It’s been 20 years since Dave Ramsey’s book The Total Money Makeover recommended that Americans start an emergency fund with $1,000. That doesn’t mean, though, that the figure was meant as a hard-and-fast rule — for now or even back then.

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When asked about that threshold number by an audience member on an episode of his eponymous show, Ramsey replied: “$1,000 was not enough in 2003.”

As the audience clapped and cracked up, Ramsey continued: “It was never designed to be enough. It’s enough to keep the little things from kicking your butt off the get-out-of-debt wagon.”

At one point, Ramsey recommended using every bit of savings to pay down debt, which for the record, is still a great idea if high-interest credit cards are beating your bank account to death. But this strategy caused some Americans to lose hope, which led him to make the $1,000 tweak as a safety valve for small emergencies on the way to debt freedom.

“So [the $1,000 savings] doesn’t need to be adjusted, because it was never supposed to be enough.”

The question is: What is enough for an American’s emergency fund, qualitatively or quantitatively? The financial guru offered his answer later on during the show. Based on his advice, here’s what you can glean on the way to coming financially clean.

Use monthly expenses as an emergency fund barometer

If you’re following Ramsey’s “baby steps” to pay off debt, he also suggests you pause to set aside money for the unexpected. To calculate your emergency fund needs, first look at your monthly expenses over the last three to six months and come up with your average spending.

Gathering this statistic could help you avoid becoming a statistic. As of 2022, the Federal Reserve reported that 37% of Americans couldn’t even cover a $400 emergency expense without borrowing money, or selling something. That's up from 32% in 2021. So calculating your average monthly expenses can ground you in financial clarity in case of an emergency.

Consider job stability and income volatility

Those in volatile fields or positions — independent contractors or commission employees, for example — know income can shift without warning. In such cases, emergency funds should cover a longer time horizon to factor for job or income loss, or a lack of financial stability.

A JPMorgan Chase Institute study found that on average, families experience large income swings almost five months out of the year.

If your income is inconsitent or your job uncertain, a good rule of thumb is to plan for three months of emergency savings for every 10% of income volatility.

Read more: This young couple's shocking story of being almost $1M in debt just went viral — use these 4 simple tips to prevent financial disaster

Assess the range of risk factors

Beyond job uncertainties come personal ones that involve health, dependents, car repairs and home maintenance, for starters. The danger comes when you’re forced to pay these off with high-interest loans and credit cards, which can easily double or triple the initial charge.

Households with low liquid savings and high debt-to-income ratios will of course get hit harder when homefront pitfalls turn into financial ones. So the more possessions you own and responsibilities you have, the more you’ll need to save.

In the end, it comes down to being prepared. Take a cue from Dave Ramsey, who would no doubt approve of trading in a $1,000 benchmark for acting on million-dollar advice.

Get your finances in shape

Having an emergency fund in place is crucial to feeling financially stable. But, as Ramsey himself would point out, that emergency fund doesn't do you much good sitting in your bank if you're still digging yourself deeper and deeper into debt.

While Ramsey recommends the snowball method — starting with your smallest debts and clearing them first to build momentum — if you've got lots of high-interest debt on say multiple credit cards, that can get expensive real fast. Due to compound interest, you can end up paying interest on your interest before you've cleared that account.

And with the average credit rate over 24% according to LendingTree, that interest can catch up fast. Depending on how much you owe and how many accounts you have, consolidating your various debts into a single loan could end up saving you thousands in interest.

These days, there are helpful online platforms make finding a personalized loan easy and efficient. By replacing your old loans with a single, cheaper one, you can keep yourself organized as you work to pay it off.

And if you want to get out of debt sooner and save even more on interest, you can choose a shorter repayment plan.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.