A question about emergency funds: How much do you all have in there and how often do you use it?

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  • #93278 Reply

      I initially thought that actual emergencies only happen every few years, but it looks like they happen every few months (ie several times a year?)

      What I mean by emergency is everything from car breaking down to water heater not working to unexpected medical bills. Anything that’s unexpected, and cannot be adjusted within that month’s salary.

      I thought big unexpected expenses only occur once in few years, not once in few months. I don’t know if I have a terrible luck or if that’s just normal for others too, and we should be planning accordingly?

      #93279 Reply

        I think this is when the concept of “sinking funds” comes in. Somebody else might be able to explain it better, but I’ve heard it said that many things in life aren’t true emergencies, and can be predicted if you think about it in advance (I.e. car repairs are pretty much a given every x number of miles, a roof replacement every 15 years, appliances every 15 years, that sort of thing) setting aside a certain number in the sinking fund for that category like car repairs house repairs (2% of your home value yearly) can help negate some of this.

        #93280 Reply

          Those are not actually emergencies in the true sense (like losing a job), but just variable expenses that you know will happen, but just are not sure when. They should either be part of your regular budget (preferable) or added to your emergency fund.

          This is how people end up in debt — they do not actually account for the true costs of their lifestyles, but only best case scenarios or aspirational budgeting. You should be assuming that whatever you spent last year on such things will be recurring expenses next year, just for slightly different things.

          Don’t miss: How much of your emergency funds should one be holding in cash?

          #93281 Reply

            An emergency fund can still earn interest of around 5%. Ideally, a healthy emergency fund should cover all your living expenses for 4-6 months.

            That way, if something really bad happened, like injury or loss of job, you could pay all your bills for several months.

            #93282 Reply

              I used to have a 8 month emergency fund at it’s highest. Now that I have strong brokerage and retirement funds and home equity I keep just enough money to be comfortable in the checking account.

              I know I can access funds from my assets if things really go bad.

              #93283 Reply

                I love the topic of Emergency Funds but I start to rethink and rethink again what I should be saving and how I should categorise.

                After reading all these comments I feel like I should have 2 tiers of EF…

                1 account for a true emergency that does not get touched ie job loss (luckily unlikely for me) and a second account for those regular type of emergencies outside of sinking funds.

                There are only so many sinking funds one can have because your money gets spread so thinly, none of the accounts gain traction.

                #93284 Reply

                  We have about 75k. The rest of our savings- we put into investments. We don’t need more than that, because that is 6 months of expenses in case of job loss or sudden move. Or- if we need a new car suddenly- we can pay cash for something else within a couple of days.

                  #93285 Reply

                    3-6 months of your monthly expenses. Yes, it’s very normal. Life happens. Also take into account what if you lost your job. Would it be easy to find another one? How long do you think it would take?

                    If you think it would take 6 months, then I would keep 6 months in the emergency fund.

                    #93286 Reply

                      I used to keep around 24k in emergency, but eventually felt that was way too much. Everyone’s situation is different, and I would base it more on how long would it take you to build it back up, and how much you are putting towards savings a month already. I keep 10k as emergency now, and even that may be more than I need, but it’s fine.

                      If there truly was an “emergency”, then I could sell off some investments if I had to.

                      #93287 Reply

                        We have an emergency fund for long term emergency that would last us 3-6 months. This is for if we get laid off and will cover mortgage, bills, and necessities.

                        Most “routine” emergencies like car breaking down, having to suddenly travel for a family emergency, etc. we typically cash flow; we will use a credit card for the cash back, but pay it off when the bill is due. You can create sinking funds to cover things like car repairs, medical bills, house repairs, etc. Also, I strongly believe in payment plans especially for medical bills.

                        This year, I’ve had to travel back to my parents for medical emergencies 3x already. We bought tickets a day before travel. Talk about $$$! We have financed emergencies before. We had a plumbing issue that was over $20k to fix. We did the 18 month 0% financing, and then transferred the balance to a no fee BT card.

                        We were not about to use up a large chunk of cash when we didn’t know what else might happen.

                        #93288 Reply

                          Sometimes it all happens at once and you just aren’t ready for it. We are personally still trying to build all these funds we would need, but our house and car had other plans. We thought we bought a move in ready home, but turns out we didn’t. In the last year and a half, all of my appliances have broken except the dryer. We had an “actual” emergency where we found mold under our floors because it turns out they had been installed wrong and water was able to get under them. HVAC broke (we live in the desert so replacement was neccessary). Fence got blown out in a storm but it was older and in need of replacement anyways. Car only has 75k on it but there are now multiple things wrong with it (and its a honda). We have only gone into debt on the HVAC. everything else we have been limping along or living without trying to pay for cash and not be in more debt. Eventually we hope to be at the income and savings level where we can cover all of this, but we have to dig out of this hole and fix everything that is broken first. Eventually you do want to be at the point where you have multiple funds saved for these things, but obviously you’re not there yet, and that’s ok too. No, it’s not completely uncommon for multiple things to go at once like that, but when you are having times without this stuff coming up, you should be saving harder for when it will. I looked back at the Zillow history, and it looks like our home was completely redone in 2012 (I’m assuming from how cheaply it was sold).

                          So, we’re hitting the end of the lifespan on…. everything 🙂 especially house stuff does have an expiration date so to speak, so if you know how old your things are you can semi plan for when they will need to be replaced. Same with cars btw, certain things tend to go at certain lifetime/mileage ages.

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