How many months do have (or want) in your emergency fund?

[HHM]

@Logan, the thing is, you are speaking in generalities. For example, just because you "can" get a tax deduction, doesn't mean it actually helps. For example, that student loan interest deduction that discomble1 gets is only $962.50. It may not make that much of a difference. It is an upfront deduction, meaning it decreases taxable income. So, if you are in the 20% tax bracket, the tax savings is only $192.50. The tax benefit is too marginal too matter. Each year, that amount marginally decreases. Granted, I realize that this is an oversimplification, but it illustrates the point that the tax benefit is very marginal.

The thing is, we don't really have the numbers to do a proper analysis.
1. What is the remaining term (time) on the student loan
2. What is the minimum payment
3. What is the disposable income available.
4. How much is being saved already.

It really just depends on the individual circumstance, I just think your advice is being too general and really doesn't factor in all the numbers and circumstances. Most of the time, people come out ahead paying down the debt ahead of super accelerated savings because after the debt is paid off, they can save more.

[tobee43]

I was just talking to my mom about this today. She has always been financially savvy and keeps on top of those sorts of things. She said for keeping things liquid that is basically as good as it gets nowadays... still hoping for the upswing in the economy.

She's been selling copper and silver on the side and has been turning quite a profit. Apparently that is where the money is at these days. She has also always invested in gold... I remember a few years back when gold was lower, and she stuck with it. Now she's probably at a point where she can light a cigar with a $100 bill, but in her mind she is always broke.



I am realizing that as well. You know on Mint how on the bottom it shows your cash vs your credit debt? Right now this is how I am looking... please don't laugh at my pitiful cash worth :



And it irritates me!! I've already sent checks out. :P

i think it's looking pretty good!! LOL!! after all, you just beginning to rebuild your "wealth".

there has been some really good advise on this thread...even the point made if ( and we do) have out of state family. we have elderly parents (in their 90's both) and two kids with grand kids..both in different states. so far, just in the past 14 months i have had to go care for my parents whom still live in calif. 4 times, while we are in florida. so we MUST keep enough money put aside for travel. (wish it was a really nice vacations.. that's been about 6 years since the last one...i call "vaca" now... going to our daughters! LOL!!).

everyone seems to have a different approach to how much to keep aside in case of...i saw the amount of 50%...wish that could EVER be real..and just when you think you're beginning to be at the point you THINK you can save X monthly...well then gas goes up 2 bucks a gallon....or food cost skyrocket. i think much depends on your age, and your potential future earning power. someone like us...well, we really need to save that impossible goal of 50%! or should, to assure our retirement is secured and, since we are both over 50 now, and have very little chance of every accumalating any large amount from earned income anymore..

[debee]

...i saw the amount of 50%...well, we really need to save that impossible goal of 50%! or should, to assure our retirement is secured

I think the 50% figure comes from my post. Misunderstanding. Warren wasn't advocating saving 50%, although if that's what someone wants to do or can do, then more power to 'em !! I know I couldn't, but it would be nice.

Warren's suggests having a 50% necessities budget to stave off foreclosure, bk, etc in case of catastrophe medical, job loss, etc. The other 50% of the budget she allocates mostly to entertainment. Yup. I'm going from memory and it's been about 10 years since I read the book, but I believe it was up to 20% in savings and the rest in fun - travel, books, etc - anything that is not "necessity".

I loved her approach. Instead of putting it all into the McMansion, you live within your means and enjoy the speck of life that you've got. In the last few years I believe new research has come out that indicates that what makes people happy is "experience" rather than "stuff". Creating memories by doing things provides way more happiness than a Gucci bag. (Well, for most people). So she was ahead of her time.

Anyway, I agree that OP is off to a good start! Have some fun along the way!

[tobee43]

I think the 50% figure comes from my post. Misunderstanding. Warren wasn't advocating saving 50%, although if that's what someone wants to do or can do, then more power to 'em !! I know I couldn't, but it would be nice.

Warren's suggests having a 50% necessities budget to stave off foreclosure, bk, etc in case of catastrophe medical, job loss, etc. The other 50% of the budget she allocates mostly to entertainment. Yup. I'm going from memory and it's been about 10 years since I read the book, but I believe it was up to 20% in savings and the rest in fun - travel, books, etc - anything that is not "necessity".

I loved her approach. Instead of putting it all into the McMansion, you live within your means and enjoy the speck of life that you've got. In the last few years I believe new research has come out that indicates that what makes people happy is "experience" rather than "stuff". Creating memories by doing things provides way more happiness than a Gucci bag. (Well, for most people). So she was ahead of her time.

Anyway, I agree that OP is off to a good start! Have some fun along the way!

well..i'm dreaming about the possiblitity of that 50%...and you just got me thinking i sure wish i could do that.. maybe someday...LOL!! if i'm around long enough i hope.

we are happier in this half of our old house then were ever have been!! don't miss it a bit!

[discombob1]

I was just talking to my mom about this today. She has always been financially savvy and keeps on top of those sorts of things. She said for keeping things liquid that is basically as good as it gets nowadays... still hoping for the upswing in the economy.

She's been selling copper and silver on the side and has been turning quite a profit. Apparently that is where the money is at these days. She has also always invested in gold... I remember a few years back when gold was lower, and she stuck with it. Now she's probably at a point where she can light a cigar with a $100 bill, but in her mind she is always broke.



I am realizing that as well. You know on Mint how on the bottom it shows your cash vs your credit debt? Right now this is how I am looking... please don't laugh at my pitiful cash worth :



And it irritates me!! I've already sent checks out. :P

Hey, absolutely nothing wrong with your numbers! It takes time to get where we want to be, and as happy as I am to have a good emergency fund, I have a lot more left looming in student loans. Bleah, baby steps I guess. At least now I DO have an emergency fund and have finally learned to live below my (meager) means!

[discombob1]

Tobee and debee... wouldn't that be great, though... if we COULD save 50%? I'll just have to find a way to double my income and then I'm living the dream! LOL

[debee]

Wouldn't it be great?

The problem with me is that when income increases, so does my spending. What I need to spend now is some serious time rethinking some of my habits. I'll never be the person to wash and reuse my tinfoil (although I know there are people doing it and laughing all the way to the bank), but I'd like to keep trying to do better than I'm doing now.

[brokeinal]

We are working towards 6 months of salary in our emergency fund. I've seen others recommend 6 months of EXPENSES.

[HHM]

We are working towards 6 months of salary in our emergency fund. I've seen others recommend 6 months of EXPENSES.

Reason being, you must focus on the need. Why do you "need" an emergency fund? You need an emergency fund to pay certain expenses. As such, it makes no sense to benchmark the emergency on salary, the amount should be benchmarked against the need for the emergency fund in the first place. The need is to pay expenses should there be an income short fall. But, since most people don't really know what they spend, it is "easier" to say, save 6 months of income since that number is easier to figure out.

The real debate on emergency funds is centered on whether you should plan on a "lay off" scenario or should plan on dealing with one time, unbudgeted larger expenses? Suze Orman takes the view that the emergency fund should plan for a lay off scenario and you have 8 months of expenses in the emergency fund. She has moved to 8 months because it takes people, on average, longer to find a job nowadays than historically. Dave Ramsey has you save $1000-$3000 initially so you can stop relying on credit for unfunded expenses, then pay off all debt except mortgage, and only THEN Fund an emergency fund for 3-6 months of expenses. I side on the shorter end of the spectrum and view the emergency funds as a way to deal with budget gaps and short term income decrease. Also, for those with lower incomes, it can take years to save up 6-8 months worth of income/expenses.

[jetsfan2010]

some very good info in this thread.
I have never successfully built up an emergency fund, but one of my goals after I convert and discharge from this ch 7 is to start small, and get 2 months worth of "emergency expense" money built up. That will take me about 4 months to do. I am putting these funds into a savings acct first, but once its built up, I will then have my bank switch into a penalty free CD. That way, I can earn a decent amt of interest on it while it sits there.