Dear readers, I was just thinking to myself how I would handle loss of income should both my wife and I happen to be jobless at the same time. Not that it is happening now, but who is to say that it will never happen.
My wife and I are currently in the midst of starting a new company and we have decided that in order to increase the success rate, she would have to quit her current job. The reason as to why her and not me is because she knows the sector way better than myself. Therefore during these few months ( 4-6 ), we will be relying only on my income which means that our savings and investment amount will be cut down by a lot.
I was thinking, what if during this period of time, I was to lose my job as well. Would it be as disastrous as I think it would be? Upon careful consideration, I do feel that the emergency fund would suffice for these 6 month. We would have to cut down on eating out or going for holidays as my planned emergency funds was supposed to cover just our basic needs - plus or minus.
Everyone has different needs to be drawn from the emergency fund. Here are mine should I have to ever utilize it. - Fingers crossed that I will NEVER.
1) Car Expenses - About $300 ( should be a lot less since won't have to commute to work.)
2) Utility bills - About $250
3) Food - $700
4) Wife's Transport - $150
5) Mobile - $60
6) Cable - $50 ( would most likely cancel this, but would be a good replacement for going out which would cost more money)
7) Toiletries - $50
8) Condo Fees - $350
Total a month would be about $1500-$1900
6 Months would be about $9000 to $11400
I used to be pretty paranoid about having a huge emergency fund to last me a long time, somewhere along the line of 2 years worth. However, I have deemed it to be totally unnecessary and have cut it down to about $15k. The rest were put to better use in investments.
How much emergency funds do you think is enough? 3 months? 6 months or like the old me, 2 years? What are your basic needs and how much can you cut it down to? I'm sure I can cut mine down by quite a bit but I do not see the point as I do not feel that both my wife and I would be out of job at the same time for too long a period of time. An emergency fund is a definite, the question is how much.
As always, save more, spend less and invest wisely.
P.
Agree with you - You can always liquidate some profitable investments if really need more emergency funds at a later date rather than lock up cash without investing. If you had bought in at the 2008/2009 lows, those would likely be still profitable no matter when you need money.
ReplyDeleteMissed out that period as I was studying over at Australia, did not even touch the markets. That said, if I was invested during that time, I might not have a mindset stable and experienced enough to have the guts to buy in or hold. So, both good and bad. Now though..I guess I have grown quite a bit.
DeleteI am surprised you miss out expenses for children and parents. They are the biggest items in family expenses. Even if you have no children, you still have parents to support. They are unavoidable expenses.
ReplyDeleteParents and children make up the biggest expenditure for most families, including mine.
Hi james, no kids yet.. but good reminder. Those are major expenses as well..I'm getting more forgetful these days.
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