3/13/2012

Emergency Fund Goal

It's been white a while since we've looked at our emergency fund goal to ensure it realistically fits our current lifestyle.  Our worse case scenario for us financially would be a job loss - given that my income is a bit higher then Jordan's - in figuring out how much we need in our fund, we'll assume that I lose my job.  I've done some reading online and come up with a reasonable employment insurance income (less taxes) so we wouldn't be on one salary necessarily.  The analysis below, also assumes no credit card debt (which we won't have for much longer if you saw yesterday's post).


  • Jordan isn't sure he wants to continue having allowances as it is - so that's the first thing to go in our 'emergency budget'. 
  • The next to go are our joint house and joint gifts account - these are two of our variable spending accounts - intended for larger purchases.
  • Following that is a reduction in our variable 'day to day' spending account from $1,200 to $1,000 which would cover gas, groceries and about $150 of 'other'.  Our gas wouldn't go down much because we carpool as it is
  • The next to be cut is our emergency fund - if we are withdrawing from it - there doesn't seem like much point to be contributing to it.
  • The next step is hard...I hate touching RRSP contributions...even in an exercise like this - but it's got to be done.  RRSP contributions are reduced from $200 to $150.
Wow!  I'm pretty surprised - but it looks like we could handle this scenario and still be okay.  We wouldn't be having much fun, but we'd be okay.

I think that it's important for us to remember that while we could handle a job loss as long as I had EI benefits - there are often delays in securing said benefits.  There may also be an instance where we wouldn't qualify for them.  

There may also be a time where neither of us loses a job - but we need to take some time off.  We both have benefits - but again - there may be a time where we have exhausted our benefits and still need to be away from work for a period of time to support our family in one way or another.

I've always been comfortable with $1,000 buffer - I know, I know - it's not three months or six months expenses, but it's always worked in the past.  Now that we have a mortgage payment, I'm not so comfortable with that line of thinking.  I think that a one month buffer would be $1,500 (based on assumed EI earnings).  

I would like to see us end up with say, $5,000 in our emergency fund - perhaps held in a TSFA or some such thing - but for now, $1,500 feels like a good number to reach for.  Once we're there - I think we will probably increase the goal in increments of the same.

How did you come up with your number?
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6 comments:

  1. Good luck with your goal! And we just kind of picked a number that we would be comfortable with. $15,000 is what we would need for a bare budget with not a ton of extras.

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  2. I just chose $1000 as that would handle most immediate emergencies that were fairly small scale, like a doctor visit or a basic car part that needed replacing. Plus, I always try to use my regular spending money before I hit up the EF. $1000 was also a number I could reach within a year when I started to build one. Since I built it with an auto transfer of $20 a week, I just left the transfers after I reached the $1000 so sometimes it goes over and if it ever dips, it builds back up itself.

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  3. We want to have at least 3 months of income in our Efund. That's our combined income, and even though it's not likely that we'd both be out of work at the same time, we recently had a time period where neither one of us was able to work for several months because our little girl was very sick. Thankfully, hubby had paid sicktime but that may not always be the case. We definitely wouldn't have wanted financial worries on top of medical worries.

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  4. I generally have $3000 in mine. It's just sitting in my regular bank account which needs $1000 to avoid bank fees. It's easily accessible if needed. It would get me through at LEAST 3 months. But unfortunately it's not EARNING me any interest..

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  5. We also have three months of what it would take to survive if we both lost our jobs. We also tend to have some money in our "house savings account" which is used for remodels and things like that, and it would be moved into our e-fund if something happened. I'd like to have 6 months once we have kids, but for now, we're fine with 3 months.

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  6. As someone who has been on EI a few times in the last few years I suggest a bit more of an emergency fund. You don't receive any benefits for the first two weeks after you are laid off. It also can take them a long time to process your claim-one time I had to wait 8 weeks.

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