Should you have Two years of expenses saved?

 

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