Is $1000 enough for an emergency fund?

[marla]

This isn't really my question. I stole it from Sweepsplayer in another thread, but I have often wondered it and thought it deserved it's own place to be discussed here. Is $1000 really enough for an emergency fund? What do you think is the right amount for an emergency fund?

[slimcustomer]

It depends on what type of emergency you are planning on having .

Rules of thumb saying that you should save 3-6 months worth of income only help out to the extent that your emergency costs less than the amount you have saved. I like to think in terms of maximizing my savings and investments without having a seperate emergency fund. Not having an emergency fund probably makes me less likely to "find" an emergency to spend my money on.

well, the standard wisdom is 3 - 6 months of expenses easily available.

the range is there to accommodate those with less reliable earnings (salespeople on commission for example).

for most people, being able to cover everything for 3 months would do fine but you will find those with perfectly stable jobs who prefer to have an entire year's worth of expenses stashed away.

it's all about your comfort level.

[Ima saver]

I just want to save as much as I can and not stop at a certain level. Being self employed, I like us to have a years worth of expense money.

[cbmeeks]

I think our family will get to the $1000 as fast as we can, start paying off debt faster, and gradually build the EF to at least $2000.

In fact, I don't see the harm in always saving. Even if it's $50/month it's something.

[enabler]

Don't forget money to cover insurance deductibles, whether it's for the home, car, or your health. My motivation to save an emergency fund came last year after an unexpected injury on vacation, paying for all the health care that insurance didn't cover. It's a double whammy without that emergency fund - the problem itself and then finding a way to pay for it.

[Broken Arrow]

A little late to the party, but here's my two cents worth on it anyways....

It depends on what kind of emergencies you are preparing for.

It depends on what your monthly expenses are like, and how far out you would like to cover yourself.

It also depends on what other funds you have. For example, if you already have a car fund, you don't need to worry about dipping into your EF in case your car breaks down.

So on and so forth. That said, I don't think $1k is enough, but it is a very good start.

[Fern]

No, $1,000 wouldn't cover even 1 month's living expenses for me.

[PRICEPLUS]

6 months expenses and then some. More than 1000 dollars certainly. Everyone is different and if 1000 is all you can scrape together then it is better by far than nothing!

[jmjj215]

I think we need to remember that the 1k is a "baby" emergency fund that DR suggests so people can keep their momentum when a bit of reality hits while trying to get the debt paid off as fast as superhumanly possible.

[boefixepa]

I have "in case" envelopes that I let build up. I have "minimum" balances I want to achieve in them and "maximum" values that over which the surplus would be transfered to savings. I haven't maxed them out yet and in some cases I am still chipping away to get to the minimum I want to keep in there.

For example - Car maintence -- Minimum $500.00 Maximum $1,500.00

For an unexpected repair and regular matienance including tires and major work like belts/brakes etc. If the repair costs more than 2K I'd get a new car as my car would not be worth repairing at that point.

Another example

Vet Expenses Minumum $300.00 Maximum $1,500.

This convers their yearly check ups/vaccines, heart worm meds, and any emergencies that may come up. (Even a common sickness I can't fix is generally $200.00 GGRR!! Just a blood workup is $100.00......glad they are generally healthy!!!)

So I have many 'probable' emergencies like these and medical deductables built into the envelope system. An emergency fund is exactly that in my opinion....for emergencies. AKA thing you CAN NOT plan for. We all know we are going to get sick, need car repairs, the occational trip to the doctor/ER (or not so if you are sick alot or have kids) so if we build things we KNOW are going to happen we just don't know WHEN into our budget we don't worry about them when they happen.

Am I an odd ball in this? Or do others do it too?

[cbmeeks]

I am going to get my Baby $1K first. Then, start paying off debt. And during that time, build up another $1k in ING.

That way, I will be investing and saving while I am paying off debt. I just want to sink as much as possible into my debt.

[boefixepa]

Certainly not a bad thing to do, but you continued to be frustrated by things like this if you don't start planning for them now....promise, been there...done it. The debt will not be gone before many, many of these little 'common emergencies' pop up. Then all you will be is frustrated at your wife/child/self because your debt payoff plan that month is frustrated. You will get there, you are on the right path, but you didn't get where you are in six months, so you can't get out of it in six months. But putting off needed repairs, (which will save you money in the long run, like oil changes) or not going to the dentist (a cavity repair just became a root canal) because it's not in the budget is really not going to save you money in the long run.

It feel nice to pay off debt....yes of course...woohoo!! But it's even nicer not to go further into debt when something comes up. And it fells great to have 500 sitting there to change the belts when 60 K rolls around!

[Writer@Large]

Someday, we will have to sit down and have a chat about the psychology of Dave Ramsey's Total Money Makeover. But the short, short version:

$1,000 is not what Dave suggests an emergency fund should be--that is, it's not what he calls a "fully stocked emergency fund." $1,000 is Step One of the TMM, the first goal you're to reach in the plan, and the first of many 'small victories" meant to keep you eager to save, not spend. It is a safety net for when the car needs repairs or the furnace breaks, because many people who find value in the TMM have a much smaller emergency fund: like "$5 in dimes and two credit cards with some money left on them."

Step three of the TMM is "fully stock the emergency fund." Which means--say it with me now--three to six months of expenses.

--W@L

good point above about what constitutes an "emergency." if you know it's coming, ala the pet bills (which I share) that were mentioned, then that shouldn't be an emergency. you should have planned ahead of time and have the money ready...well, as close as you can foresee, a concept I learned this year when my buddy's $120 annual checkup turned into about $500 because he needed an operation. fortunately I paid for it out of "daily" cash and it didn't dent the e-fund....cool what you can do with no cc or car payments!


I currently have $3000 with GMAC for my fund, that would keep me afloat for about 4 months if I should need to get by without a job (yes of course things would be cut in that eventuality).

I now send $50 per paycheck to that account as a "trickle."

I doubt I'll ever stop, at least in the foreseeable future since I've become so accustomed to the deduction, I no longer miss it.

yes, it's nice having your biggest concern each check being, should I send some to GMAC, or to Vanguard?

it's still new to me (after many years of stupidity) and I'm still wallowing in the satisfaction so please forgive me.

[BAGAGT1]

Originally Posted by rexdart

...but you will find those with perfectly stable jobs who prefer to have an entire year's worth of expenses stashed away.

it's all about your comfort level.

That would be me. I've been with the same company for 7 years now, but my goal is to stash away one year of take home salary, before I feel completely secure that we can face a long bout of unemployment. Partially that is a result of my mortgage payment, which stands at nearly $1800 a month, so I know it would take more than $20K alone in any given year.

[Bookie]

Another thing I notice is that once the habit of saving becomes established, it develops a momentum of its own.

I get almost as much of a kick out of watching my saving balances increase as I do watching my indebtedness decline. There was the day last year when the two lines crossed, and I knew I had enough in hand to clear the slate any time I chose. That felt good.

After living for so many years paycheck-to-paycheck, I like the sense of security I get from money in the bank. I recognize that I pay a small premium for that feeling of comfort. My interest rates slightly exceed my savings earnings, but operating for so long without a safety net, I'm willing to accept that cost.

[poundwise]

I think the answer is, it depends.

If you have high balance, high interest revolving credit, by all means, have a smaller emergency fund for the car or unexpected home repairs or the doctor's office and throw the rest of your money at the debt.

It would seem very odd and a poor choice to me, for instance, if you had a credit card with a $3K balance at 16% while you have $5K sitting in a savings account.

I'm not saying anyone is proposing this. I am just demonstrating that what may be good in one circumstance may not be good for all.

I think $1K is plenty of emergency savings when you are talking about unexpected but fairly possible potential expenses. I think it is woefully inadequate if you are talking about dealing with a major medical set-back (i.e. - if you're uninsured or underinsured) or to get one through a period of lay-off/joblessness. Like I said, it depends.

[boefixepa]

It's so encouraging to hear from those of you out there that are ahead of me!!! Yes it can be done....repeat....yes it can be done......repeat....yes it can be done.............

[cbmeeks]

yes, it can be done. You just have to be organized.

I've mentioned this before and since it's June 1st, the numbers are in.

On May 1st, we had $32 in checking and $100 in savings. One month later, we have $700 in savings and $1600 in checking. Now, I received $800 extra this month for a computer job but that means we managed to NOT spend at least $800 extra. On top of that, I paid off $458 in debt that closed two accounts.

For the first time since we've been married, we actually came out ahead.

Even though I found out about a "secret" $500 CC I didn't know about, we are still trying.

I'm not giving up. I too enjoy watching savings go up as much as debt go down. And remember this people, the more you stick at it, the EASIER it becomes!!! How? Well think about it, in May, on top of watching my money, I managed to squeeze $458 to pay off two debts. In June, I won't have to squeeze that $458. If I choose to, I can squeeze it for another debt. So, as the debt falls, you have more money to put at it. It truely is a snowball effect that WORKS.