What's in your EF? How does it compare to your monthly expenses?

**kork13** · 03-04-2013, 06:06 PM

In your current situation, $18k appears to be a pretty reasonable EF. The general recommendation is to hold at least 6 months' expenses as an emergency fund. Some highly imprecise & rounded math puts your expenses at around $2700/mo. Based on that, $18k would be just above 6 months' expenses.

Keep in mind that 6 months' expenses is just a general rule of thumb, which should be varied based on your circumstances. Your fiancee, for example, with his variable income, is quite right to hold a more significant EF in savings.

I'm not married, so I can't offer much advice on combining accounts... The one thing I will say is that most people recommend that you do combine your accounts -- there's no longer "his money" and "her money", but rather it's "our money". There are various opinions on this however, so do what you both are comfortable with. For example, some couples choose to keep a small savings account on the side for guilt-free personal spending that is separate from the primary joint accounts.

As for your last question about what everyone else's EF looks like compared to our income and expenses, the responses will vary widely, because everyone is in their own very different situations. For myself, however, my goal (still working toward it) is to have a $25k EF (6 months' expenses). My monthly expenses are about $4k/mo, and income is about $6.5k/mo (gross... take-home is about $5k/mo, after taxes, TSP, insurance, etc.).

**BMEPhDinCO** · 03-05-2013, 08:21 AM

Looks like you are in pretty good shape - my suggestion, if y'all plan on living together for 1 more year before getting married, would be to switch back and forth on the bills. That is, for Apr. 2013, you pay everything (he does NOT give you the $700), then for May 2013, he pays everything (you do NOT give him anything). Everything would be:

Owe 120k (1100/month includes property tax etc)4.25%
Water: 60
Electric: 120
Gas: 50
Cable/ Internet: 110

And so forth ... this would be a bit tight for him in some months, but probably doable, depending on his savings and other expenses... It makes it a bit more "fair" and gets you used to paying the full bills without "income" from the other person (ie, once you are married and combine expenses, it's now all "both" month).

I calculate monthly expenses (for you alone) at $2735 (ie, your expenses + health insurance if you lost your job since the new law requires everyone have it)... thus, a 6-9 month EF would mean a total of $16,410 - $24,615. I think your $18k is a good start and once y'all combine finances (and add in his bills) you will probably want to up that amount to around $25k at least.

I would also suggest you and your fiance get together and calculate a cost for the wedding now so you can start a targted savings account for it.

Finally, I would suggest your fiance pay himself a set monthly salary (ie, $3k) and then put the rest into a "job flex" savings account (so if he's under that, he takes from the account, if he's over, the rest goes into it) since a set value makes it easier to budget. If he's an independent worker, don't forget the self-employment taxes either!

Finally, since you asked about my EF... We currently have $22k ($1k in quick access, the rest in online savings). This will cover us with just my salary for 1 year + 5 months of no salary. This is a bit higher than we would normally need, but DH is graduating with no real job in sight yet so I'm trying to prepare. Normally, I'd keep around $15k since I have other targeted accounts that also have a bit in them.

Good luck!

**JenniferG** · 03-05-2013, 08:46 AM

Thanks for the suggestions!

When my fiance first moved in last september we wernt engaged and the house etc was in my name so I didn't feel it was right that I charged him half the mortgage since all the equity in the home was going to me so I just chose a set amount each month for him to pay, now that were engaged I think it's fair he pays half the bills. He realises this and often contributes extra money towards groceries eating out etc. He has also expressed intrest in helping pay off my CC bill, however I'm the one that made purchases on the credit care so I should be the one to pay it off.

Once were married I can see us setting up a "joint" account for living expenses and seperate savings accounts. I already have a bank savings account and online account. Is that normal for a married couple, to have sepearate savings accounts?

In my fiances case I think paying himself a set amount each month is an excellent idea, I'll be sure to suggest that to him.

**~bs** · 03-05-2013, 09:24 AM

My recurring monthly expenses are around 2500. I keep aound 20000 as ef and business cah buffer outside of my normally revolving cash balances, which probably should be raised due to the uncertain nature of business. Of course the net inventory I carry is worth more thsn 100k, so barring a complete collapse, that can be sold..

Keep in mind that there's opportunity cost to keeping money in an ef, especially if your situation is stable and you may not need such a large balance. Over a working career, 10k too much in an ef means you potentially gave up maybe 250k in investment earnings. Fo me, id have no problem with 20 or 30k as a buffer, because a few times in the year, ill need to swing the money into the business to cover addl purchases in which ill realize a 10% or so profit in a 2 to 3 week business cycle. Then pull the money back out. But everyone s situation is different

**phantom** · 03-05-2013, 10:14 AM

I think upping your emergency fund to $18,000 once your credit card is paid off sounds like a good goal. I agree with Kork's assessment that it would cover a little over 6 months of expenses, and that sounds pretty reasonable to me.

If you haven't already, make sure you come up with specific numbers for the amounts you want to put towards your wedding and your honeymoon, and make sure you are planning on paying for those things separate from building your emergency fund. I think you could probably get away with setting the goal for your emergency fund a little lower if you find it difficult to set aside money for the wedding and honeymoon and emergency fund all at the same time. You will want to sit down with your finance at some point and work out how much you will want in your combined emergency fund once you're married.

I think the most important thing about combining finances in a marriage is to get into the mindset that, one you're married, everything belongs to both of you, all of the debt and all of the assets. You should also make sure you're on the same page about what your goals are and what sort of spending, savings, and debt you find to be reasonable. I do not think the mechanics of how you combine your finances are nearly as important as your mindset.

Some couples find that sharing checking and savings accounts forces them to think of their money as being shared. But, I don't think there's any one solution that works for every couple. My husband and I choose to keep all of the individual accounts that we had set up before we were married and just added each others' names to those existing accounts. It could be a confusing mess, but using tools like Mint and GnuCash, we are able to look at all of the money together no matter how it is spread. It's certainly not a system that I would recommend for everyone, but it is what works for us.

I like to keep our emergency fund around $24,000. The monthly expenses that my husband and I could not easily drop in an emergency come to about $3200. I rounded that up to $4000 and multiplied by 6 to get the $24,000 number. (Yes, that's an excessive amount of rounding.) I also like that number for us because it looks nice from a couple of other directions. Our monthly take home pay is about $8000, so you could also say our emergency fund is 3 months of income or about 6 months of income from just one of us. $24,000 also happens to be enough to cover a year's worth of mortgage payments and property taxes.

What's in your EF? How does it compare to your monthly expenses?