We were skeptical of having an emergency fund. Our reasoning was simple, parking our money in an online saving account meant losing value to inflation. In addition, we had other buckets we could tap into in case of an emergency. That was our thinking until Q1 of 2020 when a black swan decided to knock on our door.

Where do I begin? So last year, my company was bought out and as you can imagine, it created uncertainty in job stability. We are a one-household income so that means almost complete loss of income. The reason I say that is because we’ve created additional sources of income in the form of dividends and real estate.

Having diversity in our income is great; however, those sources are still far away from covering our monthly expenses. When they do, I’ll write a post to celebrate reaching Financial Independence.

On The Fence

The acquisition process certainly created anxiety but it was not as bad as I expected. Yes, losing my job would be bad but not the end of the world. Fortunately, my employer set guidelines in case of an acquisition that covered eligible employees under a severance package. That gave us a sense of relief.

At the time most of our money was invested in the stock market or in real estate. This meant little liquidity to cover an emergency. We sat down and discussed our plans but decided to leave our strategy AS-IS.

We normally receive an annual bonus but given all the chaos with the acquisition, we thought that was out of the picture. To everyone’s surprise, we received a bonus. This little windfall came at the right time.

I remember sharing the news with my wife. We were beyond excited. After debating options, we decided to park the funds on our online savings account with the intent to fund our brokerage account via DCA or fund our IRAs via lump-sum investing.

We held back from pulling the trigger. Our decision was not driven by a desire to time the market. We just thought the market was overpriced.

Look, we’re fans of low-cost index investing but the hype around an up and coming correction influenced our decision to sit on the sidelines. That was dumb but we got lucky.

Change In Mindset

The new year came in and we kept watching the market reach new highs. We looked at each other and couldn’t believe our eyes. We had been waiting for an opportunity to deploy our capital but we never did.

At the time, we thought it would be best to keep saving and direct the capital for the acquisition of a rental property. We didn’t put a lot of effort and as a result, we kept hoarding our cash.

Then COVID-19 happens and all hell breaks loose. This event is the true definition of a black swan. It is heartbreaking to see the impact of the virus on our society. Death numbers continue to rise, social distancing is still enforced and our financial system continues to suffer.

To make things worst, an oil war between the Saudis and Russia added the cherry on the top and yes, I’m employed in the Oil & Gas industry at least for now 🙁 .

All these craziness made us realize that a change to our plans was more than appropriate.

In addition, to the cash from the bonus, we had extra funds due to stock vesting and sale during the acquisition of my company. Our plan quickly transitioned to a few actions to navigate market volatility:

• Contributions to our Roth IRAs via backdoor
• Investing some of the funds in our brokerage account
• Setting up and funding our emergency fund with ~6 months of expenses (correction from my previous post)

Plan, Evaluate, Adjust, Repeat

I believe the options covered in this post are still valid for funding an emergency; however, the cons are starting to weigh in more than they used to.

Category	Advantage	Disadvantage
Roth IRA	Pull contributions at any given time without paying penalties	Limiting growth potential by lowering invested capital & selling in a low pricing environment
Credit Cards (0%)	Flexibility to finance an emergency	If you lost your job this might not work. If you don’t pay the minimum balance the interest rate is ~ >15%
Taxable Account	100% liquidity. You can sell some or all your positions.	Sames as Roth IRA

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2020 is turning out to be a historical year. No one could have predicted COVID-19 and its devastating effects. On a selfish note, oil futures hitting negative numbers at -$37.63? I mean c’mon!

Look, there are things you can control. COVID-19 and the oil war are none of them. However, when it comes to our finances you are on the driver seat.

Just because you had a plan in place it doesn’t mean it should remain static. When it comes to planning, set-it-and-forget-it doesn’t always work. You have to remain vigilant and evaluate changes in priorities. When appropriate, you should make adjustments and repeat as often as needed.

Final Thoughts

• When it comes to investing, forget about timing the market. The most important thing is time in the market.
• Sitting on the sidelines and hoarding your cash because you hear a correction is coming is a dumb idea.
• We just entered Q2 of 2020. It’s going to be a challenging year. Now more than ever, consider living below your means and keep an eye on your expenses.
• A set-it-and-forget-it approach can be good in cases like paying yourself first, automation, and investing via dollar-cost averaging.
• Nevertheless, your financial plan should not be included in that category. Instead, it should be evergreen and adjusted when deemed required.