Build your emergency fund
Hello All,
This week is the ninth issue of our Finances for Feminists Financial Bingo Series!
These last few years of pandemic life have taught us that we don't know what unexpected things might arise in the future. When difficult circumstances arise, ideally we don't have to manage the financial hurdles in addition to the weight of the situation itself. That's why it's important to build (or set aside) emergency funds.
What is a good amount of savings to have in your emergency fund?
A good rule of thumb is building up 3-6 months of your essential expenses. Essential expenses are nonnegotiable such as rent/mortgage, groceries, utilities, etc. When figuring out your monthly essential expenses ask yourself, would I still spend money on this if I had an unplanned loss of income or job loss?
Remember, essential expenses do not indicate value. For instance, I value my workout classes and community but if I had an unexpected loss of income I would prioritize my spending on covering my basic bills, i.e. essential expenses.
How much to set aside is also a personal question. You may decide you prefer a bigger cushion to fall back on. Consider the following:
Are you a single income household?
Do you have dependents?
What is your industry like? Is your job hard to replace?
Depending on your circumstances you may be comfortable with a bigger buffer. Building up to 3 months of essential expenses is a great place to start.
Where should I keep my emergency savings?
These savings should be easily accessible! You don't want to have to sell investments or navigate any financial barriers to get to these funds. If you have an emergency, you should be able to know that the funds you have are secure and you can get them quickly. A separate high-yield savings account is a smart choice for most people. That way, you aren't tempted to access the funds for non-emergency purposes but you can easily access them should shit hit the fan.
Let me know how it goes! Do you have an emergency fund already? You can shoot me an email at hello@financesforfeminsts.com. Well done on another bingo square completed!
