What is your definition of a...

[RuthNY]

fully funded Emergency fund?

I'm so confused by this. My goals were to:

1) pay off debt...YEAH! DID IT!!!

and 2) fully fund Emergency Fund.

My thoughts on an EF are that I have catagories that I save in so that money is there when I need it. I'm also thinking that an emergency fund would be the 3-6 month living expenses. I'm thinking that I've got a more realistic chance of saving up in catagories I'd like to have money in so that I don't have to use credit cards. When I do that goal, THEN maybe I can start saving for the 3-6 month living expenses. I may be way off, but I think that's the way I'll likely go at first.

My catagories are:
-Vet (annual tests, shots, exams and thyroid med money for Jake)
-Car Maintence and repair/Insurance premiums/Insurance Deductables
-Medical/dental/eye exams, my $250 annual deductable
-clothing/shoes/accessories
-vacation
-gifts (Chrismas/Birthday)
-Hobbies (this one might be iffy, but let's face it, money IS spent on hobbies, so maybe if I limit it by what I can put away for them I won't be so apt to just blow money)

Anyway, how does on decide what's a realistic amount? I know...track...but what I'm stuck on is the auto maintence.
I don't know, the more I type the more I know noone can answer for me but I'm just wondering how others come up with their savings plans.

My next goal is to have money saved for my next car (hopefully a few years away) and also general savings alongside the retirement money I already max out.

Any input???

[homesteadmamma]

Most financial wizards will tell you that a well funded EF account is one full year of your salary. That isn't realistic for many people I know (myself included).

Having said that I personally think you should have at least 6 months worth of salary in your EF account at any one time. (again we don't).

I also think that an emergency fund is just that. Its for emergencies, should you find yourslelf out of work, should you become sick, etc.

[forestdale]

Ruth, like you, I'm new to this and I am still building my first EF. I think of it as money that will help me in an emergency or when something unexpected comes up. For instance, DH and I are currently both getting our prescription glasses updated. We have a special deal where we get our frames free but we pay for the lenses. Our private health insurance coveres most of our lenses so, we are actually only paying about $70 for both pairs of new glasses - the entire cost of both glasses is over $800. That $70 will come out of the EF.

I see most of the things you listed as normal living expenses so they wouldn't be covered under my EF unless I didn't have the money somewhere else. For example, if I knew we both needed new glasses this year, I would have saved in another fund for it. As it was I didn't think of it so it comes out of my EF as the money hasn't been put aside to pay for them.

I have to sit down soon and work out how much we do spend on unusual incidentals like glasses. I think I have most of my other items budgeted for.

Let me also add that I think people use their EFs in different ways. I hope to have all our living expenses covered, with the money in our normal savings account. My EF will be used for unexpected things that I haven't thought about (like the glasses) or for things that come completely out of the blue. I guess I'd be happy if I had $5000 in an EF to cover those things.

[PrairieRose]

For us, we're working toward having a full year's pay in long term savings (like 12 month cd's) and then 6 months in short term (like a reg. savings or money market account = easily accessible). It's really as individual as each person and their circumstances but for us, this is what would make me feel much more secure about the ups and downs of our business cycles.

[Early Bird]

I am working toward 6 months' take-home.

[Shell]

I've read you should try to have 6 months worth. I've got my 6 months but it got to be such a great habit I thought why stop? For me, an emergency is loss of job, illness etc. but I think everyone has to decide what is an emergency for them.

[Jasmine]

DH and I just talked about this the other night. Once we get our debt paid off, we want to get $1000 set aside for things that come up (car repairs, etc) as our temporary EF. If we dip into it we have to get it back ASAP. Then we'll split our saving into two accounts. One will be regular savings for things like cars, house repairs, medical/dental, etc, that we can dip into as needed. The other will be our EF with our first goal of one month living expenses, then three months, and finally six months. We won't touch this acct unless a true emergency (job loss). We know it will take several years to get all this funded but well worth it in the long run.

[Englishlady]

I work on a "worst case scenario", BUT in ADVANCE

So way back when we had to buy our cars on an interst free or low % rate car loan, I decided that, THAT amount would become my "Car savings fund", I have been doing it for years and we recently bought ( late last year) two VERY cheap but new cars.....I am continuing to save the same amount each month and will do so until one or both of the two cars "dies" by which time ( I hope) we will have enough cash to buy a new car outright ( like we did with these)

However, when the warranty runs out and we have to start paying for any repairs these will also have to come out of the Car savings fund acount.

I try to save a certain amount each month for holidays based on what it costs me to rent a Cottage etc. X the number of times we plan to go away each year.

Christmas & Birthdays : EVERY MONTH, I save a certain amount for these which should cover the gifts, I do this each and every month regardless of the time of year, it generally works OK

Other unexpected things, I have a small fund to cover things like Dental costs and Glasses & such.

Basically no matter how small the amount I divide up 99% of our money into various catagories to cover every possible scenario I can think of, yep, I am paranoid and yep, I am a bit er, "retentive"

But I find it easier to cope with the household accounts that way and I don't get m(any) nasty shocks

I have even started "charging" myself the price of a Laundromat washing machine every time I do a load at home that way when my machine croaks, I will have enough to just go out and buy one without having to dip into any other accounts .........I like the drip drip effect, but I am sure you will find your own level with which you are comfortable soon

HTH Karen

[RuthNY]

Karen, that's exactly what I was talking about when I asked how you came up with goals in the different catagories. That helps a lot, thanks

[QuilterMom]

Originally posted by RuthNY
I'm also thinking that an emergency fund would be the 3-6 month living expenses.

Yes, this is what I consider an emergency fund - money set aside for living expenses should you lose your job or be out of work for whatever reason, truly unexpected expenses that there are no way to plan for, etc.

I'm thinking that I've got a more realistic chance of saving up in catagories I'd like to have money in so that I don't have to use credit cards.

My catagories are:
-Vet (annual tests, shots, exams and thyroid med money for Jake)
-Car Maintence and repair/Insurance premiums/Insurance Deductables
-Medical/dental/eye exams, my $250 annual deductable
-clothing/shoes/accessories
-vacation
-gifts (Chrismas/Birthday)
-Hobbies (this one might be iffy, but let's face it, money IS spent on hobbies, so maybe if I limit it by what I can put away for them I won't be so apt to just blow money)

This is what I consider a freedom account - money you set aside monthly or out of each paycheck (or however you decide) that is for expenses you know you are going to have occuring throughout the year, but are a lot of $$$ to come up with at once.

[Hollyhandi]

We'd have to have $15,000 dollars in the emergency fund.
It will never happen and thats not food and emergency money.
That's just basic bills for a year.