Comments on: Setting Your Emergency Fund Amount

By: Mike

Mike — Thu, 20 Aug 2009 01:04:53 +0000

Another strategy for people who’ve owned their house for a while, if you are refinancing, take extra cash for the emergency fund. Yes you are paying on it, but the 5% of tax deductable interest will be offset by the 1.8-2.5% taxible earnings from the savings, so it does not cost that much. Be real, if you are going to blow the money, don’t do this….

By: Miss M

Miss M — Wed, 21 Jan 2009 05:06:32 +0000

Oh I started years ago, I had to dig myself out of $20k+ of cc debt along the way I tilted towards investing over cash savings, and used much of my cash when I bought my house. I save quite a bit, one goal is $7000 cash this year, but it will still take a long time to reach that 12 month savings mark.

By: MoneyNing

MoneyNing — Wed, 21 Jan 2009 01:41:27 +0000

Many times, we see an very lofty goal and end up never starting but as Jim pointed out, anything is better than zero.

Once you start, you might just reach that $50,000 number someday. Nothing is really impossible!

By: thomas

thomas — Tue, 20 Jan 2009 23:35:46 +0000

Great post. True to the other comments that you (most) can’t just magically have 12 months of reserves. Absolutely critical to do a direct deposit to avoid the spending temptation.

I also would have highlighted the savings location a little more (point 5 and not summary). Some people might not separate the money from their checkbook which is a big problem.

By: jim

jim — Tue, 20 Jan 2009 20:50:40 +0000

Start with $1,000… then $2,000… then $3,000. Don’t start with that $50,000 number!

By: Miss M

Miss M — Tue, 20 Jan 2009 20:31:27 +0000

I have savings but not a dedicated emergency fund. It will take me years to get to 12 months living expenses, that is $50,000! I like to save money but after saving for retirement and investing for the future, saving that much for an EF seems impossible.

By: jim

jim — Tue, 20 Jan 2009 19:10:49 +0000

That’s very true, no one can go from 0 to 12, and so anything greater than zero should be considered a win.

By: Aman@BullsBattleBears

Aman@BullsBattleBears — Tue, 20 Jan 2009 18:58:04 +0000

emergency accounts are essential in this day and age. With uncertain job outlooks, rising health costs and people need to prepare for the unexpected.

The logic that “it wont happen to me” is BS and people need to not only save, but maintain this savings for when the time arises. If that time does not come where you will need to access this money, atleast it has been gaining interest and growing slowing in a corner until you retire.

By: David Duran

David Duran — Tue, 20 Jan 2009 18:31:37 +0000

We’re currently working on this. Partly for the emergency slush fund. Partly to have cash on hand to buy a house.

Ultimately I think a point worth mentioning is that while 6 or 9 or 12 months may be ideal, if you currently have nothing saved you need to start somewhere. 12 months savings is unreasonable to get to overnight so see what you can trade off and set a goal of 1 or 2 months at a time. Gradually it will build up!

By: Jessica

Jessica — Tue, 20 Jan 2009 18:09:45 +0000

I switched from a job a little over a year ago where I was making less than half of what I do now. Since I switched jobs I went from over over $1000/month worth of debt (school loans and car) to $0/month with no increase in other monthly expenses. So, for my emergency fund I have set it at 6 months worth of take home pay from my previous job. That way I know that I can easily live on that if I need to (because I did it before) plus if you factor in what I was paying towards my debt, then I have an extra $6000 buffer for the “unexpected”.

It also helps that my fiancee has his own emergency fund. We’re in the process of combining our money so there may be some adjusting that needs to be done to our combined fund.

By: Susan

Susan — Tue, 20 Jan 2009 17:29:52 +0000

I like that you mention “Spouse” in #3 – and this should serve as a reminder especially to those who have a stay-at-home spouse. There would be many extra expenses associated with the loss of services provided by a sah-spouse should s/he become ill: increased child care costs, possible house keeping services, nursing care above & beyond that covered by insurance, time off for the working spouse to attend doctor’s visits, etc.