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MBNA was taken over by Bank of America in 2006. During the Great Recession, they cut back on a lot of credit limits. I had a $30k MBNA/BofA card where the limit was cut in half. It's gone up a bit since then, but is still only $18k.

Which means if I had kept it, they would have cut the limit. It is still better than it is closed. The 3 credit cards I currently have are working fine for me. Travel has been the only reason I've had to split a transaction across multiple cards.
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Shirehobbit;

Right now, DW and I have about 6 months of net pay in emergency funds, but that is a gross over simplification.

Those same funds account for about 18 months of core spending, and we are still increasing them. I have them distributed as follows:

Local savings (held at same bank that holds our primary checking account). This one gets funds automatically, every paycheck. It holds about 1 month of core spending at any given time, and I use it primarily to smooth out some of the unexpected expenses from month to month. Interest rate is pretty low, but its pretty easy to get access

Secondary savings (held at same institution holding a number of investment accounts). I presently have about 8.5 months of core spending in this account. It earns a somewhat hire interest rate, but is still FDIC insured. Its a little harder to tap into, but I have used portions of it when replacing a car, etc. Adding to it every month.

Tertiary emergency fund. This presently holds about 9 months of core spending and is invested conservatively in the bond and stock market. DW and I are relatively young, and at this point, this is more akin to an EOTWAWKI fund and is only likely to be tapped in the event I loose my job and we are not able to establish an additional income stream. Adding to it every month. Having enough funding in my secondary savings means I don't get excited about the extra risk involved in being in the market.

At some point (and I'm projecting about 3 years) I'll probably have more than 12 months of core spending in each of the secondary and tertiary funds, and I expect to use some of the secondary savings to pay off our mortgage at that point.

We are working to aggressively reduce core spending by paying down debt (mortgage and student loans at less than 4.25% car payment at 0%). Some would argue that building the emergency funds further would be a better use of the excess we are paying, but getting core spending down will really change the dynamic.

In our instance, getting the car, mortgage, and student loan paid off will decrease core spending not quite 50%, which would double the duration my efunds could cover.
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Thank you, Dan.

I have equal to three months gross wages in an online emergency fund account.

I have 1k in cash for local emergencies. The recent urban wildfires have me more concerned than the usual earthquakes. And with PG&E (gas and electric) now doing power outages during high winds who knows who will be affected and for how long. Last week they had an accidental power outage in my local area, including an entire shopping center and the homes in my neighborhood. Unfortunately, there was no opportunity to buy food with cash because the businesses all closed their doors when they realized the power wasn't coming back on in fifteen minutes. A wonderful employee of our local Starbucks gave me two pre-packaged meals in plastic boxes that she said she would have had to throw out anyway. I walked over to the grocery store (which had closed its doors) and shared the contents with two musicians who were playing outside the doorway.

I also have a savings account at my local credit union which contains 3 years worth of wages.

My condo is paid off (so that leaves me with monthly HOA fees and semi-annual property tax). No car, but I'm thinking of getting a used one when I retire. As some of you may recall, I paid off my credit cards in October 2007. When I use them (the ones that give a cash dividend) I pay them off in full each month.

I've no idea what my medical costs are going to be when I retire as I have numerous chronic conditions. When the time comes I believe I will have to be partly retired for awhile. I'm going to switch from a full-time to a part-time job so that I can afford my health care supplement, a car (I want to be able to purchase it with cash and of course there are the expenses that come with owning it), ditto a dog, and lastly, I still want to be able to travel (although I think it will be mostly be day trips instead of multiple-week travels. The good news is the cost of taking the local train and busses will decrease by 50% when I turn 65.

Best,

shirehobbit
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Note that my online savings is divided into accounts in which I make monthly deposits (property tax, homeowners insurance, etc.). I could do this with my credit union but I want the money harder for me to access.

shirehobbit
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Primary checking with an online bank generally tops out at around 1 month expenses, but can go down to a couple hundred bucks as money flows in and out. We have a second checking account with a local institution that we just use for check deposits and cash withdrawals. It generally doesn't have a significant balance and pays no interest, but is free. We have a Money market fund that currently holds around 14 months expenses. It is both an emergency fund and a slush fund for special projects and larger lumpy expenses like property taxes and insurance. Pretty easy to draw on, though we do not currently have it set up for check-writing. Beyond that, we have a brokerage account that holds an inheritance we collected a couple of years ago. I have not added or spent from the account, but it also acts as an emergency account of more or less last resort and is conservatively invested mostly in CDs, Bonds & Treasuries with portions maturing around every 6 months or so. It would cover around 3 years of expenses, were we to draw from it.

My wife is approaching early retirement at the end of the year and we are both around age 57, so depending on how we decide to proceed, we may draw on the inheritance until we can draw from the IRAs and 401(k) plans without penalties and without using the 72(t) distribution option until reaching 59-1/2 in a couple of years.

In general, I feel our money market account with 12-14 months expenses is more than sufficient as an emergency fund for normal situations we might find ourselves in. We've spent most of our lives with a whole lot less than that in any kind of emergency fund.
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My wife is approaching early retirement at the end of the year and we are both around age 57, so depending on how we decide to proceed, we may draw on the inheritance until we can draw from the IRAs and 401(k) plans without penalties and without using the 72(t) distribution option until reaching 59-1/2 in a couple of years.

If you have/will leave your last employer in or after the year you turn 55, your employer's 401(k) may allow withdrawals without penalties, and without having to use the 72(t) option. You will have to check to see if there are any restrictions on the withdrawals.

AJ
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If you have/will leave your last employer in or after the year you turn 55, your employer's 401(k) may allow withdrawals without penalties, and without having to use the 72(t) option. You will have to check to see if there are any restrictions on the withdrawals.

We did talk with a representative for the 401(k) plan last year and it doesn't sound like it is an option with her 401(k) plan. We may still opt for 72(t) distributions from one or more of our accounts, but the inheritance nest egg gives us lots of options.
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I have accumulated about $100,000 in my checking account and can't seem to get rid of it with my usual devices of DRIP stock purchases and such. That prunes down increases, but I don't really have good uses for it.

I suppose I ought to make a point of studying up on that issue, but I haven't done so.


Seattle Pioneer
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I can send you my PayPal address.

Fuskie
Who notes sometimes the best use for cash is to just set it aside in reserve for golden opportunities, like the next correction or recession, or for an anniversary vacation or other live enjoyment...

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I am employed.

I could live off my savings reasonably for approximately 420 months if I had to, excepting any unusually large surprise expenses such as emergency surgery and stuff like that.

The total is approximately 200x my monthly net wages.

I enjoyed my Saturday, thanks!

xtn
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I'm mostly retired, but have worked part time and seasonal for about 15 years. My financial advisor tells me I won't run out of money in my lifetime. The most recent forecast tells me that even after taking required minimum distributions, I will have more money in 20 years than I do now.
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<< I will have more money in 20 years than I do now.>>


After being retired for ten years, I discovered that despite having zero earned income, my net worth had increased by 50% in that time.


Seattle Pioneer
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I keep enough cash in checking to last 6-9 months cash, if I go hard core LBYM, that would stretch a couple more months. This is somewhat variable as this is my "daily living" cash. 😀



I have a variable amount of cash in a brokerage - between 1-2 years worth normal expenses, 2.5 to 3 under duress? I use this for "stock market opportunities" and for large, planned expenses.

I also have a years worth of credit on CC. Yeah, I know, that's NOT allowed, but I'd use it if push came to shove.

🙂
ralph
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I also have a years worth of credit on CC. Yeah, I know, that's NOT allowed, but I'd use it if push came to shove.

Ha. One of my credit cards just increased my credit limit. I now have over $100K limits on CCs of which $95K is available. The other $5K is at zero percent for another two years.
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I gotta say, I love a good old fashioned emergency fund thread!

For almost 10 years - ever since my husband died and I received a pretty sizeaboe life insurance payout - I have thought about my emergency fund much differently.

Previously, I was chasing the goal of having credit cards and cars paid off, funding my retirement funds, and building up 3-6 months expenses in a safe account. Getting 400k in life insurance allowed me to basically go directly to “everything is paid off even the house, and I have extra to invest.”

Since that time, I don’t really keep much in a dedicated emergency fund. I have enough in non-retirement investments, some of which is invested for growth and opthe rest that is more conservative, that is could live well over a year without touching any retirement accounts. That works for me.

Recently I ditched corporate America to work for myself. Right now, I have enough earmarked in my “getting started with this business” to go several months with zero income before I’d have to crack open investments. My goal is to manage my money and bulk my business in a way that allows me to handle paying the bills without selling any investments if I possibly can.
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shirehobbit,

You wrote, For those of you who are employed, how many months savings do you have in your emergency account? And do you equal the total to X amount of gross or net monthly wages?

I actually have almost 12 month's worth of expenses in "cash" in taxable accounts. But I'm approaching retirement and I now view my cash position as part of my bond position and try to place it in money market funds and CDs that yield a decent rate. If intermediate or long-term bonds were paying more, I'd probably shift more into a fund like that. Right now my overall bond position is a mixture of relatively short-term or "stable value" instruments, an intermediate bond fund and a couple of high yield positions. My bond position makes up about 15% of my total investable assets and I intend to move it closer to 20% by the time I retire late next year.

From what I can tell there are two or three times in your life when you don't really want to carry too much cash just for an emergency fund. When you're young; when you're trying to pay off high-rate debt and when you are retired (or about to be or are otherwise financially independent). The first two cases the cost of accumulating the cash may be worse than the alternatives. Either you miss out on things like schooling that might increase your income, or you wind up paying 20+% interest rates. In the last case your entire portfolio evolves into your emergency fund … which you rebalance every time you do a major draw-down.

In between while you are trying to pay down lower-rate debt and/or accumulating funds for retirement or just financial independence, the cost of not having the cash on-hand might be worse than setting aside some for a rainy day. But as your accumulated assets become significant, you have resources you can draw on if you need them in an emergency so maintain a large cash pool seems to become increasingly less important again … assuming those assets aren't locked up somewhere and inaccessible.

At least that's the way it seems to me...

- Joel
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I don't really have good uses for it.

SP, I believe this means that it's time for you to start thinking more broadly about how to use your money. You've regularly mentioned that there are causes you care about -- the Boy Scouts, your nephews, the trades, and a variety of other things. Why not start giving more to things like that? Seattle has an excellent network of community colleges that have really good trades programs. (I still wish, looking back on it, that I had stopped and gotten an HVAC tech certificate when I was there. At the time, I didn't understand what it was or why it would be valuable.)

Alternatively, of course, you can leave it for your heirs to deal with, along with your other stuff. However, since it's your money at the moment, you might as well find effective ways to use it for the benefit of things you care about.

ThyPeace, in the process of planning that myself because of an extra income stream (due to my mom's passing) that I had not expected.
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One of my credit cards just increased my credit limit. I now have over $100K limits on CCs of which $95K is available.


Wow! I'm a millionaire, have a credit score well over 800, have held the same job for thirty years, my youngest CC account is fifteen years old, and I still only have $42,500 in combined CC limits. What's your secret?

xtn
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What's your secret?

I've no idea. Never asked for an increased limit. Credit Scores over 800. Oldest account 30 years old. Newest account 2018 when I had to open a new account to get 36 months of zero percent interest on a new furnace and AC. Existing card increased my credit limit but then couldn't use it because it only allowed 12 months of zero percent interest. Single/widowed retired. House is paid for. Social Security, pension and RMD more than enough to meet my expenses. Never missed a payment.
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For those of you who are employed, how many months savings do you have in your emergency account? And do you equal the total to X amount of gross or net monthly wages?


Damn good question, Shirehobbit. I’m a contractor, contracting through my own limited company, so my affairs are a little more mixed up than most peoples. I pay myself a good salary, (£45k which is 50% more than the average London wage). Goal number one for the company is to have a float of 3 month’s salary, payroll taxes and pension contributions (401K). This time next year, when I do the 2020 corporate tax return, I’m hoping it’ll be up to 6 months. I consider this the company’s money, not mine. (In Britain, I can’t claim the derisory unemployment benefit - “Jobseeker’s Allowance” of £76/week - unless I make myself redundant from my own company.)

On a personal level, I have a £10k proper Emergency Fund, which sits in a harder-to-reach bank account. That equates to 6 months living expenses. Everything else is quarantined into their own little pots (e.g. holiday money, glasses replacement fund, IT replacement fund). I’m saving a reasonable proportion of my takehome pay each month (25%) towards all those pots of money.


I think one of the best concepts I ever learned on these boards is to Quarantine my savings and investments. I don’t think of this money as mine - it belongs to whatever is the designated savings goal. For instance my car has his own account, into which I pay the mileage I can claim when I travel for work plus (currently) £100/month. The current balance is just over £5,500, which will pay for insurance, repairs, etc, and part of the way to a replacement when the worst happens. It’s not my money, it’s Lucky Car’s.

Another example: my rental property’s emergency fund (£5k) is held separately. The current tenants are moving out soon and I expect to pay £3k in refurbishment costs. That will be replenished by the rent I receive from the new tenants.

HTH

- Pip
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Wow! I'm a millionaire, have a credit score well over 800, have held the same job for thirty years, my youngest CC account is fifteen years old, and I still only have $42,500 in combined CC limits. What's your secret?

Do you want more than $42,500 in available credit limits? If not, then why worry about it?

If you do want more, here are some tips:
- If you only have 2 or 3 cards, and you want more in total credit limit available, you probably need to open some additional accounts. Look for cards that offer a significant cash back bonus for opening, and if it's a rewards card, be sure that it rewards your current spending patterns. (It doesn't do a lot of good to get a hotel brand rewards card if you never stay at those hotels, for instance.)
- Be sure that your credit card issuers have updated income information - since your most recent account was opened 15 years ago, if you haven't kept the issuers in the loop on your income, they may still be using your income from 15 years ago (or longer)
- Ask your credit card issuers what you need to do to increase your credit limits - different issuers may have different criteria that they look at when granting credit limit increases. And the criteria aren't just based on you - they also have to take into account the issuer's available capital. So it's better to ask for credit limit increases when your issuer has been reporting record earnings, rather than when they are having a bad year.

AJ
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What's your secret?

xtn


Some credit card companies are more lenient with credit limits. My MBNA card which is now closed had upped my credit limit to $50K. The limit was increased over time. The account was closed after I didn't activate the cards because of the credit limit. I didn't want a card with that much credit limit.
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My highest limit card is at $28,000 and I can't imagine ever putting that much on it ever. I have several cards and rotate through them for everyday purchases and pay the balances in full. Since the cut off date for all of them is about the same time of month, when I pay the one I'm using this month, I switch to another one for the new months purchases. That keeps all of them active. The only one with an ongoing balance is the zero percent for 36 months card and once I'm through with it, it will go back in the drawer until the next time I need an appliance and can use it. I'm expecting to replace the hot water heater and dishwasher in the next 5 years and while I could pay cash, I will take advantage of zero percent interest if it's available.

Although, many years ago now I bought a used car using a credit card because it was a long weekend and I couldn't get to the bank to transfer money until they reopened.
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Some credit card companies are more lenient with credit limits. My MBNA card which is now closed had upped my credit limit to $50K.

MBNA was taken over by Bank of America in 2006. During the Great Recession, they cut back on a lot of credit limits. I had a $30k MBNA/BofA card where the limit was cut in half. It's gone up a bit since then, but is still only $18k.

And if you don't use a significant part of your limit, they can also be cut. I rarely use my AMEX card any longer, but I do have a small recurring charge (about $5) on it every month in order to keep it active. It's been that way for about 4 or 5 years. A couple of months ago, they cut my $20k limit to $10k because I wasn't using the 'full value' of the limit. It hasn't seemed to affect my credit score, which is still well over 800, depending on which model is being used. I still have over $100k in credit limits, of which I typically only use about 2% - 3%, so a $10k drop in my available credit wasn't a huge impact.

AJ
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Wow! I'm a millionaire, have a credit score well over 800, have held the same job for thirty years, my youngest CC account is fifteen years old, and I still only have $42,500 in combined CC limits. What's your secret?

Similar story here (dude, it's almost like looking in a mirror). But I do have a single card with a limit approaching $50k (plus a few others that generally sit unused and collecting dust). I asked for a limit increase when we purchased our current house - we were buying a bunch of tile, flooring, and other reno material, and I was worried about running up too high a utilization before my payment would clear. I asked for an increase and they bumped us to nearly $50k. No complaints here, it keeps my utilization low. I put EVERYTHING I can on that card for the rewards, and pay it in full every month.
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Do you want more than $42,500 in available credit limits? If not, then why worry about it?


I don't, and I don't. I average about a thou per month in spending across my four cards, pay them in full every cycle, and really only use them in the first place because of the numerous little conveniences (online purchases, pay-at-the-pump refueling, not having to replenish the cash in my wallet as often, etc). I certainly don't need the credit. Was just asking out of curiosity.

But thank-you for gracing me with your help. I can't remember whether I've told you before that I think you are one of the best members of this forum. I feel a little bit honored that you replied to my question.

xtn
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Similar story here (dude, it's almost like looking in a mirror). But I do have a single card with a limit approaching $50k....


That gets another Wow! from me. And it makes me wonder whether my relatively lower limits has anything to do with the type of cards they are. You know, none of my four accounts is anything approaching new. And they are basic cards, never have applied for "platinum" (or whatever) upmarket cards. I wonder if - behind the scenes - issuers have different ranges for different cards.

xtn
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That gets another Wow! from me. And it makes me wonder whether my relatively lower limits has anything to do with the type of cards they are. You know, none of my four accounts is anything approaching new. And they are basic cards, never have applied for "platinum" (or whatever) upmarket cards. I wonder if - behind the scenes - issuers have different ranges for different cards.

xtn


It isn't hidden that different level of cards have different maximum credit limits. If you requested a higher credit limit and its approved, the card level would have been upgraded.
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MBNA was taken over by Bank of America in 2006. During the Great Recession, they cut back on a lot of credit limits. I had a $30k MBNA/BofA card where the limit was cut in half. It's gone up a bit since then, but is still only $18k.

Which means if I had kept it, they would have cut the limit. It is still better than it is closed. The 3 credit cards I currently have are working fine for me. Travel has been the only reason I've had to split a transaction across multiple cards.
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