How much do I need in my emergency fund? I’ll admit, I’ve been all over the place on that question since I began my cash lifestyle years ago. I don’t have a credit card to fall back on, should anything happen. Whatever cash I have in the bank is all I have to get me through if something goes wrong.
I’m not alone in my uncertainty about my emergency fund. If you look around the personal finance community, you’ll find recommendations ranging from $1,000, to 3-6 months expenses, to 1 year’s worth of expenses, to keeping nothing liquid (depending on credit cards and/or investments that can be used in an emergency). It’s a hotly debated topic.
I’ll be honest, my short-term financial focus tends to be all over the place. I know what I want long-term. But life is always changing, and I find myself trying to adjust to whatever comes my way. Often times when I make big adjustments, I’ll also adjust how much money is in my emergency fund.
What are some of the things that have caused me to adjust the amount in my emergency fund?
A big factor has been how much cash I have in general. When I had larger amounts of money in my savings account set aside for other priorities, like home improvement, I felt more secure in having a smaller emergency fund. Having $1,000 in an emergency fund isn’t a big worry when you have several thousand more in your savings account that you could potential pull from, if needed. But, as that money has been spent down, I feel less secure about having enough money if something happens.
Another factor has been how “secure” my life feels. When the boyfriend lost his job, our situation immediately became less secure. Both of us took on more expenses. Right now, he doesn’t have a long-term job, so there’s no guarantee that we’ll have 2 paychecks coming in every week. It was also a vivid reminder that no one’s job is guaranteed. With everything that was going on, ramping up the emergency fund seemed like a good idea.
Six months ago I felt pretty good about having a $1,000 emergency fund. Now? I’m working on building that fund up to $3,000. I’m half-way there. Will it be enough? I don’t know. Emergency funds are for emergencies. For the unexpected things that come up in life. I’m hoping my emergency fund will turn out to be more peace of mind, and I won’t have to find out if it’s enough.
I’m sure the amount I feel that I need to have in an emergency fund will continue to fluctuate over the months/years. Someday I’d love to be one of those people who is debt free, and has 3-6 months worth of expenses sitting in an emergency fund, just in case. I know there are a lot of people who build up to this amount to start, and then work on slaying their debt. I tend to lean towards keeping the emergency fund a little smaller until the debt is gone. After all, the more debt you can get rid of, the less money you’ll need to cover your monthly expenses if you lose your job.
How do you feel about an emergency fund? Do you lean towards keeping more money set aside as a cushion? Or would you rather put that money to work in other ways?
– Cindy W.