If you have read my previous articles, you know I believe in
the importance of having an emergency fund. If this year has taught us
anything, it is the importance of being prepared. One way to do that is to have
an emergency fund.
There are many experts out there that say you should have
three or six months of expenses saved in your emergency fund. But, I still
remember the 2007-2008 housing bust that changed my way of thinking. After
seeing many of my friends and family lose their jobs and spend months,
sometimes years trying to get back on track, I decided Suze Orman’s eight month
emergency fund was a good idea. That is when I set out to expand my emergency
fund to eight months of expenses. But, after taking all that time and seeing
what I accomplished, I was hooked and decided to expand my emergency fund to a
full year.
Now in 2020 we find ourselves in another emergency. When the
world heard about Covid-19 back in March, we all thought it would only last a
few months and then everything would be back to normal. Now it is November and many people are still
out of work and some states are reporting increased Covid cases, which means we
may continue to deal with the fallout into next year.
This got me to thinking if a two year emergency fund, maybe
worth having. Even if you are lucky enough to be working right now, what about
your spouse? If your spouse loss their job, did it cut your household income in
half? Are you now spending more on Wi-Fi because your kids are attending school
from home?
So I was thinking maybe a two year emergency fund maybe in
order, especially if your income contributes to most of the household bills. If
this year has taught us anything, it is that many jobs we thought were secure aren’t
as secure as we thought. As we are seeing many jobs lost in the food, airline
and travel industries. This two year emergency fund maybe just the thing needed
to give us the ultimate flexibility, in case of a job loss or injury that
causes us to reevaluate our job of choices. Not to mention if you are lucky
enough to be able to continue working during a crisis, you may have parents
that are affected that you may want to lend financial support to and having two
years of expenses saved allows you to help them and still have money left over to
still secure your household.
If you decide to increase your emergency fund to two years
or this pandemic has finally made you think about starting an emergency fund,
remember to include all of your monthly expenses. Expenses like Mortgage/Rent,
Fuel for vehicles, Electricity, Water, House Gas, Trash Pickup, Insurances,
Cable, Internet and Food. Remembering to include food, insurance, fuel for
vehicles and even trash pickup is essential because those are expenses many
people forget about. But, you still have to eat, get around and keep your various
insurances on rotation.
Ms. Smart
