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Your Take: How Is Your Emergency Fund?

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20% of Americans “suffered a significant economic loss” last year, according to a report two weeks ago, the highest level in the last 25 years. The Economic Security Index has been tracking data on income loss, medical expenses, and debt since 1985 and it has shown economic insecurity has risen across all groups. What’s economic insecurity? When they’ve lost 25% or more of their available gross income within a year and not enough of an emergency fund or reserves to make up the difference.

Here’s the shocker (at least to me) – “48% of Americans said last year they only had enough resources to carry them for two months before experiencing any economic hardship.”

That’s scary. I’m curious to know how many months you have saved up in your emergency fund as well as how that level has changed in the last two years. We used to have an emergency fund of only around six months until two years ago, when I left my job to pursue blogging full-time. Back then, we decided to up the level to around twelve months of expenses in order to handle the fluctuations in income. It’s maintained that level ever since, in a CD ladders, and I haven’t increased, or decreased it, during the recession. I consider myself lucky, a lot of folks have had to dip into that fund.

How about you?

{ 60 comments, please add your thoughts now! }

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60 Responses to “Your Take: How Is Your Emergency Fund?”

  1. Rosa Rugosa says:

    I am very grateful to you PF bloggers, because two years ago, an EF wasn’t even in my vocabulary! Now we have about one year of living expenses, which is a good thing, since my husband lost his job earlier this year. The EF is the only reason I can sleep at night!

  2. My wife and I decided we needed to have an EF that would at least cover all our expenses for a full year before I quit the corporate world and started working for myself.

    That was 2 years ago, and luckily we’ve managed to not touch it at all.

  3. Livin' on the Edge says:

    I have about #300 in the bank and about $800 in credit card debt (on a $1100 limit). I pretty much live every day of my life terrified that I’ll mis-calculate my budget, buy something I shouldn’t, and have no way to pay my rent at the end of the month. I’m trying to save the best I can (clip coupons, shop sales…heck, I even have some bills in different currencies when the exchange rate is in my favor!). Sometimes the best way to save for an e-fund is to increase your income. I think that’s what I’ve got to do. It can be a catch-22 since without an e-fund it’s hard to be flexible and find a new career!

  4. Sandy L says:

    Currently about 2 years worth in savings bonds, but it is also doubling as the kid’s college fund. They are not the best investment. However, it’s the only thing that I tried that I haven’t been tempted to cash for other purposes.

    I’m super risk averse, so we also do the following:

    -Dual income that could live on one income if needed.
    -Reducing our fixed expenses by working to pay off the mortgage early. (if we pay off mortgage debt, suddenly that 2 year e-fund turns to 3 years)

  5. Darwin Benedict says:

    We are retired, wife and I, and have been since June/July 2003. We have managed for these years on retirement funds from wife school teaching fund and I from social security. 2008 in the fall when everything to a dive I quit drawing on my IRA. We now have no EF to fall back on. I work part time to supplement pocket money and some traveling. But this past spring my pocket money is disappearing. Next year will most likely not be traveling. Worked for all those years for what I wanted to do now will have to try and find work to support daily living. Now at 66 years of age don’t know what I will find for work.

  6. Chicgirl says:

    I have 10 months ($20K)in my online high yield account. I’m shooting for 12 months in EF = $24K…after that I will be able to sleep well.

  7. TS says:

    Monthly expenses: ~1800 rent + utils
    ~110 cell phone
    ~60 DSL + home phone
    ~1000 food
    ~100-200 gas for cars
    ~3150 / month in expenses

    Cash/brokerage acct: ~3 years (not counting unemployment checks that and minor cut backs in spending which should take us out to 5 years+)

    Retirement accts: 4 more years or so.

    Current rate of growth of savings is about 2-3 months of savings for each month worked so I think we’re in a good position

  8. We had only 2 months and we both lost our jobs. Unemployment income wasn’t enough and we slowly but surely faced financial ruin. We’re now in the middle of a bankruptcy. I wish we never got trapped in the credit card debt cycle because paying on those debts took away from our ability to save for emergencies. Getting into credit card debt was incredibly dumb on our part but not having savings was also equally short sighted. We’re now saving towards an emergency fund and are trying to do an about face on our finances.

  9. Eddie says:

    We keep six months in a MMF, but continue to add to it monthly. Every now and then, if we don’t need to tap it and the balance grows to 8 months, we pour the extra into an S&P index taxable fund.
    Fingers crossed, G-d willing and the creek don’t rise, the “backup” EF index fund will convert to our “Early Retirement” fund.

  10. Issa says:

    Ours is 6 months. But it was in danger of getting depleted 2 months ago when my husband had surgery for pacemaker implantation, which was not covered by our insurance. It was great that he had friends who helped us with the expenses.

  11. Jason says:

    I have 8 months in my Emergency fund, a decrease from 11 months from the beginning of 2010 as I used the difference to pay off a car loan in 17 months vs the 60 month term.

    My plan is to have 12 months by Jan 2011 and 18 months by Jan 2012.

    This is based on my actual must have monthly expenses, rent, auto insurance, groceries, utilities (no cable TV but internet ),etc. No padding or frills included.

  12. About a year’s worth of living expenses in the bank. Like Darwin Benedict, I also learned that I could not draw from retirement funds after the crash — luckily, I had not quit my job, as I imagined I could at the height of the illusory boom. Now laid off into forced “retirement,” I’m managing to delay drawdowns by cobbling together a living from part-time employment and freelance gigs; so far have not had to eat into the EF. Yet.

  13. otipoby says:

    I have 9 months of current expenses in the bank. If one or both of us get laid off, I have no doubt we could stretch to 12 or 15 months.

  14. cubiclegeoff says:

    We have about 4 months on our comfortable budget, but mostly because my wife’s on unpaid maternity leave. We plan on growing that back up to about 6 months, but with unemployment if that became necessary, it’d last probably a year.

  15. ziglet19 says:

    We have enough for 7-8 months worth of living at our current level. If my husband or I were to lose our job, we would probably try to cut spending right away and could probably stretch the fund another 2 months or so.

  16. As Charlie mentioned above, I think each individual’s definition of an emergency fund differs. There is the current expenses versus belt-tightened expenses, plus in the case of couples where both are working, do you count your time frame assuming that both lose their jobs, or do you calculate assuming that the lesser income is kept, because it is unlikely that both would lose their jobs at the same time?

    In our case, if you assume that we both lost our jobs, I think we could only last about 3 months at current spending levels, but if we “tightened our belts”, we could probably not even touch the EF by living on the lesser of our two incomes. Since it is extraordinarily unlikely that we would both lose our jobs, I think that is a fair calculation. BUT, I do still intend to keep growing our EF anyway… just in case.

  17. Sarah in Alaska says:

    We have 6 months of a normal budget saved. If we cut back it’d be more like 8 months.

    Over the last two years, the amount in my emergency fund hasn’t changed, though I now label $X emergency and $Y home downpayment. The home downpayment number has grown.

  18. Rhino says:

    I don’t have an emergency fund because I need to pay off 4k of credit card debt 🙁

    • Scott says:

      Credit Cards are the Debil…

      • Actionwoman says:

        I think that everybody should put at least something away each week. Even if its only $25. If you put 25 bucks away for a whole year $25*52=$1,300. It’s not a bad start. Try to be creative.I bring back my bottles and sometimes get a dollar. I have also tried to save my change and dollar bills. make your own coffee. You could also try and go on a spending freeze, stay away from the stores, make your own lunch. Definetely make paying off your debt a priority. But find $25.00 somewhere per week and put it in a safe place. It will take time, but give yourself some piece of mind.
        Have a plan and work at it bit by bit. You will succeed.
        Good luck to you

        • Scott says:

          Here’s where we cut back. Costco brand coffee says it is roasted by Starbucks & tastes great in a Bunn coffee maker. Coffee costs around $.50-75 per pot or $5 / lb.

          Eating out less for dinner. Service isn’t what it used to be and the steaks I grill taste better and you can “afford” a steak for the price of a #5 hamburger combo…

          Buy less clothes by taking care of the ones we have; don’t buy designer (much)…

          We’re out of debt now, but the lifestyle remains and is well worth it.

  19. cubiclegeoff says:

    I found this interesting from The Cheapskate Next Door about emergency funds: While they have savings in the bank, less than 15% have a formal “emergency fund” (“an emergency fund is for people who don’t have their financial house in order otherwise,” another cheapskate said).

    I think I believe the opposite, having an emergency fund IS having your financial house in order.

  20. jsbrendog says:

    ~3-4 months i believe. wish it was more but it is what it is and recently i havent been as focused on saving. ill get back into it. it ebbs and flows

  21. Scott says:

    We have a couple things. If my wife loses her job, we have an executive savings account that will pay out about $2,500 monthly for 5 years when her employment is terminated or she quits.

    If I lose my job, she makes plenty for the 2 of us, but we also have multiple CD’s that would take care of us for at least 5 years. Just have to pay the 6 month interest penalty for withdrawal.

    If we both lost our jobs, we’re going south to Mexico or Dominican Republic to live while the world gets fixed (if that’s possible). We are gringos looking for an experience and know folks who have been down there for some time and speak highly of the quality of life for the budget minded.

    I recommend at least 6 months, if not 12 months to anyone I speak to…

  22. Megan says:

    We have $18,250 in an “Emergency Fund” and that would give us 6 months with bare expenses and NO additional income, stretching to about 10 months depending on what else was coming in. However, I also count this as money available for our insurance deductibles (about $6,000) so in reality it’s about $12k for “emergencies” or “job loss”. We also have other accounts for paying for school (We’re both grad students as of this fall), paying off my student loan (while deferred, let it earn money – also serves as a backup EF), and small accounts (Right now) for car, house, travel, misc expenses.

    My goal is to hit $20k until we’re out of grad school and reassess when we both (hopefully) have jobs.

  23. Actionwoman says:

    My emergency is now at around $5,300.00 and my credit card debt is $77.00; I only have a $800 line of credit but I found even paying $600 back painful. I now get it that the purpose of a credit card is to build up my credit score not to spend it all because it is there. I will continue to get it to a $0.00 balance and then I plan on using no more than 10% of it. Instead, I am working on getting a little fund which I call “nice things for me fund” and another one for other little emergencies like doctor, dentist. I don’t want to borrow from the future anymore. I pretty much skrimped and saved to build my emergency fund any last week I let go and eat out went skiing and let go of my money easy. Why is it so difficult to stay motivated to save and why is it so easy to spend. I hate self control but I know that it is necessary to get ahead.

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