How To Build T-Bill Ladder Emergency Fund (My Plan).

I plan not to build a emergency fund but to convert my existing emergency fund into a T-bill ladder. I plan to turn my current emergency fund more into a passive income generating machine, while meeting my rainy day needs.

I’ll talk about what I plan to do with my 6 Month Emergency Fund, using a T-Bill Ladder Strategy , but read further and find out why this work is well worth it based on my opinion. I’m glad you are here; it’s a sign you are doing your research, and hopefully, working with your tax/money professionals, you can journey with me toward financial independence.  

My Plan To Build A T-Bill Ladder Into My Emergency Fund.

One drawback we know about T-Bills is that if you don’t go onto the secondary market, T-Bills aren’t very liquid. Even if you go onto the secondary market, I was told there is a delay in getting your funds. 

So, understand I plan to keep the starter emergency fund amount, $1,000 (Baby Step #1 of Financial Peace University), AND the remaining One month of expenses in a very liquid account, a Bank Savings Account connected to my checking, or maybe a High-Yield Savings Account that I link to my regular bank checking account. In this example, the first month of expenses will NOT be included in the T-Bill Ladder.

My T-Bill Ladder will only include months 2 through 6 of monthly expenses to help balance my idea of using 13-week T-Bills.

Three teams climbing ladder.

Now The Math Behind My T-Bill Ladder.

Five months of expenses will be divided into three groups of T-Bills.

In the First Month, I will invest 1/3 of the funds into 13-week T-Bills and turn on Auto-Reinvest.

In the Second Month, I will invest a second 1/3 of the funds into another group of 13-week T-Bills with Auto-Reinvest turned on.

In the Third Month, I will invest the remaining 1/3 of the funds into another group of 13-week T-Bills, with again auto reinvest turned on.

Simple, correct, or is it?

Let’s Talk About “What-If” Scenarios?

Make a plan only if you are focusing on the outcome.

What If I Never Need My Emergency Fund?

Each of the 13-week T-Bills matures, reinvesting(along as allowed), and I collect Monthly interest.

And life is good. A build a monthly passive income stream using a T-Bill Ladder.

What If I Need My Emergency Fund?

Life's emergencies happen, ignoring them is a bad choice.

I have direct access to my first month of expenses, the liquid access I mentioned earlier.

Also, I turn off auto-reinvest on all my T-Bills. As each set matures, being no more than one month from maturity, I can access my money.

If I choose, the matured T-Bill money will be moved into my savings account or HYSA.  


I have access to one month of expenses immediately. Within about four weeks, my T-Bills started maturing, all three groups one month apart. 

Clean Up After An Emergency?

After an emergency, I will talk about cleaning up and rebuilding my T-Bill ladder. Still, the truth is, I’ve only addressed a no-income emergency a couple of times in my life(unemployed after the military and periods I took months off from contract work during the birth of my children so I could remain home).  

So I still have to work the math out, but it could be as simple as saving money, and once I get three or more months (minus the first month of liquid expenses), I can rebuild my T-Bill Ladder, adding to it each month till I get full six months invested. 

Leave a comment if you have experience with funds used in an actual long-term emergency.

Now That Was How I Plan To Build My T-Bill Ladder.

Let’s look at what I am currently doing with my 6 Month Emergency fund; I plan to move into this new idea of investing money for a rainy day.

Where Did I Keep My 3-6 Month Emergency Fund?

I still keep my Emergency Fund setup up like this; I need to build my t-bill ladder. I was setting up.

Stacking the financial deck in your favor.

Currently, my 6 Month Emergency Fund is broken up into three parts:

Part 1: Regular Bank Savings Account.

My initial $1,000 starter emergency fund (FPUBaby Step 1) is kept with my checking account. It’s in a savings account held at the same bank I have my checking account.

This allows almost instant access to that $1,000 in times of emergency(i.e. Fast Cash). I don’t have an overdraft setup, so if I forget to move money into checking for that highly emotional emergency bill, the bank will automatically draw from my savings account.

Which I keep below $1,000.

Part 2: High-Interest Savings Account.

First Full Month of Expenses(Minus the initial $1000 starter emergency fund I keep with my regular checking account), I keep separate from my standard bank and hold in a High-Interest Savings Account.  

Now, this money is still accessible, but it’s out of sight essentially since it’s in another bank. This way, I don’t have that balance staring me in the face while fighting an impulsive purchase.   

It’s only for one thing right now: an emergency(FPU Baby Step 3).

Part 3: A Money-Market Mutual Fund.

After parts 1 & 2, which are my one month of expenses emergency fund, the remaining months (2-6 months of expenses) are kept in a money market fund, a mutual fund version.  

It’s not the version you get from a regular bank. I previously spoke about it; I use T-Rowe Price‘s TSCXX. Currently TSCXX is making >5%(Updated: Nov 2023).

Should I Build A T-Bill Ladder Emergency Fund?

Now you read how I took my emergency fund and broke it out into three parts based on liquidity (access) and investment returns(yields). Why change it?

Well, the bulk of the balance of the saved money sits in T-Rowe Prices’s TSCXX money market mutual fund. It makes excellent rates, well-ignoring inflation, and generates very passive income.

Author’s Notice: This page contains affiliate links, for which I may earn a commission by their use. As an Amazon Associate I earn from qualifying purchases.

One thing I learned from the early years(early 90s) of my journey to financial independence was that taxes were the one drain on your income based on something other than the services you get. This was a basis for (very dated I figure) Charles Given’s More Wealth Without Risk Books and Programs.

Example I Was Told, With My Life Experiences:  

When I was younger, I had police protection, swept streets, fire protection services, etc., and I paid no taxes.

When I was a tax payers’ drain on the government living on welfare, I still had police protection; streets were swept, fire protection services, etc.

When I got older, I pay more in taxes as I learn(yes, I said learned) and earn more; I still have police protection, streets were swept, fire protection services, etc.

So taxes are a non-demand drain on your income.

This is where T-Bills come in. They are exempt from state and local taxes. Every penny I keep is a penny I can invest, and remember what Ben Franklin wrote in his 1737 Poor Richard’s Almanac

A penny saved is a penny earned

Benjamin Franklin

Do You Pay Taxes On T-bills?

Tax Money Burned.

Well, yes! You still pay federal income taxes, but state and local income taxes are exempt.

I live in a mediocrity income tax state, about 3% state and 1% local taxes up to about 4% combined.  

An extra 4% you keep on your returns and continue to invest them over time add up. Your tax savings can be higher depending on what state you live in(Income Taxes By State).

How I Plan To Build A T-Bill Ladder For My Emergency Fund.

So, what do you think?

Do I need to make my plan simpler?  

Is it more complicated than my current plan of a three-part emergency fund using a savings account, a high-yield Savings Account, and a Money Market Mutual fund?

Is my attempt to save on local and state income taxes using T-Bills worth it?

Should I stick with my original investment setup?

What are you doing with your Emergency Fund?

Make things happen, plan for wealth while preparing for life's problems.

Testing Building T-Bill Ladder with a 4-Week T-Bill Ladder For Weekly Income Strategy.

Emergency Fund T-Bill Ladder Update

Fear overcame me, and decided to modify my first test to only use a shorter maturity T-Bill: Emergency Fund In An 8-Week T-Bill Ladder, My Thoughts And actually building the ladder: How I Built An 8-Week T-Bill Ladder Emergency Fund.

Tom, Growing His Passive Income Generators.
Myself with an interesting Bull Sculpture.
Notice: No Lambo’s. :/
Hi I’m Tom, A Blogger And A PIG Farmer.

PIG Farmer as in I grow Passive Income Generators(PIG’s).

I’ve been playing with stocks, mutual funds, and options for decades, as well as always working on my side hustle stacks.

Unlike what you read online, I’ve yet to find a way to get rich quickly. Get Rich Quick isn’t happening for me.

My journey has been long and continues. I hope to have so many PIGs I can stop working at my current job and volunteer as a medical worker overseas. 

Still waiting, but getting there. I still am a family man, and while on this Journey of Growing PIGs.  

I wanted to share my adventures(ups and downs), hoping you will contribute with your feedback and comments.

Fun Fact: In my spare time, I am a Band-Dad!

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