Calculate how much you'll need to feel ready to handle anything
We’d all like to feel confident when it comes to money. Like we have a buffer that protects us from worrying about something bad happening. That’s what having an emergency-proof fund can do for us. But what’s the right amount for that fund?
FIRST, WHAT DOES IT MEAN TO BE "EMERGENCY-PROOF"?
Being emergency-proof is a pretty awesome thing. It means feeling invincible when it comes to the financial speed bumps, detours, and roadblocks in life. That can be pretty great. But in order for us to feel motivated about putting that money aside, we need to change the way we think about it. Here’s where we start. We’re not going to talk about this in terms of depriving ourselves to put money away for bad stuff that might happen. That just sounds kind of depressing. Instead, we’re going to talk about how we are buying ourselves something incredible – the freedom from worrying about all those irritating “what ifs” in life.
SO HOW MUCH DO WE NEED TO BUY THAT FEELING OF FREEDOM?
To figure out your emergency-proof number, we’ll crunch numbers in two areas:
- Speed bumps - These are the situations that could smack us with a bill of a few hundred dollars. Things like needing to replace the worn tires on our ride. Or the air conditioner going on the fritz on the hottest day of the year. A good rule of thumb is to have $1,000 set aside to handle the speed bumps.
- Detours - These are the bigger situations that can really set us back, like losing a job or getting hit with a major medical bill. It’s a good idea to have at least 6 months of salary put aside for these.
