What = 3 - 6 months' living expenses?

[vsjhoc]

We all know you're *supposed* to have that Emergency Fund saved up and stashed away. And better to have more liquid funds, than less. But how do you calculate 3 months' "living expenses"?

1. The amount of your gross salary salary for 3 months
2. The amount of your net salary for 3 months, because if you lost your job you wouldn't be paying taxes and some other deductions
3. The amount of your usual budget for 3 months, minus amounts normally put in savings/investments accounts, and amounts spent on non-essentials such as clothing, vacations, etc.
4. The amount of your usual budget, minus the taxes, minus the transportation costs (because you're not driving to work) but plus the full cost of health insurance because it wouldn't be partially subsidized by your employer
5. Other ....

Can you see why I find this confusing and never feel like I have "enough"?

[HiImSeth]

I go with #3 for ours.

[tinapbeana]

for me, a month of expenses equates to my legal obligations & necessities. rent, car payment, utilities, groceries, and the normal amount i save every month for infrequent bills (insurance, taxes) are necessities, min CC payments and my student loan are legal obligations. i also include phone, internet, and gas for the car b/c if i'm on my EF likely i'm out pounding the pavement looking for a job!

i don't include over-paying debt, retirement, fun money, or that sort of thing. personally, i also don't include health/dental/vision insurance b/c DH & i both work; if one of use loses a job they can be added to the other's plan. if we both lose our job, we may be able to qualify for medical assistance or cobra.

therefore, my concept of an EF actually has little to do with my current salary (gross or net)

[Ima saver]

I would go with number 3 also, but I want to have at least 6 months of living expenses.

[pearlieq]

I go with a modified #3. I do keep our retirement contributions in the equation, but I eliminate all non-essential spending from the budget.

[Broken Arrow]

For me, the goal was to have enough to live for 6 months with only the bare essentials. Rent, basic utilities (electric, gas, water/sewer), food, and gas. So, it's pretty much in line with what everybody else has said....

[disneysteve]

I'd go with #3 plus health insurance.

Don't forget that COBRA coverage is quite expensive. It is not just continuing the payments you already make.

Also, when figuring "non-essential" spending that you could cut, don't forget that some of those non-essentials can't be cut if you are locked in by a contract: cell phone, internet access, etc.

Just to complicate things more, if you are tapping that EF because you lost your job, keep in mind that you may have expenses assoicated with finding a new job such as new clothing, travel, printing resumes, etc.

[fairy74]

I went with number one because it was easy!

[disneysteve]

Originally Posted by fairy74

I went with number one because it was easy!

That's actually a very sensible option and an easy one for most people to figure out. It would probably be more than you would actually need, but better to have too much than not enough.

[fairy74]

That's my thought exactly disneysteve!

[Broken Arrow]

That's a good point, Steve.

[Fizgig]

I also go with #3. More is better, of course, but that gives me a goal I can achieve in a pretty short period of time. (I gave myself a year to save a 4 month cushion.) Whatever helps you sleep better at night is the right answer, I figure.

[aurielle]

I'm going with #2.

[rduell]

My emergency fund goal is #2 also. I would rather figure too high because there's always things that come up that you aren't expecting.

[Gruntina]

hmmm I was going to go with my net take home #2 but now after reading this thread I am going to go with #1.

These are my reasons:
1. I have insurance under my company, if I were to be laid off, I would have to pay Cobra for extended insurance which is more than I pay pre-lay0ff plan.

2. I am sure I will use more gas for interviews and job hunting and things to go with it. What if I had to relocate for the new job and it’s not covered by the company?

3. If I am not working, what am I going to do with my time?

4. Gap to 401 K or other retirement funds, I should have a savings to make up for the lost so not double behind.

But to make this happen, I am starting at goal #3 and work my way up to #1 when it’s possible. #3 is way better than none!

[bjl584]

No need to look into it too much. I'd say just use your monthly gross income as your baseline for your emergency fund savings.

[vishenda]

For me, here's how I calculate it.

Take an 'average' month of expenses (including gas and other transportation) and multiply times 6. You wouldn't be driving to work, but you would be looking for work, going on interviews, and honestly taking some time to 'just get away from it all'.

Your salary really doesn't factor into it because you can always buy with credit cards. So figure out how much _should_ go out each month. (yeah, it'll be a very scary number)

[Gruntina]

A good thing to keep in mind is to keep all receipts for anything related for job hunting such as gas, interview clothings, doc /career testings cost as it can be used for a tax write off.

[lrjohnson]

I do #3, for 6 months worth.
Or I'm doing #1 for 3 months worth.

[Gruntina]

Originally Posted by lrjohnson

I do #3, for 6 months worht.
Or I'm doing #1 for 3 months worth.

Lol! that is so true!