How Much Emergency Funds I Should Have?
So I’m probably the only person on YouTube that’s going to teach about the 3 levels and emergency account has, most people just say, save 3-6 months and call it a day. But in this video I’ll tell you how you can get away with a lot less and how you an also build it up to a lot more.
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Obviously First: you have to know that I’m a little paranoid most of the time, so I’m always trying to make sure, I’m set up for the future, but you also have to know that you cant control the future, just prepare as best you can and let God handle the rest.
Level 1: Started Fund
This is the first version of your emergency fund.
And you only focus on getting to an amount that can you started on your financial goal, and this case it would be to become debt free
And for most people savig $500-$1000 is more than eneough to fix any little problem that might happen
Here is why you first start a Started Fund:
To save 6 months worth of yur monthly expenses can take a long time, especially when you are in debt
So its best to save $1000 that can take you 1-2 months potentially
And then get started on your goal, and if something happens, fix it and rebuild it
Level 2: Solid Fund
Because at level 2 this fund is going to be good enough for most people for at least 10-15 years
Kinda sounds crazy right to build a fund that is only level two and to use it for this long without trying to get to level 3
But again each fund has its reasons, and this fund is to give you enough stability to start investing and to finish paying off your home
How much:
You want to save 3-6 months worth of an emergency account.
I highly recommend you spend the extra time and save up 6 months.
Its makes it so much easier, to handle the rough patches in life, like losing a love one, losing a job, a car accident and all those surprises we never want to have
Level 3: Prime Fund or Mature Fund
This fund is going to have anywhere form 12 months to 36 months of emergency money, some people even go as far as having 60 months worth
And you may be asking why so much money and how can I save that much and when can I save that much
First: When do you do this
You do this once you have a paid of home and you want to continue invest
Second: Why ( although I should start with why I know lol )
But it’s because you want to be able to stand firm incase we have a huge market downturn, if the market is down for 5 years it wont matter to you
Third: How do I save that much
Now if you’re expenses are 24k a year, to save 3 years worth would mean 72k
Well the answer is, you keep investing your normal amount and send over aa percentage you feel good into your saving
That could be 5-10%, it’ll take a long time but that’s fine
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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I'm an Accountant but I'm not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.
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