So I have 3 blog entries in January and then *poof* I disappear for the next 6 months. It's a good thing I dont have my exercise regimen tied to the frequency of my blogging, or I would be one large dude by now (and not in a muscular way).

The year has been a busy one, especially financially, but I will save that information for my annual self-introspection entry, due to come out in late December. Given my lack of regularity on this site, that should be the next time you hear from me.

Nonethless, I have an interesting topic for you to debate. Dont worry, you wont hurt my feelings if you disagree with me or each other, as the identification of an individual's emergency fund is different for everyone.

Here's the background: In June, my DW determined that, for a variety of reasons, she needed to resign from her job. She had been after me for years to stop working, and my canned response was always "Only if you can stop spending money." (Not that she is irresponsible in any way, but it was said in jest) Well, due to health and family concerns, we decided it was time to get serious. But she surprised me by coming out with, "I want to see if we can do the Dave Ramsey system." (We have some close friends that have been doing this for a little over a year, and I think she sees their success as something for which to strive.)

Being the numbers guy that I am, I have read most books by the popular finance gurus and have even used techniques from each of them in one form or fashion over the years. I like what the DR system can do for someone that has no concept of their spending habits, or for anyone just trying to get debt free. However, I have never been one to follow a recipe completely (I even put ham in my deviled eggs!), and I prefer to refine any free advice with my own knowledge and common sense. That is to say, I appreciate the intent in the DR philosophy, but will alter it to our situation.

I evaluated our cash situation at the time and determined that we could take care of the first couple "baby steps" right away: $1000 EF + pay off all non-mortgage debt. I had already maxed my 401K contribution so the 4th step is gone too. But what about that 3rd step - 3-6 months' EF?

I think we have covered at least a month's worth of EF through a current initiative. We have been working to stock up a full month's worth of expenses in our primary checking account and should be there soon. The goal is to live on last month's income (Hello YNAB fans!).

But in talking to my accountant, we dont see the sense in holding any more than that in a low interest savings account. Think about it. If you have, say, $25k sitting around "just in case", do you want it making 1% or 10%? That 9% is an awfully expensive insurance policy, and it gets even more so as the years go by, due to compounding.

You could debate that it's not quick to get money out of an investment account. I counter that with a backup plan to my backup plan. I have a $15k personal line of credit that I opened last year in case there were last second overruns on our pool construction project (fortunately, there werent). So for $25 a year, I can keep it open and it is there, acting like a 9% credit card, that is only used in the most dire emergency. There are no transaction fees and it is tied to my bank accounts, so I could have cash almost instantly, if needed. (Then when the investments are liquidated, I would eliminate the debt.)

Remember, we are talking emergency fund here, so none of it will be pretty. It would only be the most emergent situation, one which I hope to never need.

Sound feasible? Debate amongst yourselves. My accountant and I are on the same page, so I am comfortable with our strategy. I just wanted to share for the debate of my readers... both of you.

Next Entry: DR Step 6 - paying off the mortgage? or not?