How do you calculate amt for e-fund
Find a Conversation
How do you calculate amt for e-fund
| Tue, 12-13-2005 - 11:38am |
I'm just wondering, how do you calculated how much you need in the e-fund?
I heard that you need 3-6 months worth of e-fund.
3-6 months of what?
My DH and I both work full time. We both make about the same amount.
Is it 3-6 months of:
1) One of our salary - on current standard of living
2) Both of our salary - on current standard of living
3) One of our salary - on reduced standard of living (just paying what need to be paid, no snowflakes, reduce eating out, entertainment, groceries, etc.-- barebones)
4) Both of our salary - on reduced standard of living
I am really confused as each of the amount would really be different. Of course this will effect the amount of money saved for e-fund vs. paying down debt.

I don't know that this will help you, but we don't yet have the 3-6 months, and we're not even working on it. Instead, we have $1000 in our e-fund, and the rest of our snowflakes go toward debt. We've been working on debt elimination for three years now, and in the home stretch--we expect to be completely paid off by or before the end of 2006.
I figure, if dh loses his job or whatever while we're still paying off debt, and the $1000 isn't enough, we'll end up back on CCs--but at least we have the credit available to do that. BUT, if he doesn't lose his job or whatever (most likely scenario), we'll have our debt paid off quicker.
Once the debts are paid off, the 3-6 months fund is just the amount that we'll have in a readily liquid fund. Once we have that much saved in a liquid account, we begin saving in other accounts (mutual funds, bonds, stocks, etc.). So the 3-6 months would probably be our 3-6 months salary, not expenses. But that's a matter of preference--once we're at that stage in our financial lives, we won't want to be in a position of having to cut back drastically because of minor setbacks like job losses (by that time, a job loss would be exactly that, a *minor* setback), so we would want the cash set aside to live on without making major sacrifices. But some people would rather not have that much sitting in a savings account and would rather be investing it, so 3-6 months basic living expenses would be sufficient.
The important thing is to set a goal based on your preferences and philosophy, and then make a plan to get there. What the exact goal is is a matter of preference.
Blessings,
Heather
I think it's really up to you.
Becky
CL of 4th, 5th & 6th grade Scoliosis
I would consider the emergency fund the amount of time it would take to find a new job or to cover a major expense (like the oil burner dying or the roof caving in - you can't wait for insurance to cover it, you have to lay out the money immediately for a new roof or oil burner).
If you and your husband are likely to both lose your jobs due to the same set of circumstances (i.e. you're both employed by General Motors), then you should have enough to cover 6 months of bare bones living expenses while you both find other jobs. If your jobs are governed by different circumstances, I would only put in as much as you think you would need to have available should the higher-paying spouse lose a job.
In my case, my HELOC is my emergency savings account. I have a pretty good line of credit already approved that I have not drawn on. It's enough to cover an emergency home repair, which is the only thing I can really think of that I'd have to lay out money for. I have disability insurance, car insurance, life insurance, and I'm not likely to ever lose my job. So I have less in emergency than most people would think was prudent.
Kelly
Hey Heather,
I am sorta following Dave Ramsey's plan. But I really have mixed reviews about paying everything to the house and not putting into investing.
Are you going to pay off you house? Or just continue on the loan and invest your snowball?
Shannon