I thought I’d take a post to write a response, as my answer to her comment could probably have gone on for quite a while. 🙂
So, here’s the deal – we currently have about $18,000 in a Money Market account. This is comprised of three different “funds” (I break them down in a spreadsheet that I update when we add or take money away from the account):
- House / Car fund
- Debt Eradication
- Emergency fund
The House / Car fund has about $9,000 in it. This money came from selling our house, which somehow resulted in us making a bit of profit! Any interest we make off of the entire account goes in that category each month, but otherwise, we are not adding to this category.
The Debt Eradication fund is where I hold the money that I snowflake each month which will then get sent on as an extra payment to H’s Student Loans each month. Currently it has about $3,000 in it, and it is destined for that extra payment which will happen in the middle of the month (after the minimum payment is processed, so that we get the maximum amount of the payment going towards the principal).
The Emergency Fund has about $5,700 in it, because that was the number we needed to bring the total amount of money in the account up to $15,000 (minus any funds being held for Debt Eradication). This really means that even though we’ve earmarked $9,000 in this fund for a house or car, we are ready to use it as an emergency fund, if needed.
Now, to actually answer CFO Mom’s question…!
When H’s job was in question (the word on the street is that he is being recommended for hire – in the same position he’s been in for 8 years, but will now actually be a more stable position, yay! – still some hoops to jump through, though, so we’re not celebrating yet), we sat down and discussed how much cash we wanted on hand in case things went badly.
We figured out that if we cut out everything that we could (and even stopped student loan payments, which we could, since we’re technically paid through 2017 at this point) if things went south, we were comfortable with the number of $15,000.
So we weren’t tempted to pay down debt with it because we knew we might need it for something else – but this does bring up another thing that’s been floating around in my head for a while. Now that we’re pretty sure (fingers crossed!) that H’s job is relatively secure, what to do with that $5,700 that we’ve had sitting there for emergencies?
Do we use it for paying down debt (which was the original plan)?
Do we hold onto it to keep a nice-sized emergency fund because that $15,000 is awfully comforting to have around?
I don’t know yet, but as I hinted in my last post, house-hunting has come onto our radar, which I was certainly not prepared for…. Another post on that in the next couple of days! But I will say that I’m currently leaning towards going ahead and putting that $6,000 towards debt.
To muddy the waters, I’ve actually been considering holding on to that $3,000 earmarked for Debt Eradication this month. I mean, then we would have $18,000 and that would certainly be better than $15,000 if it came down to needing a downpayment…. Sigh. Our priorities are currently undecided, which is an uncomfortable place for me.
I hope that answers the question… at least for now. 🙂