Emergency Fund ?

[crunchy_mama]

Just wanting to see what others do- currently we have some money tucked away in a CD for an emergency fund, but I would really like to add to that so I was working it into next years budget and trying to figure out how much we would need to make it to our original 6 month goal and then 1 yr goal. It occurred to me looking at our budget that I have actually figured it higher than it needed to be- so I think.

I am thinking that with an emergency fund I would not also be figuring that if it comes time to use it then likely it will just be for expenses, not for extra savings as well. So, how do you figure your emergency fund? REgular budget? A bare bones budget? Budget+ savings as well? I was thinking of keeping the amt at the regular budget to allow for wiggle room in cost increases.

Figuring it that way- means that instead of only 3 months expenses saved we have 5 and in 3 yrs we will have 1 yrs worth tucked away(our other savings go to things like our massive deductible for the HSA- vehicle fund- retirement etc)

[Carson]

When I think of how many 'months' we have in our e-fund, I take the balance divided by a monthly bare bones budget amount. We've agreed if we had a drastic, unplanned change in our financial situation, there's a lot we would stop doing and things we could realistically cut off. That amount includes funding 'sinking funds' for periodic expenses, but not additional 'just because' savings.

It also really depends on your family and home situation as well. The likelihood that we go from 2 incomes to 0 incomes is minimal. What is more likely is that we go from 2 incomes to 1 and then need to replace our boiler or something, KWIM? Try to think of the big things that could really hit you while you're down, so to speak.

[Ruthiegirl]

Three months worth of living expenses -- basic bills, mortgage, food, car payment, taxes and insurance.

It does not include savings and we would have to eliminate extras like dance and music lessons. We could keep our YMCA membership since it is a wonderful place for our family and would be a much needed outlet.

I actually thought it would last longer than three months. This is the first time in our marriage that we have had decent savings and in my mind I thought it was a HUGE amount of money. Now I am realizing that the money would not go that far.

[crunchy_mama]

Well, our situation is a bit different, we are already at 1 income. Perhaps I could hope that dh could get some kind of job even if it paid half as much, but I wouldn't want to bank on it. The budget I have acounted for still includes amts for car maintenance( I put extra into this as we have older vehicles- we are much more likely to end up w/ a vehicle emergency than a house emergency as the house just had everything new put in 2yrs ago), house maintenance, pp taxes(real estate taxes and insurance are figured into the house payment)- it also doesn't include an emergency fund to cover the- oh craps that might come up.

[Denvergirlie]

6 months of fairly medium bare bones.

I would get rid of eating out, slash grocery budget a 3rd and get rid of home phone and downgrade cell phone package. However, we would keep home internet and cell phones.
(I am the breadwinner and don't need home phone other than for my work, so I "plan" for loss of job ... as we are also renters so don't have to plan for household emergencies)

To the OP - Are your CD's laddered? In that you have several 1 year CD's that come due each month? Or are they all locked into a single CD? I personally would not be comfortable with my EF locked into a single CD, my EF needs to be liquid and accessible and a CD doesn't fit that definintion as I would be charged a fee for accessing my money before it came due. Just something to consider.

[Leta]

We recently starting having $200 from every paycheck of DH's automatically put in a high yield online savings account. We use this money for non-monthly expenses like property taxes and insurance premiums, but even after that comes out, we are left with about three months of living expenses per year.

We are aggressively paying on our mortgage- it should be paid off in about five years. So at the end of five years, we should have close to two years of living expenses saved up, since our house payment will be eliminated and our savings will have had time to accumulate and earn interest.

[gentlemango]

I thought our emergency fund was doing pretty good. I just added up our necessary bills. We don't even have 1 month of savings.

[zebra15]

Originally Posted by gentlemango

I thought our emergency fund was doing pretty good. I just added up our necessary bills. We don't even have 1 month of savings.

Thats OK Gentlemango.... Use that as encouragement to sock away more money into savings....every little bit helps

[SuzyLee]

Our emergnecy fund is currently 6 frugal months. Not completely bare bones, but pretty lean.

We are happy with that- we have some retirement savings that we could withdraw penelty-free if we were desperate. We might be able to stretch the Efund to 7 months if we were super-frugal. All our big expenses are fixed though (mortgage, etc).

ETA: Assuming we were getting unemployment insurance, our Efund would actually last twice as long (UI is about 50% of income in our state). However, I agree with PP that a bigger issue would be a lost job + our boiler breaks, etc.

[Paxjourney]

4mo of living at current living, 8mo of frugal, 12mo of bare bones.... all in a savings account. 2mo of living expenses in gold/silver and 1-2mo in cash on hand.