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It’s a question a lot of people ask. How big should your emergency fund be?

The sad truth is, a large percentage of Americans live hand-to-mouth or paycheck-to-paycheck. Are you one of these people? Are you spending everything you earn?

If you are, this means that if you have an unexpected event, layoff, or illness happen that gets in the way of your earning, you could be in serious trouble.

If you have children to take care of, then you could be impacting their lives negatively in a big way.

A Suggested Emergency Fund Amount

You will often read suggestions that your emergency fund should be approximately three to six months of your usual income.

However, depending on your potential expenses, you might want to consider more than just your current income when calculating the amount of your emergency fund.

This is especially true if you are underearning at the moment. In this case, you might at least calculate three to six months of your previous (larger) income. Though, of course, saving up for that amount while underearning is going to take time until your income levels return to normal.

What Should You Be Saving Up for?

Take a realistic look at what expenses you have on a regular basis. You should probably write out a list of all of them. Overestimate instead of underestimate your costs. Then think about the different types of emergency expenses that might come up. This could include:

1. Car Repairs

Car repairs can be extremely expensive. And have you noticed that your car never seems to break down at a convenient time? It seems to always happen when you least expect it and when money is tight. Having money set aside for your auto repairs is a good idea.

2. Medical Bills

Health insurance doesn’t really cover much these days, and even a simple blood test can end up costing you hundreds of dollars. Having money set aside to help pay those medical bills helps quite a lot.

Don’t forget the dentist! Generally speaking, you will have to pay upfront and out of pocket for most dental procedures even with dental insurance.

3. Emergency Home Repairs

Are you going to need a new roof after a big storm? What happens if your area gets flooded? What if your air conditioner breaks down during an oppressive and dangerous heat wave?

4. Unemployment

You never know when you might lose your job due to layoffs, restructuring, or other issues. Making sure you have a cushion for those times means you can still pay the rent or put food on the table while looking for a new job.

5. Disability

If you end up with an injury or illness that prevents you from working like you used to, you will need some backup funds.

6. Other Unexpected Expenses

Think about what other unexpected expenses you might have. Do you have any pets? Do you have funds saved up for an emergency medical care from a veterinarian? Do you have expensive equipment that you need to run your home business that would need to be replaced if it was broken or stolen?

Saving Money for Your Emergency Fund

If you are not good at saving money, the hardest part will be putting aside some money each month for your fund. You might look at cutting back on some non-essential expenses to help fund the emergency account. Here are some ideas:

1. Make Your Own Coffee

Instead of going to Starbucks every morning, make your own coffee and put that extra money you save into the emergency fund.

2. Cut the Cable Connection

Cable TV can cost more than $100 or more per month. Instead of spending money for a bunch of channels you probably don’t watch, quit cable. Get a Roku streaming device and pay only for channels you are interested in. You might buy a subscription to a service that shows classic movies. Also, many Roku channels are free with ads, like Crackle or TubiTV.

3. Buy Things on Sale

Don’t buy those shoes for full price – wait until they go on sale! Cut coupons for your groceries. Use a website like CamelCamelCamel to keep track of prices on Amazon. (Another trick with Amazon is to add something to your shopping cart and then select “save for later” so you can monitor the item and buy it when the price goes down.)

How Big Should Your Emergency Fund Be?

It’s really up to you how big your emergency fund should be. The important thing is to get started funding it. It might take a little bit of sacrifice, but in the long run, when the next big expense hits, you’ll be glad you have the extra funds.

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