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How big how big of an emergency fund do you need?

designWe are back this week, breaking down the advice of financial gurus Dave Ramsey and Suze Orman. Last week we looked at how to pay down your debt and this week we’re tackling emergency funds.

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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