Do you think the $1000 EF is enough in our current economy?

[nodmicks]

I was reading in another thread and thought more and more about this. Dave Ramsey suggests $1000 as a baby EF while paying off debt. Do you think in our current economy and with todays prices that the $1000 EF is enough? Why or why not?

I thought it was a few years back when we were paying off debt. Groceries were less, gas was less, utilities were less. There were also always tons of job postings and unemployment was a good chunk lower. At the prices now and in our current economy $1000 just doesnt see to go as far. It seems like not enough to me.

So what do you think?

[mauimagic]

Good question. I definitely don't think it is enough, however I think it is a great first goal. A great way to begin - hence the baby EF term. Since I have unfortunately proved this fact for us, I know I need to create a larger fund, but will still work on that first step again - because I know it's attainable.

If I had first started out with a $5000 EF goal, I don't know if I would have addressed saving for it with as much 'I can do it' attitude. Put the $1000 EF aside and then start on the $5000 Intermediate EF. Downchunking goals into smaller steps makes it more attainable!!

[nodmicks]

I agree with you 100% Maui on breaking it down. Any amount helps! The dollars and pennies all add up to more. I tend to look at our EF in months of bills and food rather than dollar amounts using a bare bones budget not months of income.

For me the easiest way to save is to have it auto drafted to a different account at a different bank every paycheck. Forcing me to make due with what is left.

I wonder if down the line if Daves books get revised if the $1000 amount will ever change.

[Contrary Housewife]

I agree with Maui, it's a good first goal as a "baby" EF. Its purpose is to help you break the cycle of debt. When you can, you add to it according to your needs and abilities.

Ultimately you want to have a minimum of 6 months living expenses saved up.

[frugalfoster]

$1000 dollars is a help to take care of many small emergencies...but $2500 would probably be more realistic in today's economy...

[Mom2-3]

We originally put $1000 aside for a baby EF. I have a larger security gland than DH. I put most snowball money toward debt and put a small amount toward the EF. I know that this took us a little longer, but it was more comfortable for me.

I agree in this economy that $1000 won't go very far. We had a larger baby EF and kept credit cards open. It worked for us. We had to modify

[Preston]

$1000 isn't enough. But it is a start. Remember, these people starting this program have had a negative cash flow for some period of time. Just being able to save this much gives viewable results.

We started with $48,927 in CC debt Even though month after month I could stash away $1000 toward debt, it would still mean I'd have over $40000 to go, and if I had an emergency, I'd go further into debt.

We got our EF to $500 and then we put 5% of every paycheck into it. It grows and grows. However, it's down to nothing right now since we had a $3700 tax bill due -- which to me constitutes an emergency. So back to square one.

View getting the $1000 as another debt. Put it was your first debt and get it up there, but once you get there, establish a minimum payment for it that you will make BEFORE you attack debt.

[daughter of pearl]

I agree with what Preston said. Having just put my first $100 into my new BEF, to have an initial goal higher than $1000 would scare the pants off me, and possibly as a discourager, rather than a motivator.

Sure, $1000 is only good for keeping the roof over my head and some food in the house for about six weeks, without any other income. But it's a start, and starting is the hardest part.

[a.nonymous]

At the prices now and in our current economy $1000 just doesnt see to go as far. It seems like not enough to me.

$1000 dollars is a help to take care of many small emergencies...but $2500 would probably be more realistic in today's economy...

I agree in this economy that $1000 won't go very far.

I disagree 3x. What does "this economy" have to do with emergencies?

The $1000 BABY emergency fund is designed to give you the wiggle room to deal with minor emergencies. As far as I recall, minor emergencies do not occur more frequently in a bad economy than in a good one.

If you really fear that you will lose your job, you shouldn't put any money towards debt, but build a - as Dave calls it - war chest. You will not have an income, so make sure you stash away as much as possible to bridge the time it takes to find a new job.

If you do have a big emergency (hospitalization, house burns down without insurance, etc), $5000 won't help much more than $1000.

The $1000 mark was chosen to keep you on edge and intentional of getting out of debt. It also forces you to evaluate "emergencies" more critically. Often what seems like an emergency can be worked around with normal means.
So, your light bulb in your oven broke. No need to go and buy a new kitchen. I know, that's totally over the top as an example, but we find enough "emergencies" like that, albeit on a smaller scale/ridiculity level.

Furthermore, what apparently happens to many people putting together a bigger baby emergency fund is this (as reported by someone calling into Dave's show the other day):
Once you get close to your, let's say, $10000 emergency fund, they start to relax and are far less intentional on reducing debt. Because now they feel too secure.

Just a few things to keep in mind.

And yes, we do only have €1000 in our BEF. And so far, it has driven us to resolve all felt "emergencies" through patience and cashflowing instead of grabbing the money in the bank (including unexpected car repairs and our washing machine dying).

[craftypam]

What this economy has to do with emergencies is people losing their jobs and/or getting hours cut so they can't pay their bills with their regular paycheck. Then needing to use the emergency fund

PS People don't always know this is coming. Your employer doesn't let you know ahead of time.

[nodmicks]

Are you ever right Pam! I can not believe the businesses that their employees find out at the end of their work day or come in the next day to find the doors closed.



I looked over all our expenses on Microsoft Money from 5+ years back when we were in debt versus the 2009 actual costs. We don't have any catagories or bills that the expenses are not now up. Some way up.

That is what I mean about $5000 not going as far. Even having the furnace cleaned has cost me more every of the last 2 years as there is a trip charge, fuel surcharge etc. Garbage is the same way. 5 years ago with a lay off that $1000 might have been able to stretch to meet a months bills. No way at least for us today.

I really like Mr Ramseys approach and common sense. We used many of his tactics back when we were paying off debt. We did not use all of them though.

I was just curious what everyone thought of the $1000 with todays expenses. I know FFEF is recommended 3-6 months. We are control freaks maybe but working on a full year.

[a.nonymous]

What this economy has to do with emergencies is people losing their jobs and/or getting hours cut so they can't pay their bills with their regular paycheck. Then needing to use the emergency fund

PS People don't always know this is coming. Your employer doesn't let you know ahead of time.

If you have to rely on extra hours to pay your bills, then you're doing it wrong in my opinion. Feel free to disagree, but don't expect me to change my mind on that point.

Either way, nothing keeps you from delivering pizzas, cutting lawns, delivering newspapers, etc. to make up for a lack of hours.

And even if it hit all of us unexpectedly, people don't know any better if they're getting laid off during good times, either.
The chance of being laid off during bad times are admittedly higher, but the chance of that happening is being overestimated grossly.

[StanleyJohnson]

$1000 is a good start. Some people don't have anything in an emergency account.
We saved $1000 in our EF and started on our 6 month expenses fund.
Our debt pay down will not be a priority until 6 months of expenses have been saved.

[JoJoBean8]

I kept a 1000 BEF while we had credit card debt once that was paid off I put more into the fund weekly while we are paying off my student loans. Then once that is paid off I can build my FFEF. At the rate we are going the loans should be paid off this year which would be 11 years early and we will have 6 months worth of an EF so it won't take long to get it around 8 months.

[nodmicks]

Stanley if it isn't to personal can I ask why you decided to do it that way?