Using Toolkit "days of buffering" to determine Emergency Funds

I've been using YNAB for nearly 10 years, and have gotten used to all means of minor workarounds and whatnot, which still adheres to rules and keeps me on track and accountable.  However, it's only been less than a year since I started messing with Toolkit and it's very cool.  I like looking at both age of money and days of buffering as armchair metrics.  While I'm not really paycheck-to-paycheck, and have no debt, and don't even CC float at all, I've always struggled with building an adequate Emergency/Income Replacement fund.

With various bonuses and windfalls I've been able to make some headway for maybe, 2 months worth in a single IR category.  However, I do also work hard at building up some true/emergency expenses after having to raid some last winter when my dog needed $8k of emergency surgery.  Now I have a situation with new fixed expenses and another windfall.  Giving more details will turn this into a major TLDR, so my question:

How sound is it to use the days of buffering metric to determine my level of income replacement?  To use the funds I'm receiving to both boost IR to let's say, 6 months, AND solidly fund all major true expenses (like home/car repairs, appliances, roof flies off, etc.) would leave too much idle cash, where I need to also generate income to cover the recent change in fixed expenses.   Right now my age of money hovers around 100, and days of buffering is in the 80's.  If I get my days of buffering to 180ish, would that be a sufficient "Emergency Fund" for most people or should I make sure my Income Replacement category is about 3 times as much as it is now?

Hope that makes sense. Thank you!!

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  • I would figure out what 6 months of expenses actually is, rather than relying on Days of Buffering. Go through your budget and figure out which expenses you actually would have to (or want to) pay for and which other categories you'd still need to fund monthly in the event of income loss, add them together and multiply by 6. That will give you your answer.

    Days of Buffering is projecting on your future what you did in the past, but that's not an accurate measure. It doesn't take into account what you are saving for now that you haven't spent yet (and isn't for emergencies), and additionally it will include spending that happened in the past that would not take place in the future in event of income loss.

    Your Income replacement fund should be your income replacement fund. DOB will include your vacation funds, your new car fund, your family lifecycle events funds, your home maintenance and repair fund,  (just some examples of large savings amounts that may sit in your budget) untouched.

    Like 7
      • MXMOM
      • MXMOM
      • 2 yrs ago
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      • Reported - view

      nolesrule this is why I wish you could copy a budget so I could so some fiddling without affecting the real thing.  I have my categories already all laid out and don't want to have to redo them just for this reason. Seems like an odd flaw to me.

      Like 2
      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 2 yrs ago
      • 6
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      MXMOM 

      Copy a budget, "save as,"  a real CSV import that would read all the fields that YNAB exports to CSV . . . any of these would let you (and me) play with an existing budget to see if changes are suitable, then recover back to the known good point if the changes didn't pan out.  That one change (any viable form) would allow me to abandon my parallel records in YNAB 4.  Until it happens, my recovery plan for a disaster is to re-import my YNAB 4 budget.

      Supposedly a "save as" function is on the road map.  But it's been on the road map for over a year, while all that gets rolled out is color changes and minor user interface improvements.  Meanwhile, "up next" still displays Zapier Integration as the top priority.

      I never heard of Zapier outside the context of YNAB integrating with it.  It appears that YNAB never heard of "save as" or "copy a budget."

      Like 6
      • Annieland
      • I was told there would be no math.
      • Annieland
      • 2 yrs ago
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      Patzer 10 years of YNAB, and now 1.5 yrs of also using an annual cash flow spreadsheet that mimics my entire ynab budget and I update it manually once or twice a month.  I didn't want to have to go there, but sometimes you absolutely have to plan and can't just live in the here and now as they insist we do. 

      Like 1
  • You’re totally right,  nolesrule , thank you. I just figured that stuff like vacation, car replacement, etc. would probably get raided or put on the back burner if there was a significant income loss.  I think a good deal of my problem is I’m in the middle of a major financial change as my mom just passed away, and she took care of certain expenses of ours, but now I have an inheritance as well.  I am trying to figure out how to budget out the next months’ expenses against the inheritance, while also developing a new investment strategy.  Thankfully, I’m working with financial planners and investment advisors who I have meetings with this week.

    I think with my meticulous ynab use over 10 years I should be able to continue holding the reigns.  It’s just this period of loss and uncertainty is shaking my confidence, hopefully temporarily.   I started keeping a forward projecting cash flow spreadsheet based on YNAB data and looking at the next 6 months is scaring the you-know-what out of me.  But it is definitely keeping it real.

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      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
      • 2 yrs ago
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      Annieland Be careful with those investment salespeople. Make sure they are giving you a plan you can follow on your own and not managing your money for a percentage.

      Like 3
      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 2 yrs ago
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      Annieland

      Condolences on your loss.  Losing a parent is always hard, and IMO losing the second parent is harder than losing the first.

      Transitions are hard, particularly when the financial chaos/clutter/changes come with emotional changes like losing a parent.  You want to be careful with the budget to make sure you're not dropping money on the floor that doesn't produce a benefit to you that's worth the cost.  As nolesrule notes, you want to be careful with financial planners; sometimes they're interested in selling you something that's a bad deal for you, sometimes they aren't as competent as you'd hope, sometimes they don't truly understand your priorities and situation.  But sometimes they can give you important information you wouldn't have found as quickly on your own, and sometimes they make you think about things you didn't know you needed to think about.

      Meanwhile, you have grief and memories to deal with.  It's a tricky dance to not let the grief interfere with the finances while also not letting the finances derail a healthy grieving process.

      Like 3
  • Oh, thank you so much for your condolences and advice.  Don't worry, these are guys (through Schwab private client) that I've used for many years to help me manage my mom's affairs when she became unable to do so.  At the same time I watched her sister and brother-in-law lose their whole retirement nest egg to one of the commission based investment advisors (that you're probably warning against) who put all their money in illiquid investments that went belly up.  I actually found a lawyer for them and convinced them to sue, so they were able to recoup at least some losses through mediation.  

    While managing my mom's affairs through Schwab (and her spending in YNAB, of course), I managed our own retirement savings myself, in various accounts, diversifying every 3-6 months or so, etc.  So I'm used to tracking both my budgeting and investment performance and expenses.  If I don't like the way I see things going by next year, I will definitely consider a change.  

    What you describe Patzer is totally the spot I'm in right now, but my eyes are wide open. :)

    Like 1
      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
      • 2 yrs ago
      • 1
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      Annieland Sounds like you are in a good place with the investments then. I always get the willies when someone talks about advisory services, but Schwab is one of the "good guys".

      Things will be in flux for a little while, so treat it like a windfall and be slow to make any major decisions. If you do that you'll have the time to figure out the changes with your budget and become comfortable with the needed amounts to meet your income replacement concerns.

      Like 1
  • I ascribe to the theory of "do nothing" for 6 months except for the absolute required stuff. Extra money just gets parked until the dust settles. 

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      • Annieland
      • I was told there would be no math.
      • Annieland
      • 2 yrs ago
      • 1
      • Reported - view

      MXMOM There's definite sensibility to that approach, and I don't want to change the status quo too much.  I just have the complication of inheriting a house with (New York!) taxes and insurance due, kids in an expensive school that I can't just pull them out of due to a contract (mom was covering it), inherited IRA with RMD's, etc.  It's more like getting through the next 6 months I'm most concerned about.  I just did an analysis of inc. vs. expenses for the first half of this year ($2500/mo. surplus on average), and a projection of the rest of the year, $4500 deficit/mo. average.    

      I don't really want to deplete my emergency fund to make up the difference, so these guys have to help me figure this out (meeting tomorrow) so that I can get back to my happy ynabbing as usual.   Then I'll chill :).

      Like 1
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