I want to save 9-12 months of living expenses. What falls under that?

Submitted by D0lphan72 t3_11efn19 in personalfinance

I’m trying to build up a 9-12 month emergency fund in my savings account and although I have a list of my monthly expenses I’m not sure what would fall under that category if/ when I need to use it and wonder what would be considered in that emergency fund and what wouldn’t (would my Roth contributions fall under there?) These are being taken from my net income so my 7% 401K isn’t factored into this. Please let me know if you think one of these would/ wouldn’t need to fall under an emergency fund.

$1500 monthly to liquid savings.

$1100 monthly toward the joint checking account I have with my wife. This covers my entire mortgage, utilities, and allows us to spend money together on shared items.

$65 car insurance

$400 Roth IRA

$124 student loans

$92 engagement ring

$54 health insurance

After all of this I usually have $~850 left on spending Money including gasoline, entertainment, etc.

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Stock-Freedom t1_jadpo20 wrote

Personal finance is personal but why not calculate your fixed costs and multiply them by the months of emergency fund you desire?

Follow the flowchart.

My generic advice:

https://i.imgur.com/lSoUQr2.png

Here is the flowchart from the r/personalfinance subreddit’s Prime Directive. If you follow that, you will be ahead of almost all of your peers.

Stop by the sidebar to see the Common Topics, which include basic money handling and investing.

You don’t need to talk to anyone or buy some random book to do this. You have all the tools right here.

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D0lphan72 OP t1_jadszdn wrote

Appreciate the link. I’ll definitely crunch those numbers and put them together to see what comes out

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Werewolfdad t1_jadsdrx wrote

>I want to save 9-12 months of living expenses. What falls under that?

Whatever you want, frankly.

You can have full expenses (aka 100% of your monthly spending) or 'austerity' expenses (aka 100% of your nondiscretionary spending) if you would cut out an luxuries in an emergency.

I wouldn't include savings line items since they are fully discretionary and not an expense.

My emergency fund is about 6 months of full expenses and 12-15 months of austerity expenses, for reference

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D0lphan72 OP t1_jadsx5s wrote

When you say austerity expenses do you mean entertainment type items and non- necessary purchases? Do you lump investment lines into that as well?

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Werewolfdad t1_jadtco1 wrote

> When you say austerity expenses do you mean entertainment type items and non- necessary purchases?

Yeah, if you're on an austerity budget, you're only spending what you must, not what you may want to.

Nondiscretionary items would be things like insurances, mortgage, property taxes, probably half as much in groceries, student loan payments, car payment, etc.

Discretionary items are things like eating out, booze, travel, vacation, kid's activities, lunch at the office, some of your streaming services, etc

> Do you lump investment lines into that as well?

That's savings, which is not an expense

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Prestigious_Big_8743 t1_jae8vjb wrote

Is that health insurance through an employer? Or are you paying the full cost OOP yourself? My husband provides our family health insurance, as well as the bulk of our income. Losing his job means we have to provide insurance ourselves, the full cost. Which would be a significant expense that we don't currently have.

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[deleted] t1_jadvd5u wrote

[deleted]

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D0lphan72 OP t1_jadvuez wrote

Really good point, I’ve been thinking of this is a more black and white way when the answer is probably more of a grey area depending on the person.

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lUNITl t1_jae28qp wrote

Personally seems excessive. If you have an emergency that goes on for that length of time you should be able to liquidate whatever you need to months before you spend it.

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D0lphan72 OP t1_jae5lgp wrote

Do you mean excessive in funds allocated per month or total months in savings?

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