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?

Well, everyone is looking back on the past year, wondering what happened to the last 12 months and so on. That's why I like working these last few days of the calendar year - there is nobody in the office and it allows a person to do some good house cleaning and self-reflection. I am not immune to such introspection, and in fact I embrace it.

2012 was ugly. Dont get me wrong. I am very blessed with my family, friends, health and employment, and given the events of the past few weeks, I can overlook other items that - at the time - seemed to be big deals for me.

But that's the beauty of self introspection. You dont have to equate it to the triumph or tragedy of others, but rather to the changes in yourself over the past 12 months. And in that light, 2012 was all a roller coaster full of disappearing dollars.

In the past 12 months we have:

* relocated twice, including an apartment and a housing purchase.
* because we relocated to FL, I watched our insurance costs double, almost across the board.
* both my DW and I changed jobs (not always because we wanted to).
* I blew apart my achilles tendon in the Spring, so the resulting surgery, rehab, and doctor's visits - net of insurance - totaled between $6500-7000 for the year.
* DW had some dental surgery that totaled over $3000 after paltry insurance input.
* several touch-ups were required of the new place, totaling a few thousand bucks.
* we had issues with a couple of our pets, and the vet bills were about 4x the typical annual expense.
* we decided to put in a pool at the house, involving 2 months of construction and many dollars! (but boy it looks beautiful)

So when it came time to review the year's performance against last January's budget, it was challenging to say the least. However, all things considered , I think I did ok. Only a handful of categories were significantly different than the original estimates, and often those could be explained through cost of living or lifestyle changes that were previously unknown.

Incidentally, have you ever noticed how as soon as you decide to make a major purchase, unexpected items start popping up? It's as if someone out there says "Ok, you signed the contract, but I want to make sure you earn this" and quickly your down payment vanishes into a vet bill or your vacation money gets sucked into an AC repair. Hate those situations! If I had hair, I would be pulling it out.

So bring on 2013!! I've got some ambitious goals set and a budget laid out. Let's see how well we do. Here's a couple known items for 2013 that we will be using as qualifying factors at the end of next year.

* we will need to replace one of our cars (long story).
* the company my DW works for was just acquired (again), so we will keep an eye on the fallout from that.
* I have a 7-year old son, so you know something (car window, ming vase, etc.) will end up being replaced this year.
* then there is all those unknowns that spark the need for annual self-reflection.

"... and the hits just keep on comin'..." (think Tom Cruise in A Few Good Men - love that movie!)