3-6 month emergency fund?

lifeonthehill · December 2013

H and I took a break from our snowball to build our 3-6 month E fund. We want to start TTC next December but want the money saved away before then. We will continue to snowball while TTC and start putting away $1,500 a month into a baby fund if and when we get a BFP. When we sat down and did the math 6 months living expenses for us with literally come out to $4,068. That isn't even living bare bones that includes our iPhones and Netflix. We agreed to put $10,000 away to be safe.

Can anyone tell me how much you would be saving for 3-6 month of living expenses. I almost feel like $10,000 isn't enough.

Thanks

irishfemme · December 2013

We just looked at our expenses last night. With fully-funded retirement savings, cable/Internet, phones, etc., our monthly expenses are $4900. Include groceries ($400/month) and gas ($400/month) and incidentals, we are at about $6000. This is to maintain our lifestyle as it currently is, so our 3-6 month emergency fund would be $18,000-$36,000.

brij2006 · December 2013

After we are done with TMM our monthly budget will be about $2k per month. That includes money for entertainment, gas for both of our cars (if one is out a job we won't need that in the budget), some home repairs, etc. So we figured that if one of us were to lose our job and we needed to live bare bones, then it would be around $1,500/ month. That's $9k for 6 month efund, and $4,500 for 3 months. $4,500 doesn't seem like anywhere near enough to me, but H see's the math of it, and we can live just fine on 1 of our incomes. So we will likely do $6k in our Efund just to be safe, but I would prefer $10k because 6 just doesn't seem like enough.

You aren't alone in feeling like the $10k isn't enough of an emergency fund. But if you're a 2 income household, and the Efund would only be touched if you both lost your jobs. Then you shouldn't have a problem.

lifeonthehill · December 2013

I just wanted to add that we live for free at a boarding school campus. Both of us have jobs here that provide us with a meal plan, free housing including heat, electric, water and repairs to our home. Se even if one of us lost our job the other would have housing taken care of. This is a huge expense off our backs. I suggested thinking in a way as if we both lost jobs but even if we were fired today we would be allowed to live here until July 1st.

Maybe we should be shooting even higher than $10,000 or maybe this is a good enough start while we keep snowballing this summer. This has been the most confusing part of our Dave Ramsey plan yet.

lifeonthehill · December 2013

Thanks for sharing! This is starting to make me feel a little better. I always hear people say 3-6 months but nobody ever shares actual numbers.

H doesn't want to save more than $10,000. He wants to get back to paying off debt and be as ready as possible to TTC. He only sees the numbers and thinks we could be done saving for our e fund on Jan. 15th so why not stop there? Haha. We are doing $10,000 for my own peace of mind I think knowing we will be saving extra for a baby makes him feel a little more secure but the whole thing is making me nervous.

brij2006 · December 2013

According to DR, the spouse who wants the most, wins. So I would say do the $10k that makes you feel comfortable, then start back in toward your debt snowball once that is achieved.

lifeonthehill · December 2013

brij2006 said:

According to DR, the spouse who wants the most, wins. So I would say do the $10k that makes you feel comfortable, then start back in toward your debt snowball once that is achieved.

DR is a wise man. That is our agreement. H isn't going to fight me on that one he knows we are better safe than sorry.

vlagrl29 · December 2013

6 months is $12,000 for us. I am good with 3 months because I want to get back to contributing to retirement gain. Once we get 6k in savings we will stop for the time being.

jtmh2012 · December 2013

alyssa32713 said:

Thanks for sharing! This is starting to make me feel a little better. I always hear people say 3-6 months but nobody ever shares actual numbers.

Because 3-6 months for my expenses isn't necessarily 3-6 months for someone else's expenses.

Xstatic3333 · December 2013

We have 10,000 put away, which would be enough for four months of our regular payments (no extra) on everything if we both lost our jobs at the same time. It would also more than cover all of our deductibles. I'm comfortable with it for now, but will want 15,000 once we're homeowners and/or parents. It's frustrating sometimes to think of all the saving ahead to meet our goals. It's going to be a long road!

In your case , since you don't have rent I'd be comfortable with $10,000 even though you're TTC pretty soon. However, if you want more I'd say that's never a bad decision.

cbee817 · December 2013

We don't have a separate e-fund.. more like a big savings account that can be used for anything major- house repairs, vacations (which we don't take any with a 1 and 3 year old!), a DP on new cars if we need one immediately, a DP on a new house, etc, etc.

Right now we have 13 months of expenses saved. That includes 2 kids going to day care full time ($20,000/year), which if one or both of us were to lose our jobs, I think we would probably not have 2 kids in day care full time. They would most likely go 2 days a week (in order to keep their spot at day care) until we were back on track.

I still feel like it's not enough though- I probably just over worry but I'm hoping to get 18 months in there by the end of 2014.

lifeonthehill · December 2013

jtmh2012 said:

alyssa32713 said:

Thanks for sharing! This is starting to make me feel a little better. I always hear people say 3-6 months but nobody ever shares actual numbers.
Because 3-6 months for my expenses isn't necessarily 3-6 months for someone else's expenses.

Obviously. I am asking because our situation isn't exactly common and I am curious about what everyone else is doing.

emily1004 · December 2013

Some people think three months is okay. I don't. I don't even think six is enough. I wanted a year of expenses. I think it all depends on what your comfort level is.

vlagrl29 · December 2013

I also think it depends on your employment status and how likely you both or one of you would ever be out of a job. For us I'm not too concerned. DH has been a photographer for 13 years and can always find work. In that aspect I feel less concerned.

sillygoosegirl · December 2013

We track all our spending and averaged about $36K-$40K/year before we bought our house. Our house has added around $800/month to our expenses, and brought our total to around $50K/year. So our e-fund is half that, at $25K. In theory, we could spend less if we were both out of work, but I know that IRL if we were both out of work we'd want to travel ($$$), and do projects on our house ($$$), not to mention that we'd also need to start paying for our own health insurance ($$$), so those would no doubt wipe out any savings from cutting back elsewhere. We also can afford to live on one income, so we wouldn't touch the e-fund for unemployment unless we were both out of work.

An e-fund is not supposed to only be for unemployment. It's also for if your car breaks down, you have unexpected medical bills, or your furnace dies... Things like that. There are many kinds of financial emergencies you can encounter.

If your work covers most of your living expenses, that's great, but you probably want some money so you could move someday if you had to. If you wanted to move and take other jobs someday, it can be quite expensive between the move, deposit, first and last month's rent, and sometimes 2nd months rent before you get your first paycheck. You also want your e-fund to have enough to cover your family "out of pocket maximum" on your health insurance (especially before TTC), etc. For most people, 6 months of living expenses will cover almost every other kind of emergency, but with your expenses being especially low, it's worth considering what other kinds of expensive emergencies could come up.

hoffse · December 2013

We keep about $10K. That's about 3 months worth (without my H's loans included because they aren't in repayment yet), but we don't really look at it that way. For us it's more about the insurance deductibles. I've learned that even when a law firm falls apart in my city, people reach out and try to get you employed immediately. I've had several offers from people in the community in case I couldn't find work. So being unemployed for a significant amount of time is just not realistic in our profession where we live. Most of our student loans are also arranged through my parents, and if our world went to hell they would immediately suspend mine and H"s until further notice. We would still have H's federal loans, but those are minimal compared to what we owe my parents.

Ducktale · December 2013

We keep a 6 month emergency fund, which is $21k, or $3500/month. But that's not really relevant to you because your income/expenses is much different than ours.

Mom987 · December 2013

We started with 3 months and have contributed $200/month consistently, so our 6 month emergency fund is about $13,800 and we have 7.5 months and growing.

Mom987 · December 2013

And by "started with" I mean when we got married we had savings that we added to. That was 3.5 years ago.

Xstatic3333 · December 2013

I think another big consideration is what your criteria for dipping into the e-fund will be. For example, many families dip into theirs for car or home repair. We are getting a second account going for car expenses (repair and future purchase) and will do the same for home expenses once we own. In fact, we've already had to dip into the car-repair account since starting our new budget plan, and we're very glad to have it. My poor H seems to be cursed with lots of car issues, even though he chose a practical lightly-used Forester.

Anyway, my goal for the e-fund, once we're where we want to be otherwise, is for it to get touched in true catastrophes only. If we kept our car/house money with it, I'd want the total amount larger than 10K. I've found that, for me, making very strict divisions helps me keep to my spending and saving goals.

orangehills · December 2013

For us, 7 months is 24,000. That's not living bare bones at all, it's keeping our normal lifestyle minus a few things. But I figured save high. That's also if both of us were to lose our jobs. If it was only one of us, we could use that money to supplement for over a year. It will also be our fund if something big in the house breaks, and then we'd just reimburse it after that. So that's our goal, we'll reach it this summer. Then everything after that is going towards a new house down payment!

sccrmgoldie · December 2013

I also agree with above posters... it is very individual... personally I like to keep enough for 6 months of expenses (in their entirety) put aside, including preschool for our one child, because having life remain as normal as possible while searching for new jobs/sources of income would be a priority for us...I doubt I could be effective at job hunting, interviewing, etc... if I did not have somewhere for my child to go during the day and it is important that I have a lot of stability IMO.

That being said... there have been times when I have cut significantly into the fund and gone down to 3 months complete expenses to pay off large purchases or incidental expenses that come up unexpectedly. For example... a large medical expense only partially covered by insurance depleted about 2 months savings, but I remained with 4 months to recoup, get back to work, etc.

It also depends on what other nonfinancial resources you have. I do not have family locally, and could not relocate quickly if I did need their assistance, so my need for a safety net is greater than someone whom has supportive family more locally.

Good for you for working to create a savings net, I'm glad to see so many working towards this!

3-6 month emergency fund?

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