PP cash as emergency fund

Discussion of the Cash portion of the Permanent Portfolio

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sk55
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PP cash as emergency fund

Post by sk55 » Fri May 18, 2012 10:31 am

hi guys,

is it okay to count the cash portion as part of 6 month emergency fund?

thanks
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KevinW
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Re: PP cash as emergency fund

Post by KevinW » Fri May 18, 2012 10:42 am

I do. I think this is one of these "do whatever makes you comfortable" issues, so either choice is valid.
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l82start
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Re: PP cash as emergency fund

Post by l82start » Fri May 18, 2012 10:57 am

i count emergency funds as part of my cash as well, i don't know if i would call it ideal, what is "ideal" probably varies with circumstances.
but with a small portfolio not counting it that way would have left me with a significant portion of my total in cash..
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Lone Wolf
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Re: PP cash as emergency fund

Post by Lone Wolf » Fri May 18, 2012 2:28 pm

I think that this is just fine (and probably the most convenient thing to do.)  Allowing your cash portion to perform this "double duty" is IMO yet another attractive feature of the portfolio.

The "emergency fund" is a good financial practice and it's nice to use a portfolio that has this built right in.
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Re: PP cash as emergency fund

Post by hoost » Fri May 18, 2012 2:39 pm

I do also.  I'm preparing to transfer our emergency fund into a Treasury Money Market Fund with checkwriting privileges, probably FDLXX.  I would say just make sure you can get to it fast if you need it, and keep it in the taxable part of the portfolio so you don't have to pay penalties, or wait a week to rearrange holdings if you need it.  I think one of the points of the 25% cash is to serve as an emergency fund of sorts.
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Tortoise
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Re: PP cash as emergency fund

Post by Tortoise » Fri May 18, 2012 10:12 pm

Lone Wolf wrote: I think that this is just fine (and probably the most convenient thing to do.)  Allowing your cash portion to perform this "double duty" is IMO yet another attractive feature of the portfolio.

The "emergency fund" is a good financial practice and it's nice to use a portfolio that has this built right in.
Absolutely. And the fact that you can spread a single PermPort across taxable and tax-advantaged accounts makes it even easier to consider your emergency cash (presumably in a taxable account) part of the portfolio. It's what I do.

I'm also saving up for a down-payment on a home, and I have cash set aside for new cars to replace our current ones when they die, so I count all of that as part of my PermPort's cash allocation. I suppose when I eventually buy that home and the new car(s), I'll be selling some of my stocks, bonds, and gold to replenish the 25% cash allocation.
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Re: PP cash as emergency fund

Post by Ad Orientem » Sat May 19, 2012 3:04 pm

I concur with the previous answers with one caveat. Your PP must be large enough that the cash portion is able to provide you with 12 months of minimal living expenses. Otherwise I would build your emergency reserve first and then go into a PP. You can meld your emergency fund into the PP once the PP has gotten big enough to ensure you will have your EF in the cash portion.
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Bean
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Re: PP cash as emergency fund

Post by Bean » Wed Jun 13, 2012 1:27 pm

Just used my cash portion to make an emergency vehicle purchase after my '97 F150 died.  Feels good not having to take out a loan.  ;D
“Let every man divide his money into three parts, and invest a third in land, a third in business and a third let him keep by him in reserve.� ~Talmud
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smurff
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Re: PP cash as emergency fund

Post by smurff » Wed Jun 13, 2012 2:27 pm

Bean, now you get to rebalance, and make cash contributions to build your cash balance again. 
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Bean
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Re: PP cash as emergency fund

Post by Bean » Wed Jun 13, 2012 2:41 pm

smurff wrote: Bean, now you get to rebalance, and make cash contributions to build your cash balance again. 
My new contributions always go to cash, since I have the cash portion serving double duty as an emergency fund.  It did put me at a rebalancing band though for cash, but I am going to let the monthly contributions catch me up instead of inducing a taxable event.
“Let every man divide his money into three parts, and invest a third in land, a third in business and a third let him keep by him in reserve.� ~Talmud
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