This question has come up a couple times the last few days and it's confused me....
Here is my situation:
I live on 50% of my take home pay meaning I have 50% (this includes after some luxuries and entertainment and some disposable splurging)
I have 0 debt. No credit card debts, no car loan, no school debts.
I do have a $20 000 line of credit that is at 9% interest If I wanted. I have $8000 in available credit card credit that is 19.5% and a grace period of 19 days. My balance owing on both the credit account and the credit cards is $0.00
I have no kids no mortgage and rent and utilities are little less than 20% of my take home pay.
I am 30 years of age so lets say retirement at 60 and home ownership at 35.
I am in Canada so health insurance is not as big as of a concern as it is in the USA. We are covered for major illnesses and emergencies up here, as least medical bill wise.
Now I have about 10 months living expenses saved in high interest savings accounts. but since I am living on 50% of my income, this emergency fund grows equally with my expenses.
Should I take ALL of my emergency fund and invest it and rely on my credit as insurance for what it's and rebuild the emergency fund? I can use as my investments as the emergency fund of sorts, as long I didn't pick losers.
With my current savings rate of 50% (which I don't see changing for another year or more, knock on wood) I should be able to pay off debt quickly should an emergency arise. Am I saving too much money in emergency funds? With my income and expense status, my age, and retirement far off am I being too conservative in keeping savings? I just started investing a few months ago with a financial planner but I only give him about 40% of my monthly savings. I still have 60% of my monthly savings to do my own investing.
One other thing I do not have parents or other family members to help me out if something happens. I'd be on my own if a financial emergency came up.
I have no idea what to do with this emergency fund, how high or low to keep it. It's earning 4.10% interest yearly, taxable at approx 30%. At what point do you stop contributing to an emergency fund and jump into investing towards your goals? I have researched a number of mutual funds and think I have a possible portfolio I would like to work on. I have decided my risk tolerance so I think I know what I can lose without crying...
Sincerely New Investor.... :)