Thoughts on the Emergency Fund

Emergency Fund and Financial Buffer

An emergency fund is generally three to six months’ worth of living expenses. An emergency fund is just common sense and not structuring your life so that you are a whisker away from disaster. If you haven’t created one, here is the rough order I suggest you go about it:

  • Save at least six weeks’ living expenses.
  • Then start paying down credit card debt as aggressively as possible.
  • Once you have paid off credit card debt, you can build this emergency fund out to three to six months–or longer.
  • The amount you keep in your emergency fund stems from your temperament, the stability of your job, your age, your health, etc.
  • You can also factor in whether you could move in with family if everything came crashing down if you want. If that is an option, and if you have credit card debt, you could dial down the emergency fund time frame to as short as possible and just crush the debt.
  • I wouldn’t overthink this and obsess about how many weeks it should be etc. The key is to urgently get a small economic wall between yourself and total ruin.

I kept this post short because having an emergency fund is the most basic of common sense. You know and I know that you need to have a minimum amount of funds saved to keep you from disaster. So get on this now if you don’t already have an emergency fund! Enough said.

(See thoughts on creating a massive financial buffer, which goes way beyond the emergency fund, here.)

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