Emergency savings: HOW MUCH???

[johnjonjonathanjonny]

@jimmykiff Dave Ramsey made his money by debtmaxxing and buying into real estate. You shouldn't be following his example or what he says.

 

[theodoric]

@johnjonjonathanjonny Not a Dave Ramsey fan (or a detractor, just don't care), but doesn't it feel a bit counterintuitive to tell people to not follow the same steps that made someone else wealthy? I'd be worth three or four times my current net worth if I'd have debtmaxxed and gone into real estate seven years ago.

I get the hypocrisy though. That bothers me.

 

[kattrav]

@jimmykiff Adjusted for inflation, it's about $2100 for the "$1000 baby step 1".

Realistically, it should be your insurance deductibles at minimum. House/rental, car, health.

After that, tackle debt, then build up 6 months base expenses (including what health insurance would cost).

 

[davidtucson]

@jimmykiff I've always been told 6 months worth of rent/bills, but you have to start somewhere. That way if you are laid off you are good until unemployment or something kicks in. Growing up I didnt have someone I could rely on if I lost my job, so I had to think this way. So if rent is $1000 and other bills are $600 then having $9600 in saving should be the goal. From there you can spend it on what you need to spend it on.

 

[deekeer]

@jimmykiff Ideally, you should strive to get to six months of living expenses. It’s tough to do but it’s the best place to be in if you got injured or laid off.

 

[shane28]

@jimmykiff Just start. Add however much you can each pay period.

 

[justiceisblind]

@jimmykiff As much as you can afford to save compared to your potential needs (rent/mortgage/insurance/etc)
The real number will be relevant to your needs and ability. Don't trust Dave Ramsey or other generic advice. Vanguard may have a better sourced number but it's still an average and your number will be higher or lower based on your needs job security other assets

 

[samuelcalebisrael]

@jimmykiff I like the money guys that say enough to cover deductibles.

 

[lighthouse4031]

@jimmykiff Reflect on your life and how many emergencies you've had and how much they cost in the past year. You have kids and they get hurt a lot? Then probably $2000. Single and healthy, maybe $1000.

I'm anti-Dave but $1000 is fine if you understand the bigger picture. Remember that the $1000 is a starter emergency fund. It's supposed to take care of small things. A broken laptop, a flat tire, a late charge, calling out from work because your kid is sick or something so you lose a day's pay. It's not supposed to take care of every emergency. It's designed to make you nervous to pay off the debt faster so you can create a fully funded emergency fund that will cover all emergencies.

That said, $2000 is better because it covers more emergencies, obviously, like job loss or sick pet or whatever. $2000 isn't really even that big of a safety net but yes, I understand it might take a while to save up.

 

[resjudicata]

@jimmykiff Dave started saying 1k or 1500 around 2012, so I'm sure 2k now would fall in line with that same inflation. 2x your monthly shelter payment is probably about right across the years.

 

[homesteadme]

@jimmykiff I've read you want to have your year's salary saved up before.

In an ideal world that would take me like...4 years.

I think it's just important to try and start one. Hopefully work up to at least three months.

 

[frncsca]

@jimmykiff Mine is currently at 8000, however due to my health I will have to move it up to 50K-100K eventually.

Ideally, I want 2 years worth of wages. I will have to grind hard in this shitty economy to reach that goal, esp. with the tax man breathing down my neck and my health issues.

 

[radicalmum]

@jimmykiff Depends on how much you spend per month. It would make me nervous to only have $1000 as a cushion.

 

[2shineon]

@jimmykiff It depends entirely on your life circumstances.

What are your essential monthly bills? A lot? Bigger efund. You live for free somewhere and are Very unlikely to lose that situation? Smaller efund.

You have a kid or dependent parent? Much Bigger efund.

You have family that will cheerfully take you in long term if you lose your job or housing? Or gift you thousands of dollars? Smaller efund.

You live fifty miles from work or groceries? Efund big enough to replace your car if it blows up.

You can get pregnant and would not/could not get an abortion or surrender your rights/adopt out a baby? Bigger efund.

In general, I recommend three months of expenses in an efund, six if you have a kid, and twelve if you’re a single low income parent.

But starting with Any amount, say one month ofexpenses, is good.

 

[granrobertsdesign]

@jimmykiff I look at it more in terms of what I can get with the money then how much money I need. Start off with enough money to get groceries and enough gas to get you to work for the week. Once you have that look into saving the same except for a whole pay period. Once you have that look into having a month's rent saved up. Then a month's expenses.

I find this method helps me because you can make simple changes in your life to reduce the amount you need to save to hit the goals. Buy some canned veggies on sale? All of a sudden that week's worth of grocery money is a lot cheaper.

 

[brothergee]

@jimmykiff 25k - just had 2 cars in the shop - 2 dogs at the vet and had to install a hot water heater - 1k is for when you are just starting out

 

[mayduavongts]

@jimmykiff 6 months to a year of your expenses, whatever that amount is.

 

[lyllie]

@jimmykiff 3-6 months of needed expenses or highest deductible whichever is highest.

 

[samolub]

@jimmykiff Dave Ramsey is not someone I would take financial advice from

 

[tanaka]

@jimmykiff Ideally an emergency fund should be 10k or 6 months of expenses whatever is higher. However if you are in debt it does not make sense to have a wad of cash while paying interest out like crazy. So in the beginning save up a little emergency fund 1 to 2k pay down all your debt then save for your full emergency fund.