stevio
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Post by stevio on May 31, 2019 23:42:50 GMT
Interested in how people handle this, as specific to own circumstances, general idea of frequency of income, bills and level of contingency and methods used would help
Personally have 2 scenarios:
1) Mainly annual income,
50% of bills are regular monthly bills,
50% of bills are larger lump sum bills approx quarterly.
25% of income covers bills.
Currently reserve 50% of income, split 50:50 instant access P2P and high interest maybe 90d access to P2P
2) Monthly income but variable
No monthly bills
25% of bills are small lump sum bills approx quarterly
75 % of bills are large lump sum bills approx annually
25% of income covers bills
Current reserve 100% of income, 100% instant access P2P
It seems obvious now put like this that 2 needs to reduce reserve, maybe to 59% of income?
Any other changes, suggestions, what you would do?
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cwah
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Post by cwah on Jun 1, 2019 1:59:44 GMT
Questions if you don t mind:
- what platform do you use for instant access and 90 days?
- are you putting all your capital into p2p loans?
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Post by samford71 on Jun 1, 2019 9:02:58 GMT
Can I reiterate what @wallstreet has said. The idea that you invest your emergency fund into anything that resembles P2P is completely bonkers. The underlying investment in P2P in typically illiquid, high risk, long-term loans. Yes there are some exceptions such as 30d invoice financing but that can still become totally illiquid. The liquidity that some P2P platforms provide using maturity transformation is just an illusion. It requires more investors than borrowers. It requires confidence in both the platform and the underlying loans to exist. These can evaporate. The door on the way out will be much narrower than on the way in.
Still worried about "cash drag"? Grow up. Risking par on your emergency capital for a few percent is dumb.
Stick the money in a FSCS bank account, the NSI direct access account, premium bonds. Just not P2P.
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Greenwood2
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Post by Greenwood2 on Jun 1, 2019 9:43:49 GMT
Definitely nor relying on P2P or other investments.
For emergency cash:
Cash in bank (variable amount it tends to mainly get invested)
Premium Bonds. (save as houses, small income, chance of a big win (well live in hopes)).
Funds in instant access cash ISAs. (Could be withdrawn and put back before tax year end (or not).)
For short term emergency (a few days):
High limit credit card.
Arranged current account overdraft.
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gc
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Post by gc on Jun 1, 2019 11:33:58 GMT
@ stevio - It is a difficult one to answer as everyone's circumstances are unique. Having a years salary stashed for emergency is a good thing in case one loses their job etc, but then again for example, if your business is something like property management (landlord) and you have a few houses, then a years salary may not be required as chances of Not getting a salary within the year are pretty slim.
Also, there are people I know that take a little more risk and tie up more money than some would feel comfortable with (though at times I have put myself in those situations also) and if one ties up more than they can afford, into etf's or whatever is their bag, then as long as you have an ECP (as I like to call it) Emergency Contingency Plan, if worst case scenario hits, you should be able to ride it out.
An example of that would be what happened to a friend of mine, they invested more than they could afford, (they could afford it as long as nothing major went wrong). Their car went pop and they had to purchase another car. They got out a new credit card, 2 years interest free, and that gave them a little time (2 years) to get things together and pay it off.. Of course, one could also apply for another card and bounce the money, though unless one has no other option, this is not a technique I personally like.
So, to answer you original question about reserve/emergency funds. I would say it depends on your temperament and risk level, as some people would not be able to sleep at night if they tied up too much. whilst others would have no problem with it.
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stevio
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Post by stevio on Jun 1, 2019 13:19:55 GMT
Threads like this are cringeworthy.
An emergency fund is just that. An emergency fund.
Your emergency funds need to go in the most boring place you can find ... i.e. an old-fashioned bank account.
No P2P. No stockmarket. You DO NOT TAKE RISKS OF ANY DESCRIPTION WITH YOUR EMERGENCY FUNDS. Full Stop.
And you also don't tie up your emergency funds in places where you can't get at it. Its an EMERGENCY fund for heavens sake. You don't want to be subjected to liquidity risk or withdrawl restrictions. By definition ... EMERGENCY EQUALS INSTANT ACCESS.
Sheesh. I can never beleive people need it spelt out to them. 
As for the amount of emergency fund, one year's salary is the number to aim for. But the bare minimum should be absolutley no less than 3 months salary (on the understanding that you know full well that you are scraping the bare minimum). You have to imagine the worst (e.g. you loose your job, then other stuff happens at the same time) .. hence one year is what most sensible people do.
Ok, maybe let me put it another way, one were I dont get called dumb would be nice! Emergency fund is probably not the right word, "cash flow" of monthly living expenses and taxes to be paid in a year or so might be better Fortunate maybe, but I have never really had an emergency fund as such, I have never been out of work and I have always had some other form of income stream than employment or access to savings. P2P actually helped for this as it was a regular income stream, I was so diversified that defaults did not have so much impact and cash flow However, moving away from P2P into shares, accumulation units and CGT mean I only re-balance annually So I have to plan out living expenses and taxes a year in advance That money might not be needed till the end of the year, so there is a year it is earning next to nothing and actually losing money being eroded by inflation So I do not see any problem with finding a short term home for that with maybe double the return Its not really emergency funds, but a reserve of funds needed at a future date up to a year, that if not available at the time, I have other income and savings to cover I find it hard to believe that everyone's funds in in AC QAA or Ratesetter or similar are purely investment money that is not earmarked for another purpose
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Post by Deleted on Jun 1, 2019 14:05:13 GMT
Sorry stevio, I too put about a year's salary (if I had one) in a bank ac. Chasing 1% up to 1.5% is just not worth it for 90 days lack of freedom
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macq
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Post by macq on Jun 1, 2019 15:09:57 GMT
Threads like this are cringeworthy.
An emergency fund is just that. An emergency fund.
Your emergency funds need to go in the most boring place you can find ... i.e. an old-fashioned bank account.
No P2P. No stockmarket. You DO NOT TAKE RISKS OF ANY DESCRIPTION WITH YOUR EMERGENCY FUNDS. Full Stop.
And you also don't tie up your emergency funds in places where you can't get at it. Its an EMERGENCY fund for heavens sake. You don't want to be subjected to liquidity risk or withdrawl restrictions. By definition ... EMERGENCY EQUALS INSTANT ACCESS.
Sheesh. I can never beleive people need it spelt out to them.
As for the amount of emergency fund, one year's salary is the number to aim for. But the bare minimum should be absolutley no less than 3 months salary (on the understanding that you know full well that you are scraping the bare minimum). You have to imagine the worst (e.g. you loose your job, then other stuff happens at the same time) .. hence one year is what most sensible people do.
Ok, maybe let me put it another way, one were I dont get called dumb would be nice! Emergency fund is probably not the right word, "cash flow" of monthly living expenses and taxes to be paid in a year or so might be better Fortunate maybe, but I have never really had an emergency fund as such, I have never been out of work and I have always had some other form of income stream than employment or access to savings. P2P actually helped for this as it was a regular income stream, I was so diversified that defaults did not have so much impact and cash flow However, moving away from P2P into shares, accumulation units and CGT mean I only re-balance annually So I have to plan out living expenses and taxes a year in advance That money might not be needed till the end of the year, so there is a year it is earning next to nothing and actually losing money being eroded by inflation So I do not see any problem with finding a short term home for that with maybe double the return Its not really emergency funds, but a reserve of funds needed at a future date up to a year, that if not available at the time, I have other income and savings to cover I find it hard to believe that everyone's funds in in AC QAA or Ratesetter or similar are purely investment money that is not earmarked for another purpose Speaking for myself (and its possibly a generational thing) i would answer your last point with yes i only have money invested funds/IT's/ small amount of p2p that i don't think i require & is not earmarked for another purpose.Thats where the phrase only invest money you don't need came from but now people use the phrase to mean money they can gamble and don't worry if its lost or that's how it seems sometimes I have hopefully enough cash savings for a few years and except the poor %rates as part of having peace of mind while doing the best i can with a fixed rate savings bond ladder and instant access for what some may be call emergency money but i call living money. Why i said it maybe a generational thing (but could be off base) is that in the old days you saved to make a foundation and built up a base for your rent/bills/mortgage etc and a cash savings pot.When you were then settled you started if you were lucky to invest for the longer term.It seems some times from the threads on here & MSE etc & talking to people that now the trend is the other way round.In the sense that people are chasing higher returns/get rich quick in the likes of p2p,Bitcoin or looking for the next 10 bagger share first then asking where to put their left over money second (this is not aimed at you or anybody else but just an observation) As to the emergency part of the question-people always mention being out of work and getting a job as a reason to have the old adage of 3 months money but never speak of illness.Speaking from my own experience & some family members you can never tell how much you will need in the case of you or family being taken ill with say cancer or similar.That in turn may require you to give up work for a long time or even for good yourself or needing to look after them.
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travolta
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Post by travolta on Jun 1, 2019 15:32:11 GMT
Emergency fund HAS to be gold and portable.
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iRobot
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Post by iRobot on Jun 1, 2019 15:33:09 GMT
Threads like this are cringeworthy.
An emergency fund is just that. An emergency fund.
Your emergency funds need to go in the most boring place you can find ... i.e. an old-fashioned bank account.
No P2P. No stockmarket. You DO NOT TAKE RISKS OF ANY DESCRIPTION WITH YOUR EMERGENCY FUNDS. Full Stop.
And you also don't tie up your emergency funds in places where you can't get at it. Its an EMERGENCY fund for heavens sake. You don't want to be subjected to liquidity risk or withdrawl restrictions. By definition ... EMERGENCY EQUALS INSTANT ACCESS.
Sheesh. I can never beleive people need it spelt out to them.
As for the amount of emergency fund, one year's salary is the number to aim for. But the bare minimum should be absolutley no less than 3 months salary (on the understanding that you know full well that you are scraping the bare minimum). You have to imagine the worst (e.g. you loose your job, then other stuff happens at the same time) .. hence one year is what most sensible people do.
Ok, maybe let me put it another way, one were I dont get called dumb would be nice! Emergency fund is probably not the right word, "cash flow" of monthly living expenses and taxes to be paid in a year or so might be better Fortunate maybe, but I have never really had an emergency fund as such, I have never been out of work and I have always had some other form of income stream than employment or access to savings. P2P actually helped for this as it was a regular income stream, I was so diversified that defaults did not have so much impact and cash flow However, moving away from P2P into shares, accumulation units and CGT mean I only re-balance annually So I have to plan out living expenses and taxes a year in advance That money might not be needed till the end of the year, so there is a year it is earning next to nothing and actually losing money being eroded by inflation So I do not see any problem with finding a short term home for that with maybe double the return Its not really emergency funds, but a reserve of funds needed at a future date up to a year, that if not available at the time, I have other income and savings to cover I find it hard to believe that everyone's funds in in AC QAA or Ratesetter or similar are purely investment money that is not earmarked for another purpose Not everyone. Just some sensible people. 
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iRobot
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Post by iRobot on Jun 1, 2019 15:39:58 GMT
Emergency fund HAS to be gold and portable. Blimey! What kind of emergency are you planning for!  "HAS" -- why? (I don't see the advantages of gold over currency for 99.9% of life's emergencies. The other 0.1% - tinned food, bottled water and shotgun cartridges might be the better option... )
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macq
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Post by macq on Jun 1, 2019 18:21:38 GMT
to my mind the term emergency money is a bit of a misnomer or like putting labels on jam jars saying emergency,gas,etc it almost means you are having to set a target to force yourself to save when really its living money and everybody should aim to have "cash in the Bank" first
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Jun 1, 2019 21:23:30 GMT
Emergency fund HAS to be gold and portable. 
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hector
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Post by hector on Jun 1, 2019 22:11:30 GMT
Emergency fund HAS to be gold and portable. Being unashamedly sexist. Is that a ladies way of saying........ ‘ bling & wearable ‘........? x
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scc
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Post by scc on Jun 2, 2019 4:52:48 GMT
Have to agree with others. There is no way an emergency fund should be anywhere near P2P. For me, an emergency fund looks like two years worth of normal running costs - and sits in cash (well, NS&I and current account). There is also usually up to a month's worth of food in the house and a winter's worth of wood seasoning in the garden (with more ready to be brought up from my woodland which also has freshwater if needed). Sounds like overkill, but we get up to day long power cuts roughly five times a year - and there was a week long one during a bad winter around a decade ago. Also there would be an expectation of helping out neighbours - especially the elderly.
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