Question: How Big of an Emergency Fund do you need?
Dave says your emergency fund should be 3-6 months of living expenses. This is in line with most other advice out there and is the standard rule of thumb.
Suze says your emergency fund should be 9 months of living expenses. She is strict on this advice, citing the recent recession and how long it took a lot of people to get new jobs after they were laid off.
So what should you do?
Ultimately this is a personal decision based on your situation, but consider the following questions:
Are you a two income household?
Do you have kids?
How stable is your job?
How easy/hard would it be to get a different job?
How much could you cut down your expenses if needed?
Here is the key… Start small.
Anything you have in an emergency fund is better than zero. I personally target six months. It’s enough of a cushion that I feel protected, but not tying up so much of my cash that I’m taking away from my other goals, like saving for a house!
An emergency fund exists for you to feel secure.
What is that number for you?
Now its your turn. I want to know what your magic number is in the comments, and why that number feels good for your situation.
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