Got Financial Cushion?

I agree with Flychicaga. Put $1000 in the bank for a mini emergency fund. Then do no other saving/investing until the credit cards are done.

Once out of debt...1) set up the emergency fund, fund retirement at 15% of gross income, save for college expenses, save for upcoming expenses (car, vacation, house, etc) then everything else towards the house/mortgage.
 
Another thing to consider - I was considering doing the 6 month emergency fund thing as well but instead decided to put it all in my Roth IRA.

Why you ask, would I want to put my emergency fund money in a retirement account? Simply because any money you put into your Roth IRA directly can be taken out at any time, fee-free, you are limited to such a low yearly amount (just $4k for us under 50) that if you don't do it early you'll miss out on a lot of compound interest, and as a CFI/135/121 newbie, your AGI is so ridiculously low (my effective tax rate these last few years has been <6%) that it doesn't make any sense to do a regular 401k until you have maxed out your Roth IRA.

If you need it, the money is there, but if not, you are one step ahead of the game, IMO.

Now, that doesn't preclude having $0 in your checking account, but I found I did better that way. Obviously once I was able to fully fund my IRA I just put money in a money market account, and any leftover from that I've been playing with using www.magicformulainvesting.com. Also, I didn't look at my bank or money market account and think "Gee, I can go buy a PS3!!". It was my retirement money I was messing with. Obviously seek financial advice from a pro before considering any investment.
 
I don't know the policy on this but for people who want to learn a little about the mass options out there might try, in ALL seriousness, "Personal Finances For Dummies" great book and while I don't consider myself a dummy the book broke it down nicely and at the very least got me in the right direction. Ironically I should finish up my ratings with only the debt from my BSU days.
 
Sprint100 said:
I'm not talking a $500 type cushion either, but something you could live off of for about 6 months or more.
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:yeahthat:

They tell you to have a three to six month cushion for living expenses, just in case you lose your job.

And this should NOT go into stocks. This should go into a money market fund or an ultrashort bond fun.

The "if I get shafted" fund should be something you should be able to count on no matter what happens with the market.
 
tonyw said:
They tell you to have a three to six month cushion for living expenses, just in case you lose your job.
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Another good rule of thumb I saw was to take your yearly salary, divide it by 10,000, and that will determine how many months of "emergency" fund money you should have on hand.

The reasoning being, take someone who makes $30,000/yr. It would be pretty easy to find a job paying that same amount. However, take someone making $150,000/yr. That person would probably take quite a bit longer to find another job due the lack of $150k jobs out there.
 
Well, my wife and I put 10% into 401k's and also contribute to two Roth IRA's as well as put about $1000 per month into internet savings account. I would highly recommend internet savings accounts as the interest is usually better then CD's and money markets. We go through HSBC and our current rate is like 6% interest. Once you go at it for a while the compund interest really starts cooking. It's nice when the bank credits your account hundreds of dollars a month!!
 
1) $1000 emergency savings
2) Credit cards paid off, one month's living expenses saved
3) All consumer debt paid off, 3 months living expenses


there's more, but that's all that's really in sight for now.
 
You know, the whole "break his kneecaps, but don't hurt him too bad" thing? Geez. I knew that was a mistake :sarcasm:
 
Financial Cushion? Not at all. Nearly impossible at a Regional. Between paying back a school loan, and working for a company that is outstation based, I'm lucky if I even make any money doing this job. Also, when the company doesn't want to help you out with a parking pass at the airport, thats another $100/week in parking fees alone.
 
Airdale said:
Financial Cushion? Not at all. Nearly impossible at a Regional. Between paying back a school loan, and working for a company that is outstation based, I'm lucky if I even make any money doing this job. Also, when the company doesn't want to help you out with a parking pass at the airport, thats another $100/week in parking fees alone.
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95% of the time something can be skimped on. In harsh times providing a financial cushion invloves a lifestyle change, depends on how much of that lifestyle we're willing to change which will dictate how much you can sock away each month.
 
FlyChicaga said:
What would your advice be for someone who has high expenses (rent, gas, car, electricity, groceries, etc.) and is also working to pay off debt (credit, car, school loans)? I would love to stash away six months of pay, but I'm putting what I could use to stash up that money into credit card repayments. I feel that the need to get out of credit card debt outweighs the need to have six months of pay saved up, at the moment. That is not to say that I don't plan on building up that kind of savings, however.
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My recommedations
1. Learn to live on guarantee
This includes something above min due on credit cards
2. Figure a way to live on per diem only when traveling
This will most likely be taking some food with you
3. Use any OT pay to pay down debt
This is ALL OT, not 50%, not 80%, ALL

My wife and I did it with only about 2 years debt building after marriage. Took 3 years to get out of the hole we dug. Last 14 years we have been on the possitive side of debt (thats NO debt). It was hard, and over 2 years of NEVER eating out. I will say we live a "comfortable" lifestyle now.

Thank goodness we got out of debt before starting the family, I know the expenses that came along with that kid!
 
My .02...

IRAs and 401Ks are wonderful for long-term savings, but using them as emergency money is tantamount to financial disaster. Reason being is that if you take money out of an IRA before you're 59.5 years of age, you not only take the federal income tax hit, but you also pay a 10% penalty on that money, too. And you lose out on YEARS of compounding growth.

That said, if you've got a lot of high interest debt, it may make sense to use a portion of it to pay off that debt, because the 10% hit may be less than the interest you're paying...but there's still the fed income tax to worry about.

Your mileage, as always, may vary.
 
Minnesota_Flyer said:
With few exceptions, active investors (fund managers or do-it-yourselfers) do not beat the market over the long haul. So why bother?
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Wow someone who gets it.


I think more importantly then stashing away money for a regional level pilot is one who educates him or herself in something else. You should have a stash but i think better is to have a trade or small business that you can do while also being a pilot. You don't have to fall back on your stash if you already have someting going for you. What ever it might be I think it should be something you are doing while also being a pilot.
 
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