I think the standard recommendation is 3-6 months.

To me, the open question is - what happens if you do lose your job? Are you in a robust industry, unaffected or unlikely to be impacted by AI, growing, easy to find work, plus you have a variety of widely applicable skills? Or, are you in a position to retire early, financially secure? Then absolutely, three months expenses sounds like plenty of me.

If not, I'd stick with the six months.

I save up the maximum amount of vacation hours allowed by the company, the last job switch I made I had six weeks of pay coming. I consider that some of my emergency fund.

It's more of a philosophical and psychological question than a financial question. I keep 1 year of total expenses in a money market fund, and then a lot more in a brokerage fund. You can argue that I'm paying for peace of mind by giving up higher returns, and I'll gladly pay that fee.

Anonymous wrote:It's not just about being laid off. It could be an emergency where you can't work for medical reasons or need to leave your home or need to pay for a big unexpected expense. To me, your savings seems low relative to your expenses. It also depends on whether you are truly on your own or have family you can live with.

This. A friend of mine had a heart attack in her 30s and was out of work for an extended period before she was cleared to resume. It was completely out of the blue-no risk factors.

Another friend of mine’s husband died suddenly and getting his life insurance sorted was a massive nightmare. They relied on that emergency fund while things were tied up.

Job loss is just one type of emergency.

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Anonymous wrote:Money in your regular investment account is your emergency fund. You don't say how long it took you to save up the $34k, but if you had invested $1000 a month the last three years into VOO, you'd have ca $45k now.
When you lose a job, you pay very little tax on investments alone.
Your expenses are high. What is the reason you can't go $4k a month if needed? Be ready to sell the car, rent a studio as emergency plan, get a side hustle.
Safe job, money in investments, ability to go low expense and ready to get a side hustle, should let you sleep like a baby.

You must be young. People in 2008 lost 70% of their investment wealth, and then lost their jobs.

Wow didn't know. 70% that's crazy.

i lived through it and even i didn’t know, and didn’t come even close to losing that. i’ve been investing steadily since 2000 and my net worth now grows each year higher than my W2 income. I hold very very little in cash. it’s worked very well for me for 26 years.

Me too. If you never sold, you never lost anything. There have been a couple of times I wished we had more cash on hand in the last 30 years, but we managed our way through. Not sorry we invested almost all our savings.

You were laid off after the crash? Did you move in with your parents?

wondering this, too. If all your savings went into the market, what did you live off of after the huge crash in 2008. I also remember it well; had a friend who retried right around that time and they lost half their savings so they had to find other income. Their savings never recovered, and they died a few years ago from cancer.

Anonymous wrote:I only keep 30k in savings. We net after all deductions (insurance, 401k, mega roth) about 32k/mo and burn about 15k/mo. The remainder gets invested in a taxable brokerage. So yea if both our incomes vanished, we would have 2 months of rope at our same lifestyle. it would be very unlucky if we both instantly lost our jobs. Is rather pull from investments rather than have cash sitting on the sidelines.

The problem is that if you invest that savings into the stock market, and the market crashes (it's been a yoyo since Trump took office), then it's possible you lose money AND you have to take the money.

Emergency money should be invested in something safer.

I think the standard recommendation is one size fits all. But that doesn't take into account your personal circumstances. DH and I both have very stable careers that do not typically see lay offs. It is highly unlikely that either one of us would be laid off, let alone both of us at the same time. We have no debt beyond our mortgage. We also have parents who are very well off and would be able to help in a pinch. We have fully saved for the kids college and have strong retirement portfolios and brokerage accounts. Mentally, we are pretty risk tolerant. So I feel pretty comfortable being on the small side of an emergency fund. YMMV.

It is all come down to how you sleep at night without worry so much about the stock market. For me if I were you, $34k is a good number.

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Anonymous wrote:Money in your regular investment account is your emergency fund. You don't say how long it took you to save up the $34k, but if you had invested $1000 a month the last three years into VOO, you'd have ca $45k now.
When you lose a job, you pay very little tax on investments alone.
Your expenses are high. What is the reason you can't go $4k a month if needed? Be ready to sell the car, rent a studio as emergency plan, get a side hustle.
Safe job, money in investments, ability to go low expense and ready to get a side hustle, should let you sleep like a baby.

You must be young. People in 2008 lost 70% of their investment wealth, and then lost their jobs.

Wow didn't know. 70% that's crazy.

i lived through it and even i didn’t know, and didn’t come even close to losing that. i’ve been investing steadily since 2000 and my net worth now grows each year higher than my W2 income. I hold very very little in cash. it’s worked very well for me for 26 years.

Me too. If you never sold, you never lost anything. There have been a couple of times I wished we had more cash on hand in the last 30 years, but we managed our way through. Not sorry we invested almost all our savings.

You were laid off after the crash? Did you move in with your parents?

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Anonymous wrote:

Anonymous wrote:Money in your regular investment account is your emergency fund. You don't say how long it took you to save up the $34k, but if you had invested $1000 a month the last three years into VOO, you'd have ca $45k now.
When you lose a job, you pay very little tax on investments alone.
Your expenses are high. What is the reason you can't go $4k a month if needed? Be ready to sell the car, rent a studio as emergency plan, get a side hustle.
Safe job, money in investments, ability to go low expense and ready to get a side hustle, should let you sleep like a baby.

You must be young. People in 2008 lost 70% of their investment wealth, and then lost their jobs.

From peak in 2007 to the trough in 2009, the stock market lost just over 50%. A lot, but not 70%.

I do agree that an emergency fund should not be in VOO, though there are many investors with a higher risk tolerance who believe you should be. We have our emergency fund in SGOV. But we are older.

Meant wealth; investment income crashed and housing values (so no HELOC a popular “emergency fund” strategy).

Anonymous wrote:All I know about my emergency fund is that it could have been worth about $300K by now.

Yep same here. I sat on cash in HYSA during the post COVID boom everybody scaring the hell out of me that I need a year savings f I lose my job blah blah. I shouldn't have listened.

IMO your emergency fund is cheap shelter and car. Of your rent/mortgage and car loan are very very cheap relative to income you will weather a job loss because then you don't have to freak out to find a job at the same pay level and a temp job regardless of what it is will allow you not to dip into your savings. Now if you have an insane rate of mortgage relative to income no amount of emergency fund will be enough because your lifestyle probably mirror your expensive rent or mortgage.

All I know about my emergency fund is that it could have been worth about $300K by now.