Emergency fund-- The recommended is 3-6 months of expenses. blah blah blah.
I'm going to be honest we have about $3K in our EF. Yeah that's right, $3K, I figure that is enough. After that I'm investing it.
Why so little?, I work in the computer industry , my skills are always in demand. I never been without a job for more than 1 month. If it was longer it's because I sat out to make more money.
So, I figured $3K + unemployment checks should suffice. How do I know? because I was laid off in the past and so was my husband. I found a job 2 months later so the $3K was all we needed. It covered 2 months of expenses and my husband salary supplemented everything else. ( outstanding loans, insurance, debt)
Why some say 3-6 months?. Well 3 months if both of you have extremely safe jobs. One is a teacher and the other is a social worker or government employee.
6-12 months is one is self employed or have a job based on commissions.
Anywho, We never had no more than $4K in emergency reserves in all of our lives!!!!
Do your own due diligence. If you are the only worker in the household, you may want more than 3 months.
Psss- The secret is the less debt you have, the less money you need for expenses.
If an emergency arise, more than likely our paychecks should cover the needed expense.
-side note: My Mom and Dad never had an emergency account. Then again they never had debt either. The only thing they borrowed money for was a house.
Wednesday, September 12
The Ole Emergency Fund
Subscribe to:
Post Comments (Atom)
9 cool comments:
I kept about three months' expenses when I was single. We have about six months' expenses saved but that's just because hubby isn't comfortable without having five figure savings. We could live off one income if we reduced how much we save and cut out non-essentials (travel, dining out, etc.)
Even if, heaven forbid, we were both unemployed at the same time, we'd be okay for quite a while between unemployment and savings.
what happens if you need more than 3K for an emergency?
"we'd be okay for quite a while between unemployment and savings"
that's all I'm saying, some people will be OK with unemployment and a few thousand saved.
If something happens that requires more than $3K then I will sell some investments.
I have a friend that does not have an EF. instead they have a open HELOC.
Everyone is different.
i think you e-fund should depend on many factors and not just what someone says in a book. mine is small - but i feel good about my job and employment prospects, and i have better things to do with the money than let it sit and gain less interest than my creditors are charging me.
optimally, i plan to have a few month's worth of expenses. five figures would be nice, but only if i'm on track with retirement contributions and debt repayment (i expect several more years of debt repayment so this'll be a while.)
@ Sistah Ant - You're right that the efund depends on many factors. However, once upon a time, I felt good about my job and employment prospects and only had a small efund. Then I got let ago. Thankfully I found another job in about a month and a half. Four months later, I got laid off AGAIN. (Mind you, I didn't get much unemployment - takes a while to get started - but I still had bills that needed to be paid from my meager savings). Thankfully, once again, I found another job in about a month and a half. However, a few months later, a family member fell ill. I used all my vacation time, sick time and what was left of my savings flying back and forth across the country because of that.
The point is, life happens and you don't want to be forced into more debt when things happen. Though numerically, it makes more sense to put "extra" money to high interest debt, I would NOT feel comfortable having less than 3 months expenses, especially as a single person.
great points, gecko girl. i actually am very aware of the gamble i'm taking (see my blog about it by clicking my name). i've been unemployed before with a small emergency fund - it's nerve wracking. however, as moneymonk suggested, the less debt i have, the easier unemployment is to weather. i like my odds of killing debt more than i fear my odds of not keeping an income.
I'm the same way--I've spent my EF down to just over $3000 in the last few months, and I'm not really worried about it.
First of all, in a true emergency I have 4 grandparents, 2 parents, 3 sisters, and countless extended family members who are more than willing (and able) to help me out. Secondly, I have plenty of investments I could sell (not including retirement money or home equity) way before it came to asking the fam for help. Thirdly, I have no dependents (kids, pets, etc) and have no problem eating beans and rice for indefintly if need be. Fourth, I'm young and very employable (barring an accross-the-board recession).
So there, try to convince me I need more savings. I DO plan to build back up my EF to 3 months worth, but it's not exactly keeping me up at night.
I'd be really comfy with 3k in an E-fund at this time. That'd cover about 2.5 mos expenses for me as mine are pretty low at right now. My first goal is 1k right now and then I'll work my way up to 3k. If I owned a home I'd feel more comfy w/ 6 mos in the E-fund.
As a single person with no dependents and lots my debt, my e-fund is currently 1,000.
Once I continue to pay down my debt, I will gradually increase it to 3 months.
Post a Comment