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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Can we agree $1000 as a step-one emergency fund is nuts for people in this area? Particularly if the only debt is student loans?[/quote]

Why?  For people, even higher earners making $150+ if they are living paycheck to paycheck, you have to start somewhere.  Telling someone who can't save money that they have to have an emergency fund that covers six months of expenses without a paycheck can be overly daunting.  That's like telling someone that has a fear of heights that they have to start by climbing up a 50 ft cliff and looking out over the edge.

$1K may not be a full emergency fund, but it's a good baby step.  It's enough to replace most of the appliances in your house that fail.  It's enough for an unexpected car repair.  It's enough to handle  a small unexpected medical emergency (like needing to rent a wheelchair or buy assistive technology/equipment).  After you have that, then you work on increasing the amount in the emergency fund.  But for people who don't know how to start, baby steps can help a great deal to just getting over that hump.  Later steps will be bigger once people experience and understand what it takes.[/quote]

Quoted poster. Suppose you’re a doctor with $450k in debt. You make a ton, but it’ll be a few years before you can pay it all off. Is it really worth spending years of your life with just $1k in your emergency fund when you could easily just take an extra few months to get debt free and have a more conventional emergency fund waiting for you if you need it? The $1k in that situation just strikes me as sort of risky and dogmatic [/quote]

If you make a ton, you should be able to cash-flow an emergency above the $1000 threshold.

The idea isn’t to save a $1000 emergency fund and then continue to live large while you pay a little extra at the debt for the next 15 years. The idea is to take your savings down to $1,000, cut your expenses to the bone and throw everything you have at the debt. So you give up private school, or a $1 mil plus house, and the luxury cars, and the vacations, and the bespoke suits, and any other trappings of the UMC, and you live like the poors for a few years, except with a high income.

If your beater car breaks down, you only pay the minimum on your debt that much, and replace the beater for cash, etc. If you lose your job, you go back to paying minimums, and your expenses are already cut, so you should be able to stay afloat on your spouse’s income/unemployment insurance, etc.

You also insure your income while you are in this stage: buy disability and life insurance.

The first iteration of the babysteps didn’t have any mini-emergency fund. But it’s beneficial for Dave’s core audience (middle class middle America), who don’t have the high salaries to cash flow emergencies. Those with a high HHI probably need the $1,000 emergency fund even less. The true emergency fund they will save in babystep 3 is really self-insurance so they don’t have to make lifestyle cuts in an emergency (kids can still attend private school, they don’t have to sell the expensive house right away, etc).[/quote]

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