We were asked to write this blog at the perfect time because we had just finished saving our emergency fund (EF)⁣. To start, an EF is a backup plan for unexpected life events such as job loss. This pandemic that we are all going through would be the opportune time to have a fully funded EF.⁣ Let’s talk about how we went about calculating the amount needed for our 3-6 months of family emergency money.⁣

Step 1: We made a list of all our BASIC family expenses for food, house, and transportation. Categories such as eating out, savings, etc were not included as these would be least important during an emergency. A realistic amount was assigned based on past averages of our spending. ⁣

Step 2: Multiply this total by the number of months we are comfortable with. For example: If you chose to save 6 months with your total basic expenses equaling $2500, your emergency fund target would be $15,000⁣

Step 3: Where do you want to store this fund? Our location is not easily accessible i.e. no ATM card and off our regular commute. Some people may believe that easy access is best but I would say “know yourself” Ask yourself will I tap into my fund regularly due to the easy access? How disciplined am I? ⁣

Step 4: Decide when you want to achieve this goal e.g. I will like to have my full EF in place within the next 36 months. ⁣

Step 5: Set up an automatic deposit until you have reached your goal. Using this example, a monthly deposit of $420 would be required to complete the goal in 36 months. ($15,000 / 36) = $420⁣

How to calculate your emergency fund⁣

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