How many months to have in emergency fund?

[Planogirl]

I've seen everything from 3 months worth of expenses to a year. What do you think is wise?

I'm trying to prioritize. We have a car loan and I want to double up on payments and also some home repairs to take care of. Those repairs aren't vital but they will need to get done and include new roof, A/C, windows and appliances. Ugh... We also have dental surgery coming up. This one is scheduled and necessary and we already have the money for that.

I would say that the emergency fund should come first but I can't decide on how big it needs to be.

 

[MomToOne]

I go with Suze Orman's suggestion of at least 8 months.

 

[2Tiggers]

I like 6months but feel even better when we can get it to 8 months. If something comes up though we use that extra 2months as a cusion then work to replace it. Eventually I would love to get a years worth of emergency fund but we have other things that need to be replaced before we get there.
Hope this helps with your decision.

 

[disney1990]

We have at least a year - you just never know.

Recently a woman posted that a trip to the emergency and followup medical care have endangered their vacation plans. That's too close to a big problem for me.

 

[eliza61]

I've seen everything from 3 months worth of expenses to a year. What do you think is wise?

I'm trying to prioritize. We have a car loan and I want to double up on payments and also some home repairs to take care of. Those repairs aren't vital but they will need to get done and include new roof, A/C, windows and appliances. Ugh... We also have dental surgery coming up. This one is scheduled and necessary and we already have the money for that.

I would say that the emergency fund should come first but I can't decide on how big it needs to be.

Lots of factors come into play.

We have about 4 right now. How secure is your job? I know nowadays that's a hard question but both mine and dh's jobs are pretty secure for the next two years so we feel ok with the 4 month thing.

Roof I would probably get done as I found out the hard way putting that off could be the difference between a 10K job and a 15K job.

appliances are evil things from satan!! maybe because I purchased all of mine at the same time when we brought our house but those suckers all broke down at the same time. Then of course since I had not brought any new ones in 18 years I darn near went into cardiac arrest when I seen the price of some of them.

So for us we're rpretty comfortable sitting at 4 months and we have 2 college tuitions and medical bills to pay for so while we're handling our new budget well, we definitely are not able to pad the savings yet.

Also because both dh and I are getting close to retirement we are sinking any thing extra into 401K's and IRA's

 

[Karenj2]

Having gone through a time when I had lost my job, and DH was on LTD due to depression (for almost 2 years), my personal goal is to have at least a year of NORMAL expenses saved up (knowing that we'd probably drop a lot of expenses to stretch that out if need be). That being said, we don't have that saved up yet, and we've got some of the same expenses coming up too (all of our appliances, HVAC, and water heater are all 15 years old).

Right now we have a dedicated baby EF of $1k (for loss of job emergencies), and $1500 saved up for general emergencies (i.e., broken dishwasher). What I'm doing is dividing any "extra" money into my EF, plus into a "replace/repair" category. I'd like to double up on my car payment, but right now the other stuff is more important.

Sorry for the randomness, but my daughter wants to add some "stickers":

 

[wdwmom0f3]

Sorry for the randomness, but my daughter wants to add some "stickers":

love it!

I have always heard that you should have 6 months to a year saved up.

 

[disney1990]

Six months used to sound good to me. Last time I lost my job, I was out of work for 16 months. I was laid off again this past July and still looking for work.

If you were out of work for 16 months, would your 6 months of savings carry you through.

The job I was recently laid off from, I was assured was safe and that the person (in that position) would never be laid off -- go figure.

 

[sarah4770]

I would go for at least 8 months to a year. I got laid off last year, it took me about 4 months to find a job..... not a great job,but a job that pays considerably less than my former job. still looking for that better job, for the last 4 months.

 

[chris31997]

I've seen everything from 3 months worth of expenses to a year. What do you think is wise?

I'm trying to prioritize. We have a car loan and I want to double up on payments and also some home repairs to take care of. Those repairs aren't vital but they will need to get done and include new roof, A/C, windows and appliances. Ugh... We also have dental surgery coming up. This one is scheduled and necessary and we already have the money for that.

I would say that the emergency fund should come first but I can't decide on how big it needs to be.

What I would do is split the double car payment, half into the ER Fund and half to the car payment. This is what I would do. Now if I could pay off the car, in about 6 mos than I would double down on the car and get about a year of expenses into a ER fund. After car is paid off, I would set aside in a saving account the funds for the a/c, roof, appliances and windows. This might be the additional car payment amount, with the first car payment amount going to the ER fund.

 

[Planogirl]

When we went through our layoff situation years ago, we had about 6 months of funds available plus DH found a contract job quickly. It didn't pay as much but it helped. We were also fortunate in that we didn't lose our jobs at the same time.

I like the idea of a minimum of six months plus a separate repair fund.

 

[At World's End]

Having gone through a situation when we really needed an emergency fund (DH got laid off and I was a stay at home mom, so we had no income), however many months you have will probably not seem like enough if you ever find yourself needing it. Let's say you decide on 6 months. When you start drawing down on it you start thinking, "In five more months how will we pay the rent, in 4 more months how will we buy food." Believe me, it's horrible. We were fortunate that I found a job right away, and DH found a job within 3 months. But both of us working barely make what he made at his previous job. But we survived, didn't lose the house, are able to feed our kids, etc. but rebuilding our EF was a serious priority. We learned quick that what are "normal" expenses before the layoff were really not necessary. You can stretch a dollar pretty far when you don't know when your next paycheck will be.

 

[JaymeC]

We keep six months in our emergency fund and then sock any extra into our investment fund (I know someone is going to think this is risky, I understand that but dh is in finance and I'm in accounting, so we're confident of that decision and in what fund those particular assets are in). If push comes to shove, we can access that investment fund though we'd really prefer not to and currently that would give us about a year. If push really came to shove we'd start digging into the college savings for the kids and then retirement, but that would be a last case resort.

Having said that, dh is going back to school right now and I'm out primary income, but if either of us were working we could easily pay our bills. Which means that if I were to get laid off and hadn't found anything after a month, we'd both be out looking and as long as one of us found a position we wouldn't need to pull from savings at all. And not even a high paying job, our mortgage is extremely low, our insurances are extremely low cost, and we have no other loans. We can live pretty cheap, which is what makes me more confident in our emergency fund.

 

[2disneyboys]

Our ultimate goal is 1 year. We have 8 months of our current "budget" which includes a lot of fat that would not happen or would be seriously trimmed should one of us lose our job (which means it would really last longer than 6 months) Once we hit 6 months we eased up a bit and started another emergency fund...this other fund is for maintenance/repairs. House, auto, etc... Plus we already have a separate fund for vacations

So we r feeding 3 funds right now.. Of our savings line in the budget, 60% goes to the main ER, 20% goes to vacation fund, 20% goes to the maintenance/repair fund. Of course we are also feeding retirement funds and college funds but those are separate budget lines from savings so r irrelevant to our savings breakdown.

While 1 year is our goal, 6 months was my comfort level, so once we hit that we felt comfortable divvying up our savings category, as honestly, we could use all 3 funds for emergency if the need arose

 

[Ciao Mickey]

I've seen everything from 3 months worth of expenses to a year. What do you think is wise?

I'm trying to prioritize. We have a car loan and I want to double up on payments and also some home repairs to take care of. Those repairs aren't vital but they will need to get done and include new roof, A/C, windows and appliances. Ugh... We also have dental surgery coming up. This one is scheduled and necessary and we already have the money for that.

I would say that the emergency fund should come first but I can't decide on how big it needs to be.

I would recommend at least 8 months.

Times are tough (and they might get much worse) and depending on what field you are in and what part of the country you live in, it might take double that time to find a job.

 

[nunzia]

We have about a year in that fund. It looks like my forever reliable job will most likely be cut to part time next year, so I'm looking at options on filling in the missing cash or just cutting back on what we spend. When I put money in savings I just hate to take it out

 

[ariel71]

Doesn't answer OP's question directly since there are too many variables, but also consider -

If the person losing a job has health insurance for the family and there's no one else that can provide coverage, COBRA can drastically increase your expected monthly living expenses. Of course, there may be other offsets like not having to pay for child care. I tend to be overly conservative.

Also (OP, not directed at you) a lot of people don't seem to factor known future expenses into their budgets if they don't happen in one year. Appliances/AC/furnace/water heater/etc will need to be replaced - it's a matter of when, not if. I use long-term estimates related to housing maintenance in my budget, augmented if I know that something will happen in the short-term. I think of it as similar to a condo reserve fund. If nothing major happens in one year, I don't treat it as found money. This is separate from my emergency fund.

 

[Planogirl]

Doesn't answer OP's question directly since there are too many variables, but also consider -

If the person losing a job has health insurance for the family and there's no one else that can provide coverage, COBRA can drastically increase your expected monthly living expenses. Of course, there may be other offsets like not having to pay for child care. I tend to be overly conservative.

Also (OP, not directed at you) a lot of people don't seem to factor known future expenses into their budgets if they don't happen in one year. Appliances/AC/furnace/water heater/etc will need to be replaced - it's a matter of when, not if. I use long-term estimates related to housing maintenance in my budget, augmented if I know that something will happen in the short-term. I think of it as similar to a condo reserve fund. If nothing major happens in one year, I don't treat it as found money. This is separate from my emergency fund.

I would agree that future expenses are another factor. We have to consider our cars which are older and always seem to need something plus accident prone family members and then just miscellaneous expenses. It all adds up.

 

[Karenj2]

Well, I've been through Dave Ramsey's FPU, and use YNAB for my budget program, and both recommend "saving for a rainy day" - meaning (as another poster said), your appliances WILL break, your car WILL eventually need to be replaced, etc, so it's better to save up for those, so when it happens, it's not an emergency.

 

[JennCa]

We have a year, and that is because it takes that long for us to switch gears. Right now I work one day a week and hubby is full time. If something happened to his job then I have to wait until the enxt school year for me to go back to full time. While I don't make nearly what he does it would be enough to pay for the basics of life and is our back up plan.

If I didn't have a back up plan ready to go I'd want even more saved up. I am just an extra cautious person and so is hubby. His brother on the other hand is very comfortable have 3 months or less so it is all personal perference.

Jenn