First Person: Calculating Our Emergency Fund

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Life can throw some pretty incredible things at you and if you aren't prepared, it could leave you in a financial mess. We have been on the receiving end of some pretty terrible things in the last year but we have managed to keep our heading floating above the water, even if it is just barely. I have been very careful about saving money for out of the ordinary costs or problems, but how much is enough? If some freak accident should occur and my husband couldn't work, I want to have at least six months worth of expenses put away. This is how much we need to save, how much we already have saved, and what I plan to do about getting where we need to be.


Right now we are paying $700 a month for rent, which includes all utilities. This is a very beneficial place to be right now, and we are lucky. Six months of rent would be $4200. We have two pre-paid cellphones which cost $100 a month total, which adds another $600 to the total. My husband is still keeping full coverage on our truck, which is another $84 a month. Our six month total for insurance would be $504. All of our bill expenses for six months come out to $5304.

Misc expenses

We need food to live on and the kids need their items as well. Groceries for a month usually run about $300, which makes our six month expense $1800. Both of our boys use diapers and we spend $80 a month on that. Every six months the total comes to $480 on diapers alone. Personal hygiene products vary for all of us. On average we spend around $100 a month on shampoo, body wash, toothpaste and other various items. I figured $600 for six months of personal care products. Gas for the truck runs us about $400 a month. If gas prices don't rise, we will need another $2400 to cover that. For all of our miscellaneous expenses we need $4680.

What we need versus what we have

We will need $9984 to be able to live for six months uninterrupted. This will need to come from our emergency fund and savings. We have close to this put away already, but that doesn't mean that we are covered. We can't deplete one account and not have a back-up plan. I would like to have another $5000 put away on top of the $10000 we need to survive six months.

What I plan to do

In order to accomplish having the extra $5000 I believe we need, I am going to stick $25 a week into an envelope. While this is only $100 a month, it is still better than nothing. That will net us $1200 over the course of a year. There will also be another income tax refund next year, which we will pull money from to add in. Over the course of the next 12 months, this amount should be attainable.

It would be an absolute nightmare if my husband lost his job, but it is a real possibility in today's economy. After seeing what happens when a family goes from having a paycheck every week to not, it is not something I want to experience.

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