Hi Erin...may I offer up a different POV on this? I see the emergency fund and the savings fund as two separate pots of money with different purposes.
Emergency fund: If one is living in a self-owned house/apartment and has a car, the emergency fund could be as large as the average cost of a new appliance or costly car repair job....about $2,000. If one is renting, then the car repair example is more applicable.
Savings fund: Applies more to a job loss situation. Here I agree with your take above that 3-6 months is ideal. I have always counseled my clients that during a job search, they might need 1-month job-searching per $10,000 of salary they are seeking. So it could take about 4-5 months to find a good $50k job. This rule of thumb differs depending on one's profession and location. Point being that the savings fund should be sized according to one's profession.
Your's is 2.0-level advice for a 1.0-level class ;)
We agree that it's important to have multiple savings funds for different reasons (I myself have about 6!),but this post is more a direct reactions to the common advice that "$1,000" is all you need in emergency savings while paying off debt (and that camp does not recommend you do other savings/investing -- even retirement -- while paying off debt). Personally, I find this all to be bad advice.
Because emergency savings is often taught as a foundational piece of personal finance advice and the $1,000 is enough mantra still reigns, I find it important to focus first on refuting that advice and then offer up an alternative. For those in a paycheck-to-paycheck cycle and just looking to establish a baseline, I find the bare essential expenses target to be a good focus for getting started. $1,000 can be celebrated along the way. And then your savings fund advice is #goals for as they progress further along!
Thanks for offering your thoughts on the Roe vs Wade ruling. And thanks for matching donations.
Hi Erin...may I offer up a different POV on this? I see the emergency fund and the savings fund as two separate pots of money with different purposes.
Emergency fund: If one is living in a self-owned house/apartment and has a car, the emergency fund could be as large as the average cost of a new appliance or costly car repair job....about $2,000. If one is renting, then the car repair example is more applicable.
Savings fund: Applies more to a job loss situation. Here I agree with your take above that 3-6 months is ideal. I have always counseled my clients that during a job search, they might need 1-month job-searching per $10,000 of salary they are seeking. So it could take about 4-5 months to find a good $50k job. This rule of thumb differs depending on one's profession and location. Point being that the savings fund should be sized according to one's profession.
Your's is 2.0-level advice for a 1.0-level class ;)
We agree that it's important to have multiple savings funds for different reasons (I myself have about 6!),but this post is more a direct reactions to the common advice that "$1,000" is all you need in emergency savings while paying off debt (and that camp does not recommend you do other savings/investing -- even retirement -- while paying off debt). Personally, I find this all to be bad advice.
Because emergency savings is often taught as a foundational piece of personal finance advice and the $1,000 is enough mantra still reigns, I find it important to focus first on refuting that advice and then offer up an alternative. For those in a paycheck-to-paycheck cycle and just looking to establish a baseline, I find the bare essential expenses target to be a good focus for getting started. $1,000 can be celebrated along the way. And then your savings fund advice is #goals for as they progress further along!
Do you have any posts on how "minimalists" cut out unnecessary spending? I'm semi-under-employed and need tips on that.