How many months expenses cash on hand to cover a crisis in 2025?

[LuvOrlando]

The old rule of thumb used to be 6 months worth of expenses cash on hand or close to liquid to cover a crisis because it used to take around that long to find a job.

Since Covid the people I know looking seem to report it takes about 8 months or more to find a new job, whether you have one and are looking for different or are out of work and looking.

This got me to thinking that 6 months probably isn't enough anymore so I'm wondering what the new target might be?

 

[NYCgrrl]

I’m still holding with the 6 month rule of thumb but I’m retired so my needs differ.
In December was informed of a building wide assessment that collection will begin in February. Have a choice of paying off in increments or get a 5.0% discount by submitting a lump sum by the end of the month. The assessed amt is more than 6 months worth of monthly maintenance. Haven’t decided which plan I’ll use yet.

 

[barkley]

I’m still holding with the 6 month rule of thumb but I’m retired so my needs differ.
In December was informed of a building wide assessment that collection will begin in February. Have a choice of paying off in increments or get a 5.0% discount by submitting a lump sum by the end of the month. The assessed amt is more than 6 months worth of monthly maintenance. Haven’t decided which plan I’ll use yet.

that is LOUSY that you were only given a month's notice. for many that would be impossible to figure into a budget with such short notice. makes me think of the property tax system where we live. I get that they can't make a determination of the exact amount until after any fall elections that determine special bonds and levies but they've already completed their property valuations months before (we get the notices over the summer) so it takes what? plug in the new information into the computer to get the numbers? yet they don't send out the property tax bills until mid March with the first payment due in april

 

[MICKIMINI]

Interesting question. I would say 6 months at a minimum.

I just read an article regarding property tax reassessments in the town we moved from last year. In some cases, tax bills doubled and even tripled. We moved to a very low tax town last year (lots of mega million dollar second homes here), utilities are fairly low and most of us have well water. A comparable house in our former town would cost us an additional 22K+ in taxes, utilities and water/sewer annually. I know friends and family wondered why we were building new construction so close to retirement...this.

It is the elderly that suffer the most and I wonder how many are suffering in silence from being hungry? It breaks my heart. How many elderly have blown through, or never had a contingency plan to begin with?

Peace and Love.

 

[_19disnA]

Also depends on how liquid your savings/investments are and your overall financial situation. Cash doesn't only need to be the money you keep at home. If you only have enough money to pay your monthly bills will likely be a different answer from someone who is more financially stable. If you have unexpected expenses, repairs, etc.............depends on how much they are and how long you have to pay it.

 

[barkley]

We moved to a very low tax town last year (lots of mega million dollar second homes here), utilities are fairly low and most of us have well water. A comparable house in our former town would cost us an additional 22K+ in taxes, utilities and water/sewer annually. I know friends and family wondered why we were building new construction so close to retirement...this.

totally identify with this. we did similarly about 18 years ago. to this day we are still paying less in utilities than we paid even 5 years before we moved (and with less usage back there), lower property taxes on a much higher value home. the lower cost of living made/makes for a far more financially comfortable retirement.

If you only have enough money to pay your monthly bills will likely be a different answer from someone who is more financially stable. If you have unexpected expenses, repairs, etc.............depends on how much they are and how long you have to pay it.

this is why it's vital to look at one's entire financial picture when figuring out how much an emergency fund ideally will provide for. we got hit with some MAJOR repairs/system replacements in '24 that we largely cash flowed but having an emergency fund to supplement those expenses was a tremendous relief. I think one vital consideration any home owner needs to research is what kind of coverage their homeowner's insurance has regarding one's inability to habituate due to a covered issue. we opt to have coverage that provides for a generous housing allowance but I know those who don't and are gobsmacked when they look at how much housing will run them AND that their mortgage holder still expects their monthly payment. I know others who opt out b/c they have large motorhomes they figure they can live in. well.........when construction delays take a project from weeks to months that 'large' motorhome with the spouses/kids/grands?/pets....becomes intolerable and they too are looking at paying for temporary housing on top of their mortgages.

I budget for our e/r fund to have enough on top of the number of months of expenses i'm comfortable with to include (1) our homeowner's deductable and (2) at least one vehicle's deductable (we say homeowners in our region lose home and vehicles in wildfires-that's 2 separate deductibles that have to be paid).

 

[Jodo98]

I used to think 6 months would be enough but now i always wonder if you need a year. People are finding it even harder to find jobs, etc so you need more time. Also, you have 6 months saved and then an emergency happens and you have to use that money, you will be in even more of a predicament.

 

[tvguy]

There was an article I believe in the Wall Street Journal last month talking about how much CASH you should have in case of an emergency like the current Los Angeles fires or the storms in the east when access to banks and credit cards may be restricted.. Not an emergency fund in the bank, paper money. The experts seems to specify you should have enough cash in your house to pay one to two weeks usual expenses. Groceries, fuel, etc. Wonder how many people in Los Angeles that had to evacuate have cash in their pocket?

 

[RedAngie]

I always thought the six month guideline was a bit too risky. Sure, as a absolute minimum, but a year would be much more comfortable in case of large unexpected expenses while searching for a new job. Car breaks down, need new refrigerator or washer, uncovered medical expenses, etc.

 

[NYCgrrl]

that is LOUSY that you were only given a month's notice. for many that would be impossible to figure into a budget with such short notice. makes me think of the property tax system where we live. I get that they can't make a determination of the exact amount until after any fall elections that determine special bonds and levies but they've already completed their property valuations months before (we get the notices over the summer) so it takes what? plug in the new information into the computer to get the numbers? yet they don't send out the property tax bills until mid March with the first payment due in april

Thank you for the care.
I’ve the asked for funds just planned to use them in another manner.
You got to be prepared in this world for as many surprises as possible

I notice that historically this bldg has a large assessment every few years unlike my old co-op that steadily increase the maintenance every year by 2-4% and scooped up a local tax credit to pay for assessments. Actually prefer the new building’s way, lol.

 

[OrangeBirdGirl]

That is a tough question. You run the risk of having your money tied up in low interest accounts though for a what-if versus invested in assets that aren't as easily liquidated. What people may not consider is unless you are fired you would also get unemployment. I think in some states even if you are fired you still get it. In our state it caps very low though (I think $400/week) but that is still $1600/mo to use towards expenses. Also you have to consider if you are a dual income household and what is the likelihood both of you will lose your job at the same time? Then health insurance, that has skyrocketed over the years. Possibly go to marketplace if you are unemployed and you could get a stipend as low income? I'm anticipating when we have to buy insurance on our own until Medicare we're looking at $20k/yr for 2 adults. That's all in, premiums, deductibles, vision, etc.

When we were first starting out, funding our 401's was a bigger priority then making sure we had 6 months of expenses on hand in case of what-if's. We also set our selves up from the time we bought our first house, all expenses could be covered by only one of our income in the event we lost a job. Granted we'd be changing our lifestyle while the other was unemployed. Not going on vacation, watching the disposable money we spent on junk, and likely changing our grocery shopping to shop the sales vs what we wanted for dinner that week. But it could have been doable.

 

[DCLMP]

I guess it would depend on the economy, what you do for a living, and if you are going to get a severance.

 

[DCLMP]

There was an article I believe in the Wall Street Journal last month talking about how much CASH you should have in case of an emergency like the current Los Angeles fires or the storms in the east when access to banks and credit cards may be restricted.. Not an emergency fund in the bank, paper money. The experts seems to specify you should have enough cash in your house to pay one to two weeks usual expenses. Groceries, fuel, etc. Wonder how many people in Los Angeles that had to evacuate have cash in their pocket?

Or how much burned in their houses. Why would you need cash in your pocket? It's not like CC aren't working. Physical cash would be important in a large cyber attack if the system is down.

 

[LuvOrlando]

There was an article I believe in the Wall Street Journal last month talking about how much CASH you should have in case of an emergency like the current Los Angeles fires or the storms in the east when access to banks and credit cards may be restricted.. Not an emergency fund in the bank, paper money. The experts seems to specify you should have enough cash in your house to pay one to two weeks usual expenses. Groceries, fuel, etc. Wonder how many people in Los Angeles that had to evacuate have cash in their pocket?

Sounds right, back when 9/11 happened communications and banking was shut down for a while. This was a shock and caused me to rethink quite a few things. Since then it was about keeping, "I need to be somewhere else" money or "I need a plumber" money and day to day supplies on hand so the cars are always full, prescriptions are always up to date in a bag ready to go and there is always enough cash for hotels and food for a while because I can always find a little shop willing to take cash. Covid only reinforced this and yes, I hope all the people in California were prepared

 

[LuvOrlando]

I always thought the six month guideline was a bit too risky. Sure, as a absolute minimum, but a year would be much more comfortable in case of large unexpected expenses while searching for a new job. Car breaks down, need new refrigerator or washer, uncovered medical expenses, etc.

I agree, I think maybe age should be part of the equation. I think I could have gotten by with less when I was younger, but now it would rock me to the core, I imagine the older I get the tougher it will become.

 

[tvguy]

Or how much burned in their houses. Why would you need cash in your pocket? It's not like CC aren't working. Physical cash would be important in a large cyber attack if the system is down.

POS systems may be down so CC are useless.

 

[barkley]

What people may not consider is unless you are fired you would also get unemployment.

unemployment and other forms of financial assistance a person may be entirely eligible to still take time to apply for and be actually received. snap benefits can be issued within 24 hours in what qualifies as emergent need (if you have all your id and verifications in hand) but otherwise it can be 30 days for traditional public assistance to be approved and as far as unemployment goes it can be upwards of 2 months to get an application approved and the first funds issued (longer if the employer contests the claim). monies are needed for the short-term in these cases.

Why would you need cash in your pocket? It's not like CC aren't working. Physical cash would be important in a large cyber attack if the system is down.

when we had an ice-storm some years back none of the POS or ATMs were working so debit/credit cards did folks no good. grocery stores, gas stations and everyone else was operating on a cash only basis. a family member who lived adjacent to the terrible wildfires in northern California a few years back went without power, no POS/atm access (AND no wireless communication due to destroyed cell phone towers) on and off for weeks on end. it was cash only for purchases and a mad rush to figure out which neighbors still had landlines b/c it was the only means of communication inside and outside the region (it was telling how many businesses rely on strictly cellular phones for their main lines b/c their means of customer contact was entirely eliminated-caused havoc).

 

[LuvOrlando]

I wonder, do satellite phone/internet companies offer discounts for national emergencies like this?

Do you think California would pay for it for the schoolchildren and disabled so no-one is cut off?

 

[cvjw]

I wonder, do satellite phone/internet companies offer discounts for national emergencies like this?

Do you think California would pay for it for the schoolchildren and disabled so no-one is cut off?

Maybe Elon Musk will give California free starlink satellites for internet if the normal networks are down.

Edit to add - he is already making starlink available for California. People can hate on Elon Musk, but he always seems to be ready to help in times of need.

 

[Nancyg56]

There was an article I believe in the Wall Street Journal last month talking about how much CASH you should have in case of an emergency like the current Los Angeles fires or the storms in the east when access to banks and credit cards may be restricted.. Not an emergency fund in the bank, paper money. The experts seems to specify you should have enough cash in your house to pay one to two weeks usual expenses. Groceries, fuel, etc. Wonder how many people in Los Angeles that had to evacuate have cash in their pocket?

You never know when you will need cash, so having a sum on hand is really important. When we got hit with that October Blizzard we lost power. Not just normal losing power, the trunk lines got pulled into the river, trees still had full foliage, so the snow made them look like you took an apple slicer/corer to them. Lines down everywhere.

We were ready, I am always ready for a storm. We had gas for the old generator, wood for the wood stove and fireplace stored and dry, propane, batteries, food. We also had cash. You see, ATM's were not operating. Stores that were open only could take cash.

We try to keep some on hand all the time, you just never know