Hypothetical savings question.

[DLgal]

Say you knew that in 3 years, you would lose your job. You have three years to prepare. How much money do you want to have in your savings account (liquid savings, exclude investments) by the time three years is up?

What is your "number" that would make you comfortable while you look for another job?

I'm not looking for vague "x months of expenses." Looking at what that means to different people.

My number is $100,000 for our family of 4. For what it's worth, that's about a year's worth of expenses. The advice of six months doesn't make me comfortable.

EDIT: We are a one income household.

 

[Jen and Ashwin]

Say you knew that in 3 years, you would lose your job. You have three years to prepare. How much money do you want to have in your savings account (liquid savings, exclude investments) by the time three years is up?

What is your "number" that would make you comfortable while you look for another job?

I'm not looking for vague "x months of expenses." Looking at what that means to different people.

My number is $100,000 for our family of 4. For what it's worth, that's about a year's worth of expenses. The advice of six months doesn't make me comfortable.

My job is based on grant funding and contracts. We work on a mostly 2 year cycle for our major grant renewal. Our next grant renewal will be May 2019 and there is talk that our funding may be decreasing. That doesn't mean that I will be out of a job or even that I will have to worry much about our funding, since we have been taking lots of steps to ensure a greater influx of funding from other sources.

But I do want to be more prepared, just in case. Earlier this year, DH and I set up a plan to save an extra $500 a month towards an emergency fund. By May 2019, it should have about $21,000 in it. On top of that, we plan to have both cars paid off by that date as well, so we would just have our mortgage as our largest monthly expense. Though I would love there to be more money set aside, in the event that my job disappeared, this would be enough to get us through about 1 year of me not working. There are some assumptions I am using to get to the 1 year mark, mainly that DH would still have his job and that upon my job loss, we would cut back expenses dramatically. We would stop making extra mortgage payments, we would stop funding our vacation fund, we stop daycare, etc.

 

[davper]

Well, if I went by the last time I was out of work, 4 years of expenses. But I survived that by only having 6 months in savings. I was able to get temp work at lower than my usual salary to keep me afloat.

Everybody is different and everyone has different needs. Unless you are doing a survey, what everyone else is doing is unlikely to meet your needs. Some will feel comfortable with little money because they work in an industry that is always hiring no matter the economy. Then there are others who find it takes time to find a position and will need more money in reserve.

Are there 1 or 2 earners in the house. This will affect need as well.

 

[runwad]

We'd be fine. We don't need my income to live it just makes it a little easier. I'd just go work a minimum wage job somewhere and we'd be fine. House is paid off, cars are paid off...kids would just have to pick up more of their stuff which is fine, they could do it.

 

[littlemichelle16]

This will vary greatly based on where you live. Life in New York City is WAY more expensive than Columbus OH for instance. So, unless you could easily move quickly then location should be a factor. Also, how easily you could get another job with similar pay.

 

[smiths02]

Say you knew that in 3 years, you would lose your job. You have three years to prepare. How much money do you want to have in your savings account (liquid savings, exclude investments) by the time three years is up?

What is your "number" that would make you comfortable while you look for another job?

I'm not looking for vague "x months of expenses." Looking at what that means to different people.

My number is $100,000 for our family of 4. For what it's worth, that's about a year's worth of expenses. The advice of six months doesn't make me comfortable.

EDIT: We are a one income household.

I am going to be vague because otherwise I would be blasting what my monthly expenditures are on a message board on the internet. I feel I would be judged whatever the number.

Anyhow, I think I would shoot for the 6 months of expenses saved in savings. Once I had that, I would then focus on attacking debt (including my mortgage), investing for retirement, investing for children's college funds, and maybe investing money to make sure that once that 3 years is up everything is running smoothly (home repairs, car repairs/buy a better car, etc) so that I can easily cut expenses in 3 years.

I would also think I could have another job in 3 years. I might spend some money investing in training, college, updating my degree (for my occupation, for instance, I could work towards a national certification).

 

[tvguy]

My wife and I plan to retire in 3 years and live off savings for 3 years until our Social Security and Retirement investments will start sending us money. Our figure is $240,000. The unknowns, cost of health insurance, and how much we will be saving by not having to commute to work everyday.

 

[osopecoso]

Exactly.

This will vary greatly based on where you live. Life in New York City is WAY more expensive than Columbus OH for instance. So, unless you could easily move quickly then location should be a factor. Also, how easily you could get another job with similar pay.

Exactly. My income here in Miami gets us by comfortably but if I lived in Arkansas we would be able to retire today.

I am 40 and plan on retiring in 5 years. What we plan on doing is selling our home:renting it and moving out of the country. We already purchased a home in Medellin which is paid off. We do not have a mortgage here. We have a small home in Key West that we have no problem renting and it brings in a nice income.

What you need to do is consolidate your bills and see what you can do without and your needs. Our biggest need is healthcare. We can get excellent care in Colombia at a fraction of the cost what it is here.

 

[DLgal]

I'm totally just asking this out of curiosity, for what it's worth. I know that "it depends" on a LOT of factors. I just wonder when people say "save up 6 months of expenses in an emergency fund," what that looks like to different people.

We live in Southern CA so my figure is based on our housing payment and just essential bills like utilities and insurance coming in around $5000/month. Then we need to eat and buy gas and have clothes to wear..

 

[Jen and Ashwin]

I'm totally just asking this out of curiosity, for what it's worth. I know that "it depends" on a LOT of factors. I just wonder when people say "save up 6 months of expenses in an emergency fund," what that looks like to different people.

We live in Southern CA so my figure is based on our housing payment and just essential bills like utilities and insurance coming in around $5000/month. Then we need to eat and buy gas and have clothes to wear..

I live in Michigan, so our expenses are much different. Also, it is just DH and I (with baby due in 2-3 weeks) so we have a different dynamic as well. As far as how I calculated my amounts, I basically looked at our average monthly spending in YNAB (our budget program) and removed all of what I consider to be non-essential spending. When combined with my DH's current salary, we could probably make it for about 12 months on that $21k we plan to have saved by May 2019. I am the higher wage earner, so it would be pretty hard for us to maintain our current spending habits if I lost my job without having a much larger cash cushion set aside. Eventually, I would like to have more saved, but $500 a month is about all we will probably be able to spare towards the emergency fund for the next few years.

 

[lovemygoofy]

OP,
I think you are in the same boat as we are being military family. I'm not sure if you are retiring at number of years but my husband just retired after 20.5 years active army.
He decided at 18 years he was done and ready to retire. Okay, so let's make a plan and go forth.

I broke down the plan into increments so I could get an idea of what the actual budget would be after retirement. I did NOT add in any VA disability or extra pays. I wanted to use a budget simply on what we were spending now to include savings, any future car payments and likely moves.

For the first year, we paid off all extra debt to include car payments, 0% interest best buy, and anything else floating out there while still putting away savings.
The year leading up to retirement was learning to really budget and hit savings hard. My goal was to have close to 100k liquid cash before retirement. I didn't know where the world we were going at that point or what was next in our journey. I basically took out an extra 1k a month and put in a blind savings account that only had one card linked to it and that was locked in the bank. So, I did something that most would say is completely unpopular, I reduced retirement account deposits. BUT being that my husband would draw a check starting immediately and forever as guaranteed cash money, I saw it as a balance. I wanted to have much liquid as possible until I knew what was next for us.

There are some weird unknown factors for retirement. Are you going to use Tricare prime or Tricare standard? If you use prime don't forget the yearly fee. If going with Tricare standard, then it's factoring in medical costs like copays and deductibles and in network out of network and maximum out of pocket costs. These are the things we are navigating now as my husband just officially retired in June this year and we are already facing our first medical hurdle for myself and understanding how insurance really works outside any MTFs or Primary Care.

Another retirement conversation was about life insurance and using VGLI upon retirement or getting life insurance out in the economy. Oh and we had a long conversation about Survivor's Benefit and did we want that deducted every month from his retirement check.

The one thing I had to really keep in mind when understanding how much retirement check would be was it is just base pay. Not to include BAH, BAS, any job pay incentives or anything else just strictly base pay and typically divided by 2 to give you a good idea of generic and that is before taxes and allotments or anything else.

Sorry to be so long winded, I really didn't have any idea about all this before starting down this road with my husband. If I can give any tips please let me know.

Good luck!

 

[gottalovepluto]

1 year of expenses. I think I'd be able to find a replacement job within a year.

 

[DLgal]

OP,
I think you are in the same boat as we are being military family. I'm not sure if you are retiring at number of years but my husband just retired after 20.5 years active army.
He decided at 18 years he was done and ready to retire. Okay, so let's make a plan and go forth.

I broke down the plan into increments so I could get an idea of what the actual budget would be after retirement. I did NOT add in any VA disability or extra pays. I wanted to use a budget simply on what we were spending now to include savings, any future car payments and likely moves.

For the first year, we paid off all extra debt to include car payments, 0% interest best buy, and anything else floating out there while still putting away savings.
The year leading up to retirement was learning to really budget and hit savings hard. My goal was to have close to 100k liquid cash before retirement. I didn't know where the world we were going at that point or what was next in our journey. I basically took out an extra 1k a month and put in a blind savings account that only had one card linked to it and that was locked in the bank. So, I did something that most would say is completely unpopular, I reduced retirement account deposits. BUT being that my husband would draw a check starting immediately and forever as guaranteed cash money, I saw it as a balance. I wanted to have much liquid as possible until I knew what was next for us.

There are some weird unknown factors for retirement. Are you going to use Tricare prime or Tricare standard? If you use prime don't forget the yearly fee. If going with Tricare standard, then it's factoring in medical costs like copays and deductibles and in network out of network and maximum out of pocket costs. These are the things we are navigating now as my husband just officially retired in June this year and we are already facing our first medical hurdle for myself and understanding how insurance really works outside any MTFs or Primary Care.

Another retirement conversation was about life insurance and using VGLI upon retirement or getting life insurance out in the economy. Oh and we had a long conversation about Survivor's Benefit and did we want that deducted every month from his retirement check.

The one thing I had to really keep in mind when understanding how much retirement check would be was it is just base pay. Not to include BAH, BAS, any job pay incentives or anything else just strictly base pay and typically divided by 2 to give you a good idea of generic and that is before taxes and allotments or anything else.

Sorry to be so long winded, I really didn't have any idea about all this before starting down this road with my husband. If I can give any tips please let me know.

Good luck!

Yes, we are military and will be retiring in a few years. So, yeah, that's kind of why my mind is on this topic. Most of what you mentioned, I am aware of. We already use Tricare Standard, so used to all that. Plan to stick with it in retirement. And I'm not counting on VA disability pay either in my calculations. But we plan to stay where we currently are, either DH will find a job locally or he will work from home (already has a job like that if he wants it). We also are in the process of purchasing additional term life insurance since we don't currently have enough and our term plans expire in ten years. So we have quotes for next 30 and 35 year term plans that we will start up soon. SBP is a definite in our situation. We will max that out so I know it will take 6.5% off the pension payment. We are okay with that, as we want to guarantee as much future income as possible due to having 2 special needs children who may need life long financial support. We are trying to cover all our bases with stacking life insurance with the SBP.