Hey everyone, it’s Finance Fridays again. I haven’t really been posting much lately since there really isn’t too much that I think is more important than staying inside the house and social distancing as much as possible. However, I wanted to do a short post about “Emergency Fund 2020“.
Emergency Fund 2020
In the last year or so, I’ve built up my emergency fund to what I think is a comfortable level. As such, I’ve talked about decreasing it.
However, I think an emergency fund is good to have for times like these. These times of uncertainty. I had previously thought that doctors would be so what immune from this pandemic (financially) because we are considered essential employees.
That was short-sighted.
With quarantines, lock-downs, and social distancing in full effect, the economy in general is getting hammered pretty hard. Then, you need to consider that a majority of the medicine we practice is both “non-emergent” and “routine”. If you combine that with a quarantine, lock-down, and social distancing, then you can imagine that all outpatient/routine appointments should be canceled (and they have been).
As such, some of my colleagues have seen their volume drop by as much as 50% or more, depending on how much outpatient imaging they do. Some of my friends, especially those in partnership type groups are already forecasting pay cuts for the rest of the calendar year.
This potential significant decrease is probably not something any of us have planned for. As such, having a strong Emergency Fund in place may help prevent increased anxiety (above that of COVID-19 anxiety, in general).
What are you doing?
Well, I just began my attack on student loans. I started the first two payments on higher interest loans for both my wife and I, while continuing our normal payments. However, any future “extra payments” will put on hold to keep our Emergency Fund very conservative.
In general, I don’t foresee my wife and I either being out of a job or becoming furloughed. However, it would be irresponsible of me to not be prepared for the possibility.
I know right now you don’t need another thing to worry about. However, I’m a fan of trying to foresee and mitigating problems before they occur. As such, I would recommend you take stock of your emergency fund and/or cash reserves to make sure you have enough to be ok.
Just to be clear, I’m not advocating clearing out your 401k or whatever and putting all your money into cash and gold. I just think now is a good time to be conservative — save your money and keep it in cash. Don’t make any huge purchases or any extra payments. You may need that money on hand, sooner than you think.
Take stock of your Emergency Fund and Cash Reserves.
This may help prevent more anxiety… something we all don’t need more of.
Agree? Disagree? Questions, Comments and Suggestions are welcome.
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I’ve been a fan of having an emergency plan but not necessarily an emergency fund, as long as the plan allows you to access funds in short order (HELOC, credit card, conservative investments in a taxable account). I do see the benefit of cash in this ugly environment, though. This is the kind of event none of really planned for.
Stay safe on the island!