus in February 2022 and fill it up again with that.
Stop investing monthly and use my savingsrate (1k/month outside 3a) to get back to 10k.
in my regars a bad idea. The EF should be available, otherwise why having one at all.
this is what I’d do. in case of potential tax-advantages (3a) I’d fill up EF first, then 3a, and in case 3a is not filled to capacity at the end of the year, take some of the EF to fill it up and then continue with the EF.
This is the main issue with EF, you need to fill them up again when you use them.
My condolences about the need to buy a new pc right now.
For me, 1. or 2. would be the same except that the money would be from the margin loan from IBKR, 3. would be like if I sold my shares to cover it.
Even if my portfolio loses 50% and the margin requirements at IBKR increase, I would still be able to take out more than a years worth of living expenses without worrying about a margin call. So why should I keep one in cash?
I mean… We’re not in a crash. You wouldn’t really loose anything by selling now besides missing out on some time in the market. I really don’t think that selling now would be a terrible idea.
Anyways, I would just stop investing until you get your EF back unless you have a history of having to tap into your EF quite often. If you need it often, I’d probably even stop the 3a payments for a moment to top it up again.
But this was not a case of use for emergency, though, it was discretionary expenses that have been fueled by available cash. That EF didn’t behave as an EF but as liquidity.
Emergencies are meant to be rare, if you get to the point where you have to refill your emergency fund, and that emergency fund was enough, then you’re probably more grateful that you have gone through than worried about how you’re going to refill it.
Same as @nugget : if it can wait until February 2022, then you don’t need an EF at all (or, inversely, if you do need an emergency fund, it should not wait until February 2022).
I’d say it depends on the fees you’ll incur. With no fees or tax implications, I’d rebalance right now: when using your investments for expenses/further investments, you’d ideally take the funds out according to your allocation (so selling stocks and bonds in the appropriate ratio) to pay for it. If the fees are too high to warrant it, directing new contributions toward it may make sense.
All in all, I’d follow my traditional rebalancing strategy, whether it’s doing it with new assets, doing it quaterly/annualy or when a fixed discrepency with my allocation arises.
Edit: alternatively, this could be seen as a question about lump summing or DCAing out of the market and into the emergency fund.
I will never wait for such a long time without an EF in my asset allocation, I think I will not be able to sleep confortably until then.
This is what I will do, trying to reach this amount as fast as possible.
If you really need this EF, I will do it, currently the stock market seems to be in a confortably bullish so you won’t lose a lot by selling some of your position to take away right now 10k CHF. And you will be able to continue investing each month your monthly savingsrate and get those 10k CHF back faster than not investing at all.
Wait, could we see a variation of the @Cortana effect on this? It’s basically a lump sum vs DCA question and if contributing to the EF monthly, Cortana would stand to loose in case of a market crash… could this actually be the top?
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