I Don’t Keep an Emergency Fund

I was about to write a post explaining my reasoning behind not keeping an emergency fund when I stumbled upon a series by Early Retirement Now¹ on exactly this subject, explained way more clearly than I could: Our emergency fund is exactly $0.00.

The tl;dr is:

• Keeping an emergency fund is too expensive in terms of missed opportunity cost.
• It’s better to draw short term debt or sell investments than to keep money sitting idle in less productive investments.
• It’s very tempting to raid an emergency fund for an “emergency flat screen TV” :)
• When you need it the most (when you’re young), it’s the most difficult to build and most expensive in terms of missed opportunity cost.

ERN mentions using a HELOC as a backup source of liquidity in the case of an emergency. I’m currently renting (by choice), and I’ve done something similar recently by using a margin loan against my stock portfolio to pay a somewhat large quarterly tax bill. It worked out perfectly and I plan on relying on this as a secondary source of cash going forward.

My own personal reasoning is:

• I’m well established in my career. Even with the ever-present threat of tech layoffs that seems to be the reality these days, I think there’s a sub-5% chance of being laid off given my skill set and position. (Knock on wood)
• I can drastically reduce expenses very quickly if needed.
• Between dividends and margin loans, I can fund expenses for quite a while.

I’m glad to have found someone on the internet who backs up this idea with more authority. I keep about 1.5 months of cash on hand and plan to continue doing the same going forward.

This is not financial advice.