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I disagree here... Our monthly expenses are not just to scrape by, but to cover our needs, which include the "must haves" plus the "nice to haves", plus a portion of the yearly expenses such as insurance, etc...
This way covering our expenses is enough. If we lose one of our jobs we dont really need to save $3k a month until we can get back on our feet
Agreed.
Our monthly budget includes everything from car maintenance to vet care to clothing to life insurance premiums, etc. It's a FULL budget and not just a list of bills and groceries. It also includes things like entertainment and eating out. Obviously, during job loss we could cut back, but this way with our EF, we wouldn't have to.
And, in the event of a medical emergency, you're more likely to eat out or drive more if you have to go to a hospital multiple times a day, so keeping things like eating out in the budget when factoring your EF may help.
I disagree here... Our monthly expenses are not just to scrape by, but to cover our needs, which include the "must haves" plus the "nice to haves", plus a portion of the yearly expenses such as insurance, etc...
This way covering our expenses is enough. If we lose one of our jobs we dont really need to save $3k a month until we can get back on our feet
Wouldn't it be better to reserve more rather than less? It sounds like you are saying to do the bare minimum. Do you currently have other savings/investments beyond your emergency reserves? If so, then I understand.
If you need $9k a month to service 3 lux car loans..
You don't need those debts you really cannot afford.
Might as well put that $4-5K every month into a guaranteed returns bonds or investments etc..
And then buy those lux cars in cash outright.. when it's time.
Any financial advisors would say that..
Mine would.
Our monthly budget includes everything from car maintenance to vet care to clothing to life insurance premiums, etc. It's a FULL budget and not just a list of bills and groceries. It also includes things like entertainment and eating out. Obviously, during job loss we could cut back, but this way with our EF, we wouldn't have to.
And, in the event of a medical emergency, you're more likely to eat out or drive more if you have to go to a hospital multiple times a day, so keeping things like eating out in the budget when factoring your EF may help.
Why not just reserve 6 months income rather than expenses? This way you wouldn't need to worry about the nickles and dimes. You assume your expenses will remain constant, but in the event of a medical emergency, things could change drastically. In the event of a sudden job loss, your income would be totally replaced rather than partially for up to 6 months.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,351 posts, read 8,567,170 times
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Quote:
Originally Posted by Romaneats
If you need $9k a month to service 3 lux car loans..
You don't need those debts you really cannot afford.
Might as well put that $4-5K every month into a guaranteed returns bonds or investments etc..
And then buy those lux cars in cash outright.. when it's time.
Any financial advisors would say that..
Mine would.
Please reread my post . That 9 k supports all my living expenses including an 24k per year travel allowance plus the 3 car payments, insurance, maintenance . It's not 9k a month just for 3 car loans.
The cars are supported by buying rental houses instead of paying cash as you recommend. The rents cover the car loans for 6 years until paid off. Then I own the cars free and clear but will still continue to receive rents there after.
In my opinion, people should reserve 6 months worth of INCOME, not expenses. This way in the event of a job loss you will not just barely scrape by.
How much you reserve should depend on the number of household members. A family of 4 should probably reserve 4X as much as a single person. Also, if you own a home versus rent. A homeowner should have extra reserves to cover emergency home repairs such as a new roof, A/C, or water heater.
If you're aware of all of your expenses, there's not much difference. An emergency fund doesn't cover just utilities and food--it covers everything. Blow a tire? Covered. Medical expense? Got it.
If you're aware of all of your expenses, there's not much difference. An emergency fund doesn't cover just utilities and food--it covers everything. Blow a tire? Covered. Medical expense? Got it.
That would be true if you spend nearly 100% of your net pay. I just don't understand the point of calculating each expense down to the penny and reserving only the bare minimum. Why not just go the extra mile to be safe?
I think it is also critical that people have additional savings & investments beyond the emergency fund. If you have $100k in liquid investments then the emergency fund is slightly less critical. If the emergency fund is your only savings, then you are living on the edge.
6 months worth of expenses if fine especially if you currently have fat in there that could be cut in the event of job loss. There are some areas where I might suggest higher single income family, dual earners working for the same company or within the same industry or commissioned earners. Other than that it's overkill IMO but your safety is a personal thing
That would be true if you spend nearly 100% of your net pay. I just don't understand the point of calculating each expense down to the penny and reserving only the bare minimum. Why not just go the extra mile to be safe?
I think it is also critical that people have additional savings & investments beyond the emergency fund. If you have $100k in liquid investments then the emergency fund is slightly less critical. If the emergency fund is your only savings, then you are living on the edge.
There's no reason to calculate to the last penny, dollar, or even twenty dollars. If you have any idea how much of your take home you've been spending, then you'll have some idea of how much you want to put in the emergency fund.
Lowexpectations mentioned fat in the budget, and if you lose your job, you'll realize that there is plenty. There will be no commute to work, replacement of professional clothing, dining out, weekend trips, cable, and a host of other things. That six month fund may last for nine or twelve.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,351 posts, read 8,567,170 times
Reputation: 16693
Quote:
Originally Posted by Gerania
There's no reason to calculate to the last penny, dollar, or even twenty dollars. If you have any idea how much of your take home you've been spending, then you'll have some idea of how much you want to put in the emergency fund.
Lowexpectations mentioned fat in the budget, and if you lose your job, you'll realize that there is plenty. There will be no commute to work, replacement of professional clothing, dining out, weekend trips, cable, and a host of other things. That six month fund may last for nine or twelve.
Very good points
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