Tag Archives: Emergency Fund

Back to the Basics: Fun New Complete Financial Planning Series/Course, Part 1 : The Emergency Fund

This is the first of a “Back to Basics” Financial Planning Series that is meant to start from the very ground floor of basic Financial Planning and build on to more advanced techniques and strategies.

The goal of this series is a course like experience in Financial Planning that will touch every step in the process in order of importance. When complete, we will be adding Video’s and making into a full planning course/workshop.

Those of you that are long time clients have likely heard much of this before but may get an occasional reminder. 

If you know someone (kids, friends, relatives or the like) that may find this series useful, we ask you share, much like we did with the stimulus explanations during the pandemic, we are using our venue to give back and help as many as possible, while hopefully having fun and keeping a sometimes, boring subject matter, educational, and entertaining!

Without further ado … we begin the series with the most important primary foundation step of the Financial Planning process:

Meet the Emergency Fund

An Emergency fund is just what it sounds like, a non-investment, non-risk, extremely liquid savings account, without worry that is available at a moment’s notice. In our current environment of low interest rates, this fund is likely earning a low interest rate. That is fine, safety and liquidity are most important for this fund. Do not stretch to earn extra return on these funds, as this could lead to it not being there completely when you need it most… Return and risk are directly related and we are in a very low rate environment currently.

3-6 Months Expenses

The general rule for an emergency fund is 3 to 6 months expenses but there are many situations that may make this vary greatly on a case-by-case basis.

Here are some examples that may cause families to desire more than 6 months Emergency Fund

  • Income fluctuations – such as 100% commissions, or volatile income years – you know who you are, keep extra to avoid the stress in the down years
  • Occupational risk – if you are concerned about losing your job, get that emergency fund very healthy
  • Large purchase on the horizon- New asset, or known large expense, larger amount may be necessary
  • Sleep Well – If you need a larger than 6 months cushion to sleep better, NO PROBLEM, good is what will allow you to sleep well.

Low End Emergency Funders

On the other side of this are folks with very stable lives, possibly with multi family incomes. You may feel comfortable on the lower end of the 3 to 6 months. Other examples are those with very low overhead and stable expenses as far as the horizon can see you may error on the lower end. Lastly those with less or no dependents would also be a candidate for the smaller end of the emergency fund.

If your situation changes for some reason, prepare to increase, too low of an Emergency Fund leads to short term credit situations, stress and just a much less fun day in day out way of life!

There you have it, the General Rules of the Emergency fund, the fund itself, and examples of reasons to keep it higher or lower!

See … that was not that bad, Next Up in Part 2, Protection Planning!

Have a Great “First in Series Emergency Fund” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.



Why Source of Funds May Determine Entrance into Capital Markets

Before we jump into this post we know that in 5 to 10 years our starting point hardly matters.

We also know that we’re all human and we like to get off on a good start in anything that we do, especially when it’s dealing with our hard earned capital!

What follows is our belief of the best possible way to get started on good footing, and keep a positive investment allocation.

There are always outliers and unique events – this is a template, and loosely the starting point for funds entering the capital markets … but by no means a written in stone … exact map.

Let’s start with the easypuit-1555653

New investment dollars that came from … say the backyard …  under your sofa … your overfilled emergency fund, or some other super safe and stable asset class . … almost certainly should be work into Capital Markets over time.

Depending on the situation, the amount, the time horizon … the time frame may vary from months to quarters or even longer depending on the situation to gain entrance to the Capital Markets …

A typical scenario would be to divide the time frame into equal parts and allocate over that period of time.

The goal is to take advantage of the ups and downs upon entrance into the Capital Markets ….

Funds such as 401k rollover’s, current investment portfolios that are moving from one pocket to another most certainly do not need this staggered entrance into the capital markets as they were invested already.

An accurate statement can be “If it just came out of the capital markets it can go back into the capital markets” even though it may be cash today.

Here are the gray areas

Of course there are gray areas that need judgment…

A large block of stock options sold. The funds where IN the Capital Markets but depending on the size and the situation, it may not make sense for these funds to be moved directly back into the capital markets all at once.

A sudden liquidity event such as the sale of a business – yes in essence it was in a investment that had volatility similar to the capital markets, but in most cases, risk reduction is desired and a staggered entrance along with a conservative allocation may be the best.


It all depends on the form?

Some inheritance come in the form of cash … others may come in the form of investments that are already invested – again depending on the situation, it may make sense to stagger entrance, or it may be just fine to  continue the allocation or even re-allocate in one swoop.

Bottom Line, there is no exact way for all situations, but there are ways to go without raising the blood pressure!

Have a Great “Good Entrance Capital Market” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Mother Nature FLEXES her Muscles – High Deductible Pre-View – Friday

With a crew that absolutely loves the outdoors – beach, mountain, desert … heck they might even like a rainforest (never been with the whole gang.) Mother Nature has an influence on our lives.

Mother Nature FlexesHurricane -tropical-cyclone-63124__480

We wish the best for those in the mighty Mother’s path. With the most visible storm making landfall to our friends on the mid eastern coast line, and one of our far west states/islands are also dealing with her muscle flexing….

Safe wishes to all!

High Deductible Preview

Next week we continue our found series (PLUP, Emergency Fund-) with the last depending part, the High Deductible. Thanks for all the responses, we have greatly enjoyed sharing and will have full versions in the coming Q4 Newsletter.

Of course it’s a Tennis weekend, but long time followers will be surprised to know this weekend unusually includes little Brother in a Sunday match while older sister watches and gives important advice…..

Today is a Friday, enjoy your day and the weekend .. be safe and talk to you next week!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

The Emergency Fund – Size, Location, Reason, Need

It is so simple of a concept, but one that is easy to fail. The general rule is to keep 3-6 months living expenses, somewhere available, for safety. Those early in their careers with less dependents and less overhead will find this very manageable. Those of us with a few chips in our armor from big recessions, life’s curve balls, and experience, may want this number to be higher. Whatever level makes “You Sleep Better” within reason of course, is likely a good level.

Reasons for a Higher LevelEmergendy - helicopter-615168__480

  • Possible Job Change – Need to be higher on emergency funds
  • New Family Member- Higher is better
  • New Home – Expect unforeseen expenses – they always occur (Has anyone ever built or bought a home in less time and for less money than they thought? Nope, it’s in our nature)
  • Salary Fluctuations i.e. Commissions – Error on the higher side of that emergency fund
  • Others dependent on you – Business owner, large family, solo income earners, college or wedding – A bit higher is better

Stability Reasons for a Normal/Lower Level

  • Dual Similar Incomes – Lower Emergency fund is ok
  • Very stable Job – Smaller side of the living expenses will work

Where to Invest ? Safety first

A long time friend always commented on the Mason Jar, full of money, buried in his back yard (an old depression era tale) – all kidding aside, your emergency fund should be bullet proof safe. While that has been hard over last decade, not earning much interest, now finally we can get a few percentage points on our Emergency Fund, but that is only to keep it from being lazy, it is not an investment and should not be put at risk by stretching for a return. No risking, it needs to be there when the sky is falling.

Big Benefits

The most obvious benefit to having a health Emergency fund is less stress. Financial issues are well known to be a couples top stresser and frequently relief is felt as the healthy emergency fund is completed, when no pressure was ever felt in the first place.

Have a Great “Healthy Level” Emergency fund day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

How Much Should I Have In My Emergency Fund ?

A Scouts # 1 Motto “Be Prepared” is applicable to all of us, as a foundation of Financial Planning is to always have an emergency fund.  A solid emergency fund forms the foundation of a financial plan.

Just as our home is built on a strong foundation and hopefully withstand the storms of life, a good financial foundation starts with an Emergency fund.

So How Much Should I have in My Emergency Fund?

The absolute minimum is 3 months expenses and with today’s interesting environment, we would error on the side of a higher level of closer to six months if possible. It is safer to error on the high side rather than low.

So Where Do I put My Emergency Fund?

Short of a mattress (kidding of course) we suggest your emergency funds be very safe. Do not stretch for high returns on your safe money! Rates are low, but so is inflation.  Your emergency funds need to be there when, and if, there is an emergency, so again, do not stretch for returns.

Through the ins and outs of life there will be times when our emergency fund falls below our target zone, that is ok, and expected. Do not worry, but keep your eye on the appropriate level, and try to get your funds back to the appropriate level as soon as possible. In times of stress, a healthy size emergency fund may keep one area of stress a bit lower.

Have a Good Day!