Emergency Fund: How Much is Enough?
Well, that’s a highly debated topic. The answer is (as always), it DEPENDS. Before I get into how much is enough, let’s backtrack and talk a little about the purpose of an emergency fund.
Webster’s dictionary says that an emergency fund is “an unforeseen combination of circumstances or the resulting state that calls for immediate action.”
So, what kind of emergencies are we talking about?
Here are four common emergencies that come to mind:
This one is all too familiar to Americans in this economy. When you lose your job, what do you do? Most take out unemployment benefits.
You lose your income.
How many times have you heard people complaining about unexpected auto repairs? Things like transmission failures, blown head gaskets, and serious engine damage.
Unexpected car repair
Having lived with my parents for 22 years, I’m all too familiar with home repairs. Septic tanks, water heaters, plumbing leaks, upgrading windows, and air handler units come to mind.
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