With unemployment on the rise in the US, it is more important now to have that emergency fund handy. Unfortunately, according to an article on CNN, a third of Americans have no emergency savings. And more than half of those who do, don’t have enough in it.
So how much do you need to have in your emergency fund?
That depends on your living expenses. The article suggests that you need three to six-month worth of living expenses in the bank. At a minimum, include the items below in calculating your living expenses:
- Mortgage/rent
- Property tax
- Utilities (i.e. electricity, heating, water, cable, phone, internet)
- Groceries
- Insurance premiums (add $400-$1000 for health insurance when health insurance is lost on unemployment)
- Car expenses (gas and loan payments) or commuting expenses
- Discretionary spending (for extra expenditures such as shopping and dining)
Click here to read the full article that includes steps to building an emergency fund.
As soon as I read the article, I rushed to my computer to check my budget worksheet and calculated 6-month worth of living expenses. I let out a sigh of relief when I found out that I have more than enough in my savings to cover me for 6 months.
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I was doing pretty well at building an emergency fund last year. But then I made a move, and that ate my savings up. I’m getting ready to start back up. It does give you a sense of security like nothing else.