Rethinking emergency funds

[RetireJapan]

I spent years waiting for the March 2020 crash, and when it came we needed all our emergency funds to keep my wife's English school going when it was forced to shut down due to Covid.

I was qute disappointed that we couldn't put the money in, but it would have been a complete disaster if we'd had to sell investments at that point in time.

[sutebayashi]

This requires the acceptance that I may have to sell some investments, but if I do accept that, is it a bad plan?

I recently came to this way of thinking, and put a chunk of “emergency” cash into foreign bonds. There is certainly no consensus around here about that, but for my perhaps idiotic part, I made the choice based on data at myindex.jp, and after reading a book by Tomoya Asakura.

If the yen were to strengthen significantly right when my emergency struck (or the US defaults or
something and bonds crash), I might take a loss, but so be it.

I still have some yen cash too… just a reduced amount.

[banders]

If the yen were to strengthen significantly right when my emergency struck (or the US defaults or
something and bonds crash), I might take a loss, but so be it.

That's how I'm thinking. I have my own business so it's not like I can lose my job. I invest just over ¥3m a year. If I agree that a lump sum in the bank is necessary, I could put that money into the bank for the next 2 years and have a nice sum of ¥6m. But I just don't see that as a wise move. Does anyone disagree?

[Yossarian]

That's how I'm thinking. I have my own business so it's not like I can lose my job.
[/quote]

But if something went wrong you could lose customers, right?

[Tsumitate Wrestler]

Not having at least a 1 month emergency fund is careless in my option. I would say 3-6 months would be recommended.

Emergency flights, medical procedures, relocations and accidents happen.

Regardless, investments are not immediately liquid. If something happens over Golden week or new years it could be 1-2 weeks before a MF sale order hits your account.

Bonds are not a place for an emergency fund unless the offer near risk free return and instant liquidity.JGBs offer this, but aren't worth the trouble.

Simulate a month of work, buying tickets right now at current prices, hotels , gas and rentals. Etc. the numbers are shocking.

For those of us with attachments back home a low yen necessitates more cash savings, period.

[banders]

So if you have to use this emergency money for, say, a flight home, do you stop investing to top it up again?

[Tsumitate Wrestler]

So if you have to use this emergency money for, say, a flight home, do you stop investing to top it up again?

Yes, absolutely. Not having an emergency fund, is it's own emergency

Although, I might keep ideco going depending on how far I can top things off.

[banders]

Plenty of food for thought.

Although, I might keep ideco going depending on how far I can top things off.

Is it OK to just stop paying iDeCo for a year? I guess you can't pause it, so I suppose you'd have to keep insufficient funds in whichever account it's drawn from. Would that be flagged?

[captainspoke]

At 72, wife younger but also retired, and her mother in care (94? yrs old)...

And while I don't think anyone is going to check out soon...

One thing an emergency fund may need to cover is a funeral (and then the 7th/49th days, and so on).

[Tsumitate Wrestler]

Plenty of food for thought.

Although, I might keep ideco going depending on how far I can top things off.

Is it OK to just stop paying iDeCo for a year? I guess you can't pause it, so I suppose you'd have to keep insufficient funds in whichever account it's drawn from. Would that be flagged?

IDeco charges a fee of 167 yen or something each month, and it is a real pain to pause and start up again. Setting payments to 5000 yen (I believe that is the minimum) Could work too.

However, IDeco moves very very slow, so it is best just not to touch it imo.