Thank you for sharing your thoughts.

Possibly the most important thing about personal finance is that it is *personal*.

This means that what one sees as living above one’s means is very different for another.

It also means that one person’s attitude about losing out the return on say $30,000 could be that it’s a no-brainer, while for another it’s a significant and unnecessary loss.

Over the last century or so, the stock market returns have averaged around 10%/year. Over that same length of time, inflation has averaged about 3%/year.

If your expenses are about $5000/month, keeping 6 months of expenses in cash will reduce the buying power of the $30,000 you set aside by almost $1000/year instead of letting them grow about $3000/year.

After 7 years, you’d have lost out on about $30,000 return, and your cash stash will be worth about $7000 or so less than when you started.

Since your expenses will have gone up by at least inflation, you’ll need to actually add more money to your emergency fund to make up for its loss of buying power.

You may feel that this is completely acceptable, which is fine. Others may feel that if they have a large enough stock portfolio to be willing to risk having to sell a small portion of it if there’s an emergency, then losing so much potential return isn’t acceptable to them, and that’s also fine.

My intention was simply to shine a light on this rarely considered choice.