Emergency Fund

This past week was filled with events that made the calmest investor a little nervous. I have been sending out updates this week so this one will be relatively short.

Vanguard

Market tensions overflowed this past week as economic prospects appeared to dim, doubts about European solvency deepened, and policymakers struggled to forge remedies. The volatility added to signs suggesting a higher risk of another U.S. recession, though the consensus view remains that the economy will continue its slow and fitful recovery. After diving and spiking throughout the week, stocks regained some of their poise by Friday, but their recent performance has been downward. "Market volatility is always high when investors' expectations about the economy take a sudden turn," said Vanguard senior economist Roger Aliaga-Díaz, who noted that economists now expect slower growth in the second half of the year and that consumer and business confidence has slipped amid heightened uncertainty over economic and fiscal policy. For the week ended August 12, the S&P 500 Index fell 1.7% to 1,178.81 (for a year-to-date total return, including price change plus dividends, of about -5.1%). The yield on the 10-year U.S. Treasury note fell 34 basis points to 2.24% (for a year-to-date decrease of 106 basis points).

Importance of an Emergency Fund

Some age old advice is always be ready for a rainy day. This adage has been changed to always have an emergency fund. A rule of thumb is to have up to 3 months of income in cash or money market funds. The past 6 weeks in my life illustrates why this is important.

During July and August my family has made 2 trips to Omaha, took care of tree damage, fixed 2 cars, fixed a plumbing problem, fixed a refrigerator compressor, and fixed an air conditioning compressor plus A coil. Now you have had this same type of experience already. If you have not you have a good chance of it happening to you in the future as these are all man made things.

The reason for the emergency fund is to prevent from racking up credit card debt at a very high interest rate. View it as money to allow you to sleep easy at night. Do not think of it as I am only getting a small interest rate on my money. Do think of it as I can sleep at night and avoid credit card issues.

Trivia

We will not see another July like the one we just expe-rienced for 823 years! This past July had 5 Fridays, 5 Saturdays and 5 Sundays.

This year of 2011, we will experience four unusual dates – 1/1/11, 1/11/11, 11/1/11 and 11/11/11. Take the last two digits of the year in which you were born – now add this number to the age you currently are or will be this year. The results will be 111 or 11 for everyone in the world.

August is National Catfish Month