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How Much Money do I Need for an Emergency Fund?

by Manny Ikomi

August 1, 2020
3 min read

  • Emergency Fund
  • How To

So you've finally decided to start your emergency fund (yaaaasss! 👏🏽), now the question is: how much do I really need for an emergency fund?

Anything is Better Than Nothing 👍🏽

Maximizing how much you can save (no matter how little) will make a positive impact. Also, don't be discouraged if you end up having an emergency expense before your emergency fund is ready. It happened to me (twice!), by the second time I had to completely start over but in the end I made it work. If this happens its totally okay, that's why were saving for an emergency fund in the first place!

There is no One-Size-Fits-All Emergency Fund 📣

Depending on your lifestyle the amount you'll need greatly varies from a few thousand to even tens of thousands of dollars. For most people an emergency fund at it's bare minimum should be a few thousand dollars or more in cash. It sounds like a lot at first, especially since it can be really hard to save just a few hundred in the beginning. While you can come up with a random number to hit, it may be to much or even worse—to little. I've come up with a few methods to help you decide on a more practical number…



1 Month of necessities:

  • Rent/Mortgage payment
  • Utilities (including internet)
  • Food

The bare minimum for your basic living necessities, for most people this should be upwards of $1,000.



1-3 Months of regular expenses:

  • Rent/Mortgage payment
  • Utilities (including internet)
  • Food
  • Minimum debt/loan payments
  • Any other bills you regularly pay for

“The Padded Saddle” should cover the bare minimum plus any other usual expenses you pay for. The goal is to minimize disruption to your core lifestyle and ensure you don't fall behind.



3-6 Months of paychecks:

Basically 3-6 months worth of paychecks, for example: if you take home a $600 paycheck every week—multiplied by 52 weeks per year is $31,200—divided by 12 months per year equals $2,600 for 1 month. 3 months would be $7,800 and 6 months would be $15,600.

[$Weekly Pay] x 52 weeks / 12 months = 1 month emergency fund
[$Biweekly Pay] x 26 weeks / 12 months = 1 month emergency fund

“Thee Stallion” covers everything above and then some for extra reassurance. This method should be more than enough to negate any lifestyle changes during an emergency while covering you for an extended period of time.

Most financial experts agree 3-6 months worth of an emergency fund is what most of us should have. Having at least 1 month using any of these methods is a great place to start, especially if you're trying to payoff a lot of debt.

What are Your Liabilities and Risk Factors? 🤔

I like to think of an emergency fund as "self-insurance", it's your first line of defense against surprise expenses and emergencies. Similar to how car insurance is used to protect you during a car accident; an emergency fund is used for the rest of life's “accidents”.

Like most insurance providers you should evaluate your personal risk factors and liabilities you're responsible for. I like to frame this question as what would happen if I missed a few paychecks? How would my life change and what would it affect? The more risk you have the more you need an emergency fund and generally the more cash you'll need to fund it.

Any of the below factors are important considerations when deciding which method to use and how much your emergency fund should be:

Are you self-employed or work for an employer?

Being self-employed like a freelancer or business owner can be considerably more risky than typical employment, especially in terms of consistent predictable income.

If regularly employed, does your job/position feel stable?

If you switch jobs often or have long gaps in-between employment this is a much higher risk factor.

Does the company you work for feel stable and financially responsible?

Small businesses and startups are probably higher risk to work for than larger established companies, how would you be affected if business was slow and your employer reduced your hours?

Are you responsible for your own housing?

Living at home with your parents is usually lower risk than with roommates or living by yourself.

Do you have a car?

Car repairs/ownership can be a considerable risk and expense, especially as they grow older and gain mileage.

Do you own real-estate property like a home or condo?

Home ownership can come with extra costs and maintenance that add risk.

Do you have a dependent pet or children?

If any children or pets are dependent on your income you should consider how much you'll need to take care of them, especially in terms of food and emergency medical expenses.

Expect the Amount You Need to Change 🧐

As you grow older and lifestyle changes happen its important to re-evaluate how much money is in your emergency fund. An emergency fund as a roomie in college is much different than a single self-employed homeowner. If any of the above factors change you should consider adding to your emergency fund. Personally, I would much rather have too much cash for an emergency than to little.

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nuOpulence © 2021
by Manny Ikomi