Open Thread, June 2-15, 2013

TimS

If it's worth saying, but not worth its own post (even in Discussion), then it goes here.

You only need an emergency fund if you do not have access to credit at reasonable terms. Investments you don't touch outside of emergencies coupled with open lines of credit should outperform excessive "emergency" savings. After all, lines of credit are typically free when you don't use or need them, while not getting the best rate of return on your savings isn't.

EDIT: I was reminded of a relevant saying: If you’ve never missed a flight, you’re spending too much time in airports.. Similarly, if you never have to borrow money for emergencies, your investments are too liquid.

I've been doing this wrong, and this advice will likely save me a few thousand dollars. Thanks.

2A1987dM13y

I have a partly irrational aversion to owing money, which I maybe should edit out of myself.

0Lumifer13y

That assumes there is price for liquidity which you are paying. I am not sure this is the case for most normal people (as opposed to, say, those who invest into private equity) now because other than real estate most other available investments are quite liquid. Essentially, most of people's investments are bank accounts and market securities (again, real estate is the big exception). Liquidity shouldn't be an issue here.