Frugal Village Forums banner

Emergency Fund?

2K views 14 replies 14 participants last post by  Greebo 
#1 ·
I don't know where best to post this so forgive me if it's in the wrong spot! I was thinking about our emergency fund today and wondering if I really need to consider some of the "luxuries" when I'm calculating how much we need for a 6 month emergency fund. When I calculated how much we'd need, I included our expenses for our mortgage, car payment, cell phones, water, electricity, cable/internet.

In theory we could still knock our cable bill down and the car payment should be gone in 12 more months. Should I just be counting basic needs like mortgage, electricity, water, cell phones (we don't use landline) & internet (can't live without highspeed, sorry!)?

I know it's a personal decision but I'm just curious to see what others count when figuring out how much should go in their emergency fund.

:feedback:
 
#2 ·
I would personally only consider the necessities and basic needs. I feel because it is called an "emergency fund", it should only be for what you actually may "need". IMHO.
 
  • Like
Reactions: omalleyc
#3 ·
I take my average expenses for a month - bills and ordinary budget items - and calculate from that. I feel like that gives me a little leeway. In the ordinary expenses there are things I buy now that I would not if I were hunkered down in catastrophe mode, and that would leave some flexibility, at least a little, for things like medications if it were, for example job loss and consequent loss of insurance.
 
#4 · (Edited)
If you are talking about the SECOND EF then I figure the whole shebang luxury items like satelite, cell phones yada yada yada.

It doesn't mean you have to keep them, just that you could and let's face it saving money is only a bad idea if it keeps you in hock to debt.

If debt is going away at a steady pace and you are ready to save for the seocnd EF then go for it.

Now on the first EF--well that is at least $1000 and if there is anyone here who can live on that, then my kudos to them!

Mine would be $3,500x6=$21,000 or my set bring home income x 6 months = 2nd EF
 
#5 ·
My emergecny fund will cover everything except for two-three items that would be cut from the budget.

Landline- I have for work (tele-commute), I do expense it out, so they pay for it, so if my job were no longer I would drop the landline.

Would also lower my cell phone bill, no longer would need to pay for Blackberry internet service, that would halve that bill, but again work pays for that too, so would be dropped only if my job were no longer.

We would also drop our eating out fund were it a true emergency.

Cable internet would be kept, job searching, eBay, Criagslist - so it has a purpose beyond "fun" stuff.

Don't really have anything else that could be cut, we are bare bones for the most part already.
 
#6 ·
It is just a number the bigger the better I would include everything If you needed to use it because of a loss of a job you cold cut back and stretch it further but extra saved is a good thing.

I also think we need and emergency life fund.... call it what you want an freedom fund , Christmas account... can I afford it fund, etc it is so you do not charge life happens and I want to be prepared. It is my next goal as I build up the 3 to 8 months emergency fund... I plan on doing both at once after I finish knocking out this current debt.

We are in our 50's and NEED the mortage paid off to retire so I will also be stepping up those payments even more.

What will I use it for car repair, house projects, a new truck, anything I now use credit for That is my goal anyway.



If I continue putting the amount of money I have been putting on credit each month into savings I should do fine.
 
#7 ·
We don't have a fully funded emergency fund yet. I am hoping to save up 3 months worth of expenses -- I am only counting the bare bones necessities: mortgage, food, cell phone, utility bills, gas.

But this is because we still have debt that we are paying down. Once we are debt free (except the mortgage) I will put more into our emergency fund so that our 3 month emergency fund could fund 3 months of ALL our current expenses without any cutbacks.
 
  • Like
Reactions: omalleyc
#8 ·
At a minimum, you need three to six months of necessities.

If your strategy and budget allows, I would increase that as much as possible up to a full year of all of your needs and wants.

I would prefer to have more saved and then adjust my spending depending upon how dire of a situation we are in. For example, if it were really bad, all of the investments (retirement and 529s) would be cut from my budget and that would relieve about $1,000 a month. If it was a temporary set back, I would spend as normal and just use my emergency fund for what it is intended - the emergency.
 
  • Like
Reactions: omalleyc
#9 ·
Our eventual goal is 6 months reserve of current expenses.

Were the worst to happen, however, we would cut those expenses to the bone, which would extend our FFEF by a not insubstantial amount.
 
  • Like
Reactions: omalleyc
#10 ·
We have 6 months of our current expenses, but we don't have cable and I'm not willing to give up internet unless I absolultely have too. We don't include our misc. (blow money) or savings contributions in our EF.

We also know that dh would draw unemployment if laid off so depending on your state's track record with meeting these payments you might consider this in your calculation as well. We have 6 months in our EF but the expected unemployment benefits would stretch that much further.

I would keep planning on saving enough to make the car payment as long as you have it... 12 months is a long time and it would be a shame to be so close to paying it off and then be unable to make the payments.

Another thing many people don't consider is that if you lose your job, you lose your insurance and you need to have enough money to keep your health insurance so check into what those costs would be. My COBRA payments are nearly $400 per month and I don't qualify for cheaper insurance because I am considered high risk.

HTH! :)
 
  • Like
Reactions: omalleyc
#11 ·
In a financial emergency I'd suggest downsizing from monthly cell phone/s and/or landline to a TracPhone. You may have to learn to adjust from habitual high-minute use (a chronic social condition these days), but it IS a financial emergency, afterall, and very few people ever add up how much money they (shockingly) spend on phones. I lived over half my life without a phone, so it IS possible.

We use the annual TracFone plan and pay $99/YEAR for each of our cell phones and have never used all the minutes on them. The unused minutes also roll-over. So give that some consideration in a financial emergency.
 
#12 ·
For a 6 month emergency fund (or any length of time, for that matter), you want to include all of your basic necessities and expenses that you pay into every month.

Rent/Mortgage
Utilities
Groceries
Gasoline
Automobile payment
Insurance (Life, Health, Dental, Automobile, Renter's, Home, etc)

You want to also include anything that you have a contract with that would cost more to cancel than could be compensated for. Cell phones are a good example.

Make sure you include all debts also because even when you lose your source(s) of income, you still need to pay on those in order to prevent default and repossession.
 
  • Like
Reactions: omalleyc
#13 ·
I agree 6 months of your current payouts. Include the little luxuries as part of it. (or big ones) all it means is you have more money in your EF. And should worse come to worse, that EF can be made to stretch longer than 6 mo. We're currently working on that one too. It's hard to decide on the right number.
 
  • Like
Reactions: omalleyc
#14 ·
I heard this morning on the radio that "they" (and I'm not sure who "they" is) are recommending that you keep one months total income (not budgeted amounts, but your actual net income) times the current unemployment rate. So right now, the national average is 8%, so you should have 8 months worth of net income in an emergency fund.

I'm not sure why they are multiplying it times the unempl. rate, but that is what I heard!
 
  • Like
Reactions: omalleyc
#15 ·
I'm not sure why they are multiplying it times the unempl. rate, but that is what I heard!
Well, I suppose they could justify it by claiming a correlation between the rate of unemployment and the time it is likely to take to go between being fired and finding a new job.

Or it could just sound good to them.
 
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Top