More Money Podcast - How Much You Should Have in Your Emergency Fund - Money Minute with Jessica Moorhouse

Episode Date: January 31, 2020

For this money minute, I'm going to answer to questions I get all the time. 1) Why should I have an emergency fund? 2) How much should I have in it? An emergency fund is simply cash you have in a savings account you don't touch unless there's an emergency, and the typical rule of thumb is to have 3, 6 or 9 months' worth of your living expenses (which you can find by having a budget and tracking your spending!). Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, hello, hello, and welcome back to another edition of Money Minute with Jessica Morehouse. That's me. For this episode, I want to talk about emergency funds. I'm going to talk to you about why you need one and how much should be in your emergency fund. Okay, so let's start off with what exactly is an emergency fund and why do you need one? Well, an emergency fund, in case you don't know, is just a savings account, hopefully a high interest savings account. Not that any of those high interest savings accounts really offer that high interest anymore. But anyways, it is just a savings account in which you put money, keep it liquid so you can easily withdraw it in case there is an emergency in your life. And an emergency can be a number of

different things. It can be your pet gets sick. You don't have pet insurance. You have to pay that vet bill. It could mean you losing your job and you need to make rent and pay for groceries. It could be that a family member passes away suddenly. You have to make it to the funeral and they live across the country and you need to buy that plane ticket. There's so many different things that happen in life. It is called adulting. It is so much fun. And we need cash to be able to pay for any of these emergencies or occurrences because, I mean, I don't know, I'm in my 30s. And yes, these things have happened in my life. And I've been so thankful that I've had cash in the bank to pay for them so I didn't have to go into debt to do whatever and figure it out. Okay. So now let's talk about how much do you

need? Well, the typical rule of thumb is to have three to six or even nine months worth of your living expenses in cash in a savings account for your emergency fund. Now that may be like, okay, what does that actually mean? Well, how you figure out that number, that specific number you need to hit so you can actually start saving for that emergency fund is, well, you need to have a budget. You need to also start tracking your spending so you can figure out how much does it actually cost you to live? How much is your rent or your mortgage, your bills? How much are you spending on eating out and groceries and getting your hair done?

You need to know how much it costs to be you and to survive in the course of one month. And then once you have that number, and again, it doesn't have to be, oh, it's exactly just have a good average or a good ballpark. Once you have that number, then times that by three or six or nine. Now, it depends on your situation, whether you want to have just three months or nine months. For me, because I'm self-employed, which means my job is probably less secure than if I were to work a nine to five with

an employer, I have a pretty big emergency fund because, well, if there's a situation where I have to go back home and take care of my family, it means I'm also not working and not earning any money. So that's's for me, safety, security thing. I have a good amount of money in my emergency fund that makes me feel good and I can sleep well at night. If you feel pretty secure in your job and you know three months is going to be just fine for you, then that should be your number. Choose whatever number makes the most sense for you that makes you feel good inside, but make it a priority. If you do not have a fully funded emergency fund, make that a priority for you to save up this year in 2020. And if you need a little

help getting started, well, I highly suggest that you go to jessicamorehouse.com slash budget to download my budget spreadsheet. It includes a spending tracker as well. If you want to get your money organized, this is one very easy way that you can do it. JessicaMorehouse.com slash budget. Go make a budget if you don't already have one. Okay, that is it for me. Thanks so much for listening. Make sure to, of course, sign up to my email list if you're not already on there to find out of all the updates of what I'm doing, what I'm up to, new things I've got in store for you. JessicaMorehouse.com slash subscribe. And if you're not already in my free Facebook group, why not get in there? It's facebook.com slash

group slash money life balance. A great place to talk about money in a non-judgmental positive safe space. So hopefully I will see you in there. Thanks so much for listening. Have an amazing, amazing Friday and great weekend. I will see you back here next week for another episode of the Mo Money Podcast. This podcast is distributed by the Women in Media Podcast Network. Find out more at womeninmedia.network.