DISQUS

JC · 9 months ago

How much should we have in our emergency fund? My friend told me 2 months worth of rent? Is that optimal? What about other costs and whatnot?

Flexo · 9 months ago

The most common advice I hear is three to six months' worth of all expenses. Rent, essential utilities, food, and transportation all count. I'd suggest having even more if possible when the job market is bad in your industry. You might want to check the results of this poll I took last year in combination with this article about the right size for your emergency fund.

Dan · 9 months ago

I've read some good advice from others that I think is sound: Money Priority #1 should be having $1000 emergency fund.

Following that, the precise order of other money priorities are debatable and may vary case by case: paying down debt, funding a Roth IRA, saving more of an emergency fund up to the 3-6 month recommendations, etc. But that first $1000 (or $500 according to the study referenced here) is a comforting and paramount first step.

Roger · 9 months ago

This is one of those issues where human personality traits have to take precedence; even if the mathematical ideal process is to pay off high-interest debt first, the mental benefits are important and must be reconciled.

Writer's Coin · 9 months ago

I will second this one. We're sitting on a huge pile of cash right now because of our wedding/down payment efforts and the feeling that pile gives us is like nothing else. We could both lose our jobs tomorrow and, while it would suck, it wouldn't be the end of the world.

Miranda · 9 months ago

We so often forget that there mental and emotional components to our money as well. A little peace of mind is often worth a little more interest to establish an emergency fund first.