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I have 3 months salary saved following the counsels of Business Insider, and I believe it's enough, since my mortgage is paid up, I could always savemore , but I want to enjoy life too!
Why is it salary though? 6 months of monthly expenses should be what your saving for. I mean 6 months of salary might be 10 months or more of actual monthly expenses. Obviously better is more, but salary makes no sense.
What about if you have 2 people working? I was looking at my 6 months of salary.
I alone would have to save over 12k...my gf makes a little sense. So are we supposed to save almost 24k! Pffft. That isn't going to happen at our current jobs. Now if were talking 6 months of expenses. It would be less than 14k....huge difference.
Location: Chapel Hill, NC, formerly NoVA and Phila
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Quote:
Originally Posted by packer43064
Anyone?
Well, there really isn't a strict rule about what you should have in an emergency fund. A lot of financial advisors in the past used to say 3-6 months' of expenses. But when the economy tanked and people were losing their jobs left and right, advisors upped the amount to 6 months to a year. In reality, no amount is the perfect amount. You can have 1 year's worth of salary saved and never need it. And I can have 6 months' expenses saved and need 18 months' worth.
I think you have to look at your individual situation and figure out what you'd be comfortable with in case of an emergency. And you can even guess what your most likely emergency would be based on your job, your health, your geographic location, your family situation, your housing situation, how much life insurance and health insurance you have, etc.
If you have a great job in an in-demand field, are single, in your 30's with good health and excellent health insurance and low co-pays, a high life insuranc policy, and a paid off-house, then you can probably have less saved than someone with low job skills in a saturated field, with health problems, in his late 50's, having 2 kids to support, with no health insurance, no life insurance and paying high rent every month.
I think 6 months' expenses is a good happy medium for most people since it buys you time to hopefully overcome the emergency - whether it be a job loss, a sickness, an act of mother nature, etc. Of course, a year would buy you more time and a 3-month fund would buy you less. In today's, unpredictable economy, more is better for most people, but individuals need to evaluate their own situations.
Even when we were barely making ends meet, we put money into savings every week. Some weeks it might have only been what I pulled in change out of our pockets, other weeks it might have been $20. We never had a week go by without something going into the savings account.
We now have over five years joint salary in liquid savings, plus retirement savings and a few thousand in a regular bank savings accounts for those "life's little emergencies" like a new water heater or unexpected medical bill.
We got to that point by increasing our incomes over time without increasing our spending proportionately. While we have increased our spending to an extent, we've increased the proportion of savings considerably.
Most sources seem to say 6 months expenses, though I like 6 months salary for the security. Chances are, if you lose your job, your health and dental insurance will go up so there are all kinds of unexpected costs to plan for.
You never know what emergency will hit so aiming to save more is always better. For instance, I was diagnosed with cancer 4 months after starting my first job out of college. I went into the diagnosis with around 6 months of my then-current expenses and I had no debt (no student loans, no car - could walk/take public transit). Even while working full time and with decent insurance, my savings were gone by month 3 of treatment and I went into significant (to me) debt. Granted, a big part of that was due to needing to buy a car before I had saved enough to pay cash, but had I been a little less well-insured or not had as much savings, the end result would have been the same. It has taken me the past 2 years to either pay it off or beg the hospital to help forgive some of the debt.
Personally, I won't feel comfortable financially until I have at least a year's worth of expenses in the bank. By summer, I will have used my tax return, a few matured bonds, and credit card awards to pay off the last of my debt in addition to ~$200 - $300 a month (aka all of my "disposable" income) that I've been paying for the last 2 years - but that also means that for 2 years, I haven't been able to save and was only able to start my 401k at the minimum matched amount a few months before I turned 25. Better than some, but frustrating to me!
Emergency funds are a liquid insurance policy. You hope you never have to use it, but if you do, you want to be over prepared. My ultimate goal is 6 months expenses in liquid accounts and a further 6 months of living expenses in funds that I could access in a more serious emergency. I am at least a year or two away from even the initial 3 months living expenses, but I'm very risk averse given my history.
My situation is not exactly common, especially for people our age, but I am so ridiculously glad that I planned for the worst.
We have two people working and we gross about 100k. I put $85/week into cash savings and $110/week in brokerage. 6 months expenses for us is about 15k and I have about 13k saved up in cash. All the extra savings are for the heck of it.
I would say shoot for 6 months expenses in cash and then once you hit is start savings in longer-term vehicles like mutual funds, etc. We have 13k cash, 65k brokerage, and 28k retirement savings (both pensions so hard to gauge this) - I am 30 wife is 27.
I'm not sure where you are seeing "6 month's salary". (Which raises the question, net or gross?) It is usually "6 month's expenses". For some people there isn't a lot of difference. For me, there is a TON of difference. I have a year's expenses in savings (approximately), but that equates to only about 5 month's net salary, or about 4 months gross salary. But which one matters if you lose your job? Just expenses.
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