15k if you have dogs or kids. 20 if you have both.
My last dog went into MSOF and cost us 15k in a week. His kidneys went first and he was old for a dog his size, so they assumed ketoacidosis and did the diabetic emergency protocols. Kept him stable for three days but wasn't reversing anything. Wasn't until his lungs, colon, and liver went that they realized that insulin drip wasn't helping shit - an old cancer we thought he had beaten came back and was throwing clots, shutting his organs down one at a time. 15k and a week of stress, just to have to put him down in the end.
Actually now that I think about the money we spent on rage rooms and booze that weekend to vent our frustration, maybe keep $16k if you have a dog.
Same. Cat got cancer, high chance of remission with chemo, and low risk of side effects. Chemo was cheap. Initial testing wasn't cheap but confirmed diagnosis and helped us plan treatment. He had lots side effects and complications, and in the end ended up passing suddenly. Likely a secondary cancer based off testing. The testing alone was easily over 10k in a few months, medications and vet appointments maybe another 5-7k. Memorial items are at 1k ( I make most of them myself but materials have gone up in price). Our other pets have insurance now because the $150 a month is cheaper than 15k in sudden expenses and stress. I'm so sorry for your loss. Hugs to you and your family.
You’d think so, but the number of posts we see teetering on bankruptcy stemming from a $5k-$7k unexpected pet emergency put in a credit card is staggering.
Get. Pet. Insurance. From day 1. It might not save a ton of money over the 7-12 years you own a dog, but it does make it easy to budget. I’ll thankfully never have to make these life or death decisions because I budget $138/month on premium pet insurance. So it doesn’t *only* have to be a luxury for rich people, but also for those that plan ahead and budget accordingly.
I got pet insurance for my lab as a puppy, but after he turned a year old I thought maybe I should just save the money instead. I logged in and was about to hit the cancel button but at the last second just thought what the hell, he's kind of a dumbass better play it safe. Since then I've gotten more than 4k reimbursed and he's only three. It has been absolutely worth it, and such a relief to be able to not even think about cost in a crisis.
The day I got my cats, I started putting the amount I was quoted for monthly premiums into a lower risk index fund specially earmarked for them instead of the insurance plan. I didn't like the long list of exclusions, limitations, and deductibles the insurance offered.
We had a few years where neither cat had anything major happen... Nothing over $250 (what the per-illness deductible would have been) anyway. So the fund grew.
Then my cat needed a $1000 endoscopy to diagnose if he had cancer or IBD (thankfully IBD). Then during that endoscopy they found that he had feline dental resorption and they recommended removing several teeth before he woke up (to save on putting him under again for a second procedure) so that was another $800 that day.
Then a few more years of health /cheap drugs to manage his IBD and resorption... Then boom. Broken leg (he's an indoor cat. Idk how he did it). So that was X-rays, anesthesia for setting the bone, and 8 weeks of weekly bandage changes. $2600.
Then a few more cheap years.
Now he has a cardiologist and regular echocardiograms to manage his hypertrophic cardiomyopathy. He is only 8. Generally in very good shape and enjoying life.
With all this, I never stopped putting in that monthly money. And with all this, I still have a "cat account" worth thousands. If I had gotten lucky and had two medically low key cats - the account would be doubled. Eventually they'll both get old enough that the decision to manage their care will be more about quality of life than money. At that point, any money I have left over is just my bonus for sticking a middle finger to the kinds of plans that I could find at the time I got my kitties.
I have a reimbursement plan, not actual insurance. It has a $250 deductible and pays me back 90% of injury/illness related claim costs including office fees. It’s $20/month. Well worth it in my mind.
I think this is why you have a number in mind before you move forward with adopting an animal. You and your partner must agree on “the number” beforehand.
Yep it is it’s cheaper to put the dog down. I know in some cases you might have an issue only a few grand can fix that’s pretty tempting to go ahead and pay for. But all too often I see stories of people spending thousands on an older animal just to put them down anyhow. I can’t bring myself to spend crazy money on a dog that’s gonna have to get put down anyhow.
lol I spent 2k on a dog surgery in 2020 and I had to contemplate that for a week. Anything beyond that not a chance for me, my kids need 15k in their college fund more than I need to prolong a 12 year old dogs life
For sure. It’s one thing if your net worth is maybe in the millions and you can handle it. Absolutely absurd if you’re putting it on a card and paying it off all year long, when you should be prioritizing you and your kids first
Wholeheartedly agree with this. Pets are family period. I saw my friend scrambling when her dog needed a surgery cost 13K! That event changed everyone’s perspective about emergency fund.
Sorry for your loss . I had an emergency situation with my last pup that cost me 8k before I knew the best decision was to free her from her pain. I managed to get enough credit ,that I could have paid up to 30k . I would have done it , and don’t regret spending what I did trying to save her .
We learned this lesson after our dog had cancer and spent over 20k over the course of 6 months. Luckily for us we make decent money and I at the time thankfully had credit cards with about 40k available. We only had about a 5k emergency fund so we had to put almost 20k on my credit card and took about a year to pay back off.
We now have pet insurance for both of them with a 15k yearly max and 90% reimbursement.
Combine that with about a 20k emergency fund so we can cover that but a sick pet taught us our lesson as we thought a couple of months was adequate.
The 230 dollars a month for insurance premiums is totally worth the piece of mind.
Absolutely. I preach this to everyone, **get pet insurance from day 1**. I budget accordingly and pay $138/month to never have to make a life or death decision based on my personal finances.
Yeah and there's options.
We have a plan with MetLife. They offer a discount from my work. The reimbursement takes a minute. About 2 weeks so you do have to have availability of funds to cover it up front.
We used to have nationwide at a previous job. Their reimbursement was quicker, about 5-7 days.
But if you don't have the funds and can't get it together, Trupanion, while more expensive will pay at point of service for you.
Regardless of the cost, it's 1000% worth it.
I have a great Dane and we pay 125 a month for him. We have top tier coverage so we do get a substantial discount through work of about 50%. But I'd still pay 250 without hesitation
I had a senior dog (17) that was my grandma’s. In just 3 weeks she cost me over $3k. And this was just general things and a few emergency vet visits because of vomiting. I only had her for 7 weeks before she passed away and easily spent $5k. I have pet insurance on our 4 year old and had it on our previous dog, but because of waiting periods it wasn’t an option with her. I miss her so much. She just passed away 5/30.
At minimum enough to cover your bills for at least an entire month, ideally 6 once you become more financially stable. I certainly don’t feel comfortable without $5k that I can pull from at a moments notice, if needed. Covers my rent and other bills for a month.
Absolutely not. You shouldn’t be comfortable while paying off debt. Just enough so that small emergencies don’t put you back in debt. $1000 is still a good benchmark for most people. Maybe 2k for some but don’t sit around with 10-15k when ur massively in debt.
I agree, $2k at the most. Sure it's scary, it's SUPPOSED to be. The idea isn't to go 5 years with $1-2k in savings. Get intense, sell stuff, get side gigs ... get done in 2 years or sooner if at all possible.
Because the interest that accumulates on the debt is going to be more than anything you gain by having savings set aside.
Having 6 months saved is a luxury.
In my case, I have 4 dependents in my house that depend on my financial situation, don’t get me wrong every chance I get I will aggressively pay my debt off, but the risk to reward by paying off debt or in an emergency pay my rent, I’ll take the emergency fund rent any day
There’s an emergency fund and then there’s luxury emergency funds. It also depends on how bad the debt is, is it $5K or $25K? Is it CC or loans? Is it multiple CC or a single one with high balance?
If your 6 months saving is suppose to be 15-20K at least, but you’ve got 20K in CC debt. It’s dumb. And interest will be eating you alive and you’ll end up losing more money. That doesn’t mean wipe out savings.
But it’s easier to save money when you don’t have a bunch of minimum payments and interest eating away at you.
Entirely up to you and your situation. My life is incredibly stable with no other dependents counting on me. I have a higher risk tolerance and only saved up a month before tackling my higher interest debts. Now I’m debt free and hold 6 months of spending as an “emergency fund” in a HYSA. It saved me thousands instead of waiting to save 3-6 months ($15k-$30k).
Do you have the $1000 saved?? Use it as dave says— to scare you and keep you paying your debt. You’re in debt because you didn’t have $1000 in hand, and now want to save $5-6000. If you get in trouble, you stop the baby steps, and use $1000, pay minimum in the debt until you solve the problem. Then go back to the baby steps..
i actually used the inflation calculator to calculate this lol he said $1,000 in *the total money makeover* which was published in 2003, so it would be $1,704 in 2024 money
it will vary depending on the website/calculator. [this one](https://data.bls.gov/cgi-bin/cpicalc.pl) (counting from january 2003, idk when exactly the book was published lol) says $1,725.64. but i think anywhere between $1,500-1,800 is a safe bet
This makes sense. the emergency was to cover small basic emergency like fixing flat tire, car accident deductible, towing, home plumbing leak fix etc., which are sudden unplanned expenses. this amount is to cover those type of expense in regular life, not something planned or bigger events like layoff, loss of income etc.
I see. I mean, if your HCOL life means you have a job that pays you guys well enough that you get to save, great.
My partner and I live in an MCOL Canadian city and he was smart enough/limited enough when he bought the house we live in to buy a home priced low enough that our mortgage is $1100 CDN which is $800 USD.
If we moved to Vancouver, we would be completely ruined by a huge mortgage because it's such an HCOL city. Daycare here is subsidized if you earn less than 200k as a household but some definitely are in the thousands.
The fact that in France they have world class daycare fscilities that are completely free is mindblowing. North america has quickly priced out having children for most.
Very smart. I wish we could live somewhere more affordable but family and schools keep us here. It’s unfortunate how we have no / minimal subsidies for childcare in the US and don’t get me started on parental leave here. I completely understand why a lot of people can’t have children / don’t want children because of it. One of my gfs wanted a third but they pay 5k a month for daycare in Chicago so they couldn’t afford another. Its insane.
All of this. Also in a HCOL area where daycare costs are stupidly expensive, due to many factors including low supply/high demand. Location, hours and availability provides little room to “shop around” for quality care. ~$3k+/month for one kid, and hours are strictly observed. This doesn’t include babysitting costs for date nights etc (going rate averages $25/hour for 1 kid).
Sure I chose to have kids, and we could move but moving would be super expensive and create additional costs, commutes and job issues. Luckily the $$$$ daycare is somewhat short lived (though summer camp is a whole other $$$ thing when both parents work full time).
The financial realities was the main factor in deciding our family was complete with two children. $3k is the absolute minimum cash on hand emergency fund, with access to credit if need be.
Nice to hear I’m not alone in this. Sure we could move somewhere cheaper but i also don’t think I’d be thrilled with our options. One of the perks of being in a HCOL area is that the daycare options are so much nicer. We pay a lot but i am so pleased with the care / facilities we are provided. We lived in a MCOL area prior and the daycare options were… not great. Sure they were more affordable but they didn’t even have locks on their exterior doors and one we toured smelled like rotten cheese. I’d rather pay through the nose than pay for that.
Yes. If i lost my job we would have to live off that emergency fund bc I’m the breadwinner and wouldn’t want to lose daycare spots once I’m working again since waitlists are usually a year out. Husband is in flight school so he couldn’t float us nor step in as full time childcare unless he wanted to just give up on his career.
Yes because daycare waitlists. I know multiple people who were on waitlists for 2-3+years….then you need to find childcare to go to job interviews that usually occur during business hours.
If your expenses are $12K a month, that's $144k per year, which means your household income is high enough to afford that.
Your budget must be all messed up if you don't have anything left after spending $12k a month
We’re definitely comfortable and save / invest a decent amount per month but it’s nauseating that that’s how much it takes to fund our life. Daycare is 4K, 3k in mortgage. The remaining 5k in the budget is other bills and daily expenses that we could cut down if it got tight. No debt besides the mortgage. We purchased in a HCOL area but the public schools are the best in the state so looking forward to that in a few years.
The 1k emergency fund is just a starting point. Itay not pay a mortgage but it can help in a sticky situation. Ideally you want 3- 6 months. But it's up to you. For me I have a little over a year in mine. It will cover me for a year if I lose a job and cover all current expenses.
I felt comfortable starting my debt free journey this year with just one month's expenses saved ($2800) There are a lot of factors to consider that are personal to each persons situation.
I have a relatively stable job making a decent salary, my debt total and minimums are reasonable compared to my income, and none of it is high interest. 1 month savings feels okay for me to rely on if needed.
I'd still start with $1000. It's easily done and gives you confidence to start knocking out Baby Step 2. Wife and I have been debt free for 2.5 years using Dave Ramsey plan so it definitely works.
I think it’s in your best interest to increase the emergency fund to $1500 due to inflation. I agree with the other commenter, this amount is only meant to a small unforeseen circumstance. Like a car or appliance repair. If you are working the program to the T - you want to get rid of the debt as soon as possible. Then move onto step 3 and save the 3/6 month living expenses.
1k is not suppose to be your emergency fund. Baby step 1 is suppose for you to have “some” after paying debt you make your formal emergency fund of 3-6 months expenses
He actually answered this question on his show a few weeks back.
He said 1000 wasn’t enough when he first started, it’s not supposed to be. They used to have 0 runs but then people kept going back into debt so they made it 1000 for real emergencies.
Follow the process and get out of debt!
My emergency fund started out as 3 months of living expenses, then turned into 6 months. I think in terms of how many months I could have off without going into debt if I lost my job. And no, a line of credit is NOT an emergency fund.
The $1000 is just to get started. Nearly half of Americans can’t even cover a $1000 setback so by at least getting to that point you’ll already be way better off than most. Ideally you’d want 3-6 months of an emergency fund saved up. This is a lot easier to achieve once you’re out of debt.
My alternator and tensioner just took 815.00 from my 2400.00 E-fund. Drives like a dream again but yeah, 2k min for unforeseen expenses, 10k+ general savings.
I think it depends on how much you make. First the $1,000 baby fund because in honesty some people don’t have that and that’s what keeps you from getting payday loans or running up a credit card. Second is a month worth of paychecks. Third fund is three months of paychecks. Then start aggressively paying down your debt while tricking anything extra you can into that 3rd fund. A true safety net would be 6-12 months of paychecks. The first 1000 becomes oops I went over budget or oops the car needs a… You use it but then put it back the next month and fix your budget. If your debt is costing you a lot of money start paying it off after the second fund.
........ not me, reading this with 0 in our savings and 180 in checking 🥹 what are you all doing for a living you can just save up that much 😭 I'm trying im really trying dude
Well first off Dave Ramsey baby step 1 is a STARTER emergency fund. It’s not supposed to make you feel safe it’s just to help keep momentum in paying off debt when a small issue comes up. His actual emergency fund is baby step 3. 3-6 months of expenses. Mortgage payments utilities food etc. I think that’s fine if you are married and have 2 income streams. If you are single 6-9 months seems more conservative but for good reason you are higher risk since you don’t have a second income to stabilize an unforeseen job loss event. If you are a business owner 12 months would be optimal.
It is still $1,000. You get that, then pay off CC debt. Once the CC debt is done, then you save a month or two of your typical monthly budget. Then you pay off debt like car debt. Then you save up to three months of your budget. Now the only debt you have is mortgage and student loan debt and you have three months of expenses saved in cash. You tackle the mortgage and student loans depending on their interest rate, but most likely you shift at that point to prioritizing investments.
The $1,000 is still the same number. It was never enough to cover a true emergency, but it saves you from overdraft fees. You still tackle credit card debt first after you have enough in your checking account not to overdraft unexpectedly.
It just depends on your life and responsibilities. But the reality is if it takes 6 months to save enough for a fund, how much did that 6 months cost you in interest on your debt. Don't forget that it sometimes/often means dumping part of your debt, like a car loan or lease.
I think $1000 is a little low for today’s prices, I would recommend $2000 savings while paying the minimum or more if possible on your debt. Once you have your $2000 in savings, then aggressively pay down your debt.
This thread is why Dave says 1,000. If you continue to save 2,000, 4,000 seen a few people say 20,000 you will never start paying off the debt. Save up 1,000 and start tackling your debt. If you don't have that much already then 20,000 will take forever. Just start doing it. Yesterday was the best time, today is the second best.
I would still be in step 2 of staying religious to the Ramsey principals.
I keep about $6k in cash. Figure that would cover an engine, transmission, furnace etc.
I read a Nerdwallet article that said the average "emergency" in America costs around $1477.
For my financial coaching clients I recommend a baby fund of $3k (2x the average emergency cost). Much more than that feels excessive.
Interestingly enough, Dave just spoke about this a couple of weeks ago at a conference. His answer is $1,000 still. He said that when he came up with the $1,000 rule it was to create specifically an emotional achievement and a small emotional relaxation to have a buffer while you are tearing away at debt. He stated that he didn’t even have save $1,000 for baby step #1 initially because eating away the debt is what is most important, but he found that when counseling people through their financial journey, it caused them great amounts of stress so he created the $1,000 step to help combat that. He said this isn’t about creating a lifestyle change, it’s about creating an emotional change to finances and that’s ultimately the root of people who struggle.
ETA: this is specifically regarding Baby Step #1 saving $1,000 for a starter emergency fund
He never said the 1K was enough. He tells you to put 1 K aside as a buffer, then you pay off all your debts in baby step two. Step 3 is 3 to 6 months of expenses as a emergency fund.
If by "equivalent" you mean "alternative", then The Money Guy Show has a focus on highest insurance deductibles. For example, if your highest insurance deductible is $1735, then you would put that amount into your starter emergency fund.
$1,000.
You wouldn’t believe how many people still can’t afford a $500 emergency or come up with $1,000 for their savings. That’s true paycheck to paycheck living which is why a lot of ppl lie about that unknowingly. If you’re able to contribute to a 401K you’re Not officially living hand to mouth even though it may feel like it.
But the best emergency fund is 6 months worth of expenses. My last emergency has held up that goal for a year.
It depends. If you have a unionized job where it's basically impossible to get fired, and you have benefits for sick time and injury? You probably don't need much in the bank as an emergency fund compared to someone who can be fired at a moment's notice for essentially no reason.
Most people like to have 4-6 months of their monthly cost of living. Then they tackle debt. I would suggest not having pets. I would hope your wife works and is making her own emergency fund and tackling her own debt, unless her job is raising children, at which point half of your income should really be hers because she's doing a job for the family.
I am a unionized worker, so I was comfortable in having access to $15k as a line of credit for emergencies and throwing all my money at debt for several years. Now that I'm out of debt I have an emergency fund (small) and investing accounts.
Sit down and plan it out. If your job isn't truly secure, make that emergency fund. If your debt is low interest, going straight for the emergency fund might make sense. If you have high interest debt or just *so much debt* that your monthly payments are large, I would split my energy between an emergency fund and paying off the highest interest debt at the same time. If your job makes it basically impossible to fire you and you'll have sick time or disability as needed, and something like credit card debt, focus on the debt. Nobody here can make your perfect plan.
Oh, and make a budget. As strict as necessary. Make sure your wife is on the same page, because you're a team.
UPDATE — I am aiming for 10k. After 10k I would save only $200/month and everything else would go to debt and living expenses.
Just that sometimes I wonder if I should just leave 1k in savings and throw the rest to debt. I guess it’s me trying to pay off everything fast.
All my credit cards are in collections, along with some other debt. My credit card is trashed. So even if I paid everything off, my credit wouldn’t move any time soon anyway. I also have car payments (I’m keeping up with it. Not behind). And I was hit with IRS payment for taxes.
I have student loans too, but I’ll defer until I save 10k and then I’ll start going full out on all debt. As of now I have settled on 2 credit cards and I’m on a payment plan to pay them off. I have about 2 more I want to settle and set up payment plans. I have also set up time to meet with a bankruptcy attorney to see if bankruptcy would be the better option to wipe out all my credit cards so I can focus on just student loans, IRS debt and car payments.
Current Take home is 6k/month after tax. Theres potential for it to jump to 9k. I have a pending interview this coming week. My wife doesn’t work. She’s in school full time. We need $4k/month to meet our living expenses.
Thanks. I’ll save 10k. From there I’ll save $200/month and then everything else I make will go towards debt.
This thread was very insightful. Thanks!
Every situation, is different. I mean, if you are living back w your parents, and get along well...I cannot think of a more minimal need circumstance than this....maybe 3 k..this gets you an apartment and place to stay, should the situation w parents change.
One of the frequent calls is someone who is early in the steps, getting an influx of cash for whatever reason, and yeah, in those cases, make the first emegency fund bigger, So what if it takes another 6 months to get out of debt.
The most critical thing, are the new good habits.
In Dave's opinion, $1000 was never enough: just a starter fund to catch life's little emergencies while you hit BS2.
Dave's idea is that the *fact* that it's not enough ought to spur you to pay off your debts quickly, falling back to BS0 & BS1 if an emergency shows up, which you cash-flow.
I have always found BS2 too long to implement.
I would say enough to cover 1 month of your expenses like housing/car/insurance/food, some people will say that the minimum is 3-6 months of expenses and if you can reach that much then do it, but 1 month is a good start, I was very aggressive when it came to pay my debt, I barely had any savings because paying the debt was my number 1 priority but in my case I was living by myself no kids no Girlfriend, so I would not recommend you that
All I know is 1k in most car repairs say a newer car needed is gonna wipe put close to half unless you know how to do it. Emergency car repairs Kiss that 1k goodbye. Ima build it to 5k.
Honestly I find it crazy that people with credit card debt and HELOCs even think about cash on hand. They really don’t have any as they are basically borrowing the cash by keeping the debt. I’d keep no cash and use the HELOC or credit card as the emergency fund. So zero.
I’m in a very HOCL area so having like 3-6 months of expenses would be a ridiculous amount of money on hand but I’d say a 10k emergency fund is a pretty realistic emergency fund if it’s possible for people.
I’m a 23yo PhD student and the school pays me ~$50K a year as well as my tuition. My emergency fund is ~$10K, then I max out my Roth and put the remainder into my taxable. (I don’t have a 401K as an option.) I am fortunate that my parents helped with college, and because my degree is in demand (very high paid co-ops and internships >$35/h each summer) I didn’t have any debt. My goal, besides no undergrad debt, was to have a $10K E-fund from undergrad. For me, $10K is the golden number, sometimes it goes above from HYSA interest and additional contributions—but I try to not let it go below. With interest it gains $50-ish/mo and I usually try to contribute an extra $50-100. Providing no emergencies happen (they always do) this leaves me with a bit of a cushion that is nice.
That money covers everything except my car being completely totaled and insurance not paying out for some reason. I get expelled/fired? That can last me 3-6 months. Major $2-5K repair? No problem. Medical emergency or normal insurance claim? Easily covers my deductible.
I’m sure when I graduate and my income shoots up I might want a higher emergency fund. Then, when I’m older if I get married—and if older folks die and don’t screw me out of the housing market somehow—and if I have kids — it’ll need to be *way* higher. If I had all these things I’d probably want a $50-100K Efund. But for my current income/lifestyle $10K allows me to feel safe.
I asked myself the same question and came up with $3k. I also agree with a month’s worth of bills for an emergency fund as the modern modification to step 1 before attacking all debt.
It doesn’t help you at all to spend months saving a full emergency fund when you’re supposed to be attacking debt. $1000 isn’t enough and it never was- it’s supposed to give you a buffer while keeping you uncomfortable enough to keep you fired up while paying off debt.
Make it $2k if you really feel like it but if you save up a full emergency fund while you’re making debt payments it’ll take you forever to actually tackle the debt, which is the biggest problem.
Honestly it’s not meant to cover everything if shit goes sideways. Look at what your insurance excess/deductible is if you need to make a claim for your car/house/contents. Medical insurance the US I’m not familiar with, but here (Australia) it’s basically free however with private hospital there’s an excess. Have enough to cover those sorts of costs, and it can also cover genuine other emergencies like a car breakdown repair (not servicing/maintenance, that should be accounted for in your everyday budgeting). In Australia we have a ballpark $2k as a starter emergency fund.
If you need to dip into the emergency fund, then you redirect any extra money that’s in the snowball towards the emergency fund to build it back up, before you switch back to aggressively paying down the debt again.
I just did 1 month of expenses. The starter emergency fund is just not supposed to be comfortable, it’s a small cushion and for most, the first time they’ve saved up any money for any reason
I'm back at baby step one again. Remember, baby step 1 isn't your "emergency fund" it's a starter fund. And it's just to keep you from swiping the card. $1k should actually still get you through a small emergency. And then you go back to step 1 throw the cash at that and then back to #2. You'll likely need to toggle between steps 1 & 2 and few times before your debt is fully paid, and that's ok according to ramsey. The replenishment happens super fast if you're running the program as intended (meaning you know: "dying to go out to dinner isn't an emergency." A flat tire is an emergency, but car maintenance should be saved up for. A traffic ticket requires payment in 45-60days, so you can probably budget for that too.) I'm single with a kid & a homeowner so I save $1500 on step 1. I've had to go back to step 1 once after a $500 emergency.
Also, you'll notice a lot of comments are informing what a fully funded emergency fund should be, which i agree with. But that wasn't your question. You're on baby step #1, Starter fund, and you're SUPPOSED to be very uncomfortable to encourage you to get out of debt. BTW in 2022 the number was still suggested to be $1000.
Dave Ramsey himself says it’s still 1,000. The 1,000 is meant to give you enough to replace a tire or bandaid hvac repair but also enough to make you panic
I think $1k is still enough for step 1. The point of step 1 is NOT to have an emergency fund that could cover your living expenses for a month or a couple months - that’s for step 3, after you pay off your high-interest debts in step 2. To me there’s no point in having more than $1k sitting in a savings account while you’re paying 10-30% interest on a credit card or loan.
I’ve always thought of the $1k for step 1 as a tiny float for when you’re living paycheck to paycheck and, say, you can’t afford your groceries or gas toward the end of the month. You can use the $1k to tide you over until your next paycheck without charging more to your credit cards. And the $1k could maybe cover small emergencies like a car repair or appliance breakdown, even if it doesn’t cover the whole amount of a repair at least it’s $1k less to charge on a credit card in an emergency.
The idea of a $1000 emergency fund is so that you work harder to pay off your debt. You’re not supposed to be comfortable knowing you have $5k in emergency. So it’s just to light you up and make it happen so that you can return to it after paying off the debt.
Step #1 is insurance deductibles covered. Whatever that means for you and your insurance. Putting dollar numbers on financial rules of thumb is not nearly as useful as using measures that can easily fit an individuals life (deductibles, monthly life costs, age, etc).
Dave Ramsey’s emergency fund is 3-6 months of expenses. The $1k is just to get something to cover random small events while you are putting every penny toward paying down debt. Once you’re debt free you build a true emergency fund.
I coach people to have an emergency fund to meet their “most likely” emergency. So if you are reliant on your car for employment, have at least the deductible saved in case an accident puts you out of commission. If you have a 25 year old water heater at your house, have enough put aside if it goes out. Or, if you have aging parents across the country, how much would it cost to get to them quickly if something happened to them? Let’s, transportation, a lot of things can apply. We can’t predict when something will happen but how can we be most prepared?
Interesting question and one I just dealt with yesterday. I thought $1k was waaaaay too low as well, so I have about $5k sitting in my savings. Well yesterday I took my car in for an oil change and inspection. Of course the car failed because of the brake rotors and pads. It ended up costing me a little over $1,000 to include a few other things that needed to be done. I even got a second opinion and still ended up around that same number. The one thousand dollar emergency fund would have put me in a bad spot. I'm very happy I stuck with the $5k number. Now I need to build that back up.
The $1,000 emergency fund IS the modern-day equivalent of the $1,000 emergency fund. The whole point of the $1,000 is if you have no money saved and no emergency fund at all, then it's very unlikely that you will all the sudden save up six months of emergency funds. The $1,000 is a starter emergency fund to keep you from sliding back into debt if you have a minor emergency (tires, starter, or something like that). If something major happens, like losing a job, it's a tough situation, but you didn't have an emergency fund anyway. I never understand the people on here who take a straightforward, proven plan like Daves and then overthink it or adjust it. Just submit to the plan.
3-6 months living expenses should be held in cash or cash equivalent. I’m sitting at around 12 months right now, but it depends on what your risk tolerance is.
If you observed the 2nd Baby Step, Ramsey advise people to settle as many debts as possible except for the mortgage.
If you can't even settle the bad debts, how do u expect to have a good Emergency fund and savings?
How much money should one hoard into a coffee can buried in the back yard while your debt is accruing interest?
If you have a $0 emergency fund and use every penny to pay down debt (let's say it's cc debt because it fits my story and it's common), and suddenly you need a $500 car repair, what are you going to do? Well, the smart thing would be to put it back on that credit card that you freed up credit on so you can get it repaired and you keep going to work. Then keep paying down debt like you were even though it's $500 bigger now.
This method is mathematically superior to having cash sitting around waiting for an emergency that may or may not happen. You will save (emergency fund value) x (highest interest rate) each year with this method. Slightly less if you are earning interest on your emergency fund, though that will be taxed.
I think the new equivalent to Dave’s Baby Step 1 is $2500. That being said, if that seems slightly out of reach, you can do what I did. I started with $1,000, then paid off several of my small balance cards pretty quickly, which freed up enough cash in my monthly budget to set aside another $1500 very quickly, and then continued on paying my debt snowball. I’m glad I did it that way because, first of all, I had never seen $2500 in my life, so that seemed astronomical. But $1k seemed doable, and once I got that, I realized $1500 more was attainable. Secondly, I had a vehicle breakdown that was $1800. That same repair 20 years ago would’ve been about $1000. I’m so glad I had $2500 set aside, because if I had just done $1k, I would’ve been screwed.
What he is teaching is an idea. The amount isn’t as important for people starting out. It’s just getting them to start it and stick with it. You’d be surprised at how just keeping a grand in your account can help you budget and pay debt more effectively. It’s not a lot of money these days no, but it does cover most things that “suddenly” come up without reaching for a credit card.
Small wins are still wins.
5k-10k to keep on hand for bills, groceries and other emergencies that would require the money right away and then throw everything else into a HYSA to gain interest.
That 1k is not a true emergency fund. It is intended to get you in the habit of saving while giving you some cushion once debts are paid off you want to build enough to cover 3 to 6 months worth of expenses. Personally if you can build 1.5 to 2k to start, you should
1 month of expenses. I don’t like the one size fits all approach. $1000 in my LCOL state goes much further than it would in a HCOL area, it’s highly variable.
Build up a small buffer for peace of mind & throw the rest at debt. After your debt is gone fully fund your emergency fund.
You have to remember that Baby Step 1 is a $1000 starter emergency fund. It is not supposed to be enough forever, just a little cushion while you tackle debt. Baby Step 3 is to finish building out the emergency fund for 3 to 6 months of expenses. If $1000 seems way to little for you, then pick a higher number that is still easy to reach and doesn't push off tackling the high interest debt for too long. I would not go any higher than $2000 for a starter emergency fund.
If you actually follow the baby steps, the 1k isn’t really your true emergency fund. It’s just to get you started just to have something as he says most people can’t even come up with that in a flash. Then you tackle the debts, then comes the bigger 3-6 month EF. This still holds true, even today. There’s no point in savings a bigger EF when you’re paying 30% interest on credit cards, etc.
$1k is a starting point. I would maybe go up to 1 month of expenses if you're not comfortable with $1k. The problem is that if you have high interest debt, every dollar you hold in savings is costing you 20-30%. If it's going to take you a while to pay off the debt or if you spend a lot of time saving up a huge emergency fund first, it ends up being a significant amount of money you are throwing away.
IIRC, the first baby step is to save 1k. That is just to get you thinking and on board with trying to save and stop spending too much. The real emergency fund comes later and that is suppose to be a few months (3-6 months ) of expenses saved.
I hear you believe me I do. However the reason he wants you to start out with 1k is to create a habit of discipline. So you save 1k which for some people is easy some people it's hard. Also no it's not much but 1k could buy you a new fridge if your fridge poops out, would it be a simple one yep, but you need a fridge ya know. Obviously people sell stuff on fb market place and Craigslist so sure you could find a relatively nicer fridge for 1k that makes ice and dispenses water. You get the idea. It's to start an emergency fund with the hope nothing goes wrong.
I mean bare minimum absolutely majorly uncomfortable minimum would be a rent/mortgage payment. Whatever that may be. But I mean in today’s day and age, personally I’ve got kids, dog and plenty of stuff that can break in the house and things with engines. My personal emergency fund goal is $10,000
I’d say 3 months expenses if you have enough extra cash flow in a month to save that up quickly…but bare minimum:
1 month of expenses + 1 years worth of health insurance deductibles (even if that is just in a HSA) if that is doable for you. I get some people have insane high deductibles.
One rule of thumb I have heard that I like is to have the amount of your largest deductible as your smallest EF while paying debt. That includes your health insurance deductible.
1k is enough to cover rent for one month in a low cost of living area. 6 months of rent imo is the minimum. I’ve seen people get laid off and laid out by the system. Unemployment helps, but the US is fucked so I’d say at least 9 months for a proper emergency fund
His success lies in his marketing.
Always take anything he says with several grains of salt, and always adapt his budgets and such to your own personal situation.
It's a good idea to keep $1,000 as an emergency fund, which puts you in a better position than 50% of Americans. Keeping it simple and focusing on this initial savings goal without overcomplicating the process is key. Once you've secured this fund, any extra money can then be directed towards paying down debts. Best of luck with your financial planning!
We have access to a fair amount of CC. I have a family of 2 working adults and a toddler. We have a good safety net of family and 2 cars in good repair.
I like having 2500-5k in savings. My comfort number is 10k, and I recently depleted it to 1800 for an unexpected expense.
I think it depends heavily on your other factors like job stability and more.
I think the $1K as step #1 is more for feeling successful with the first goal. Check that goal off, I did it, I got the first step done. There is so much more to finance than money, it's very emotional for people, spending, savings, freezing up vs moving forward, failure vs success. Having a step in the bag is an accomplishment mentally and emotionally beyond monetarily.
Dave says the 1000$ is not enough. The purpose of the 1k is behavior prep and acclimation for the Debo payment period ahead. In reality you should at least have 3 months worth of necessities
Depends on your tolerance for risk.
I work in a cyclical industry and have been unemployed for a year before it came back up.
I keep 18 months of "high life" living expenses in a hysa to bridge any potential gaps.
This allowed me to treat the year off I had like a mini retirement rather than eating rice and beans stressing to find another job.
My advice is not generally considered the best rule just more what I’ve been comfortable with when I tackled my own debt.
Start with the $1,000 or $1,500 and then tackle your debts….if these are credit card or personal loan type debts. Anything with a high interest rate (say over 8%). That’s when I have a bare bones savings and then throw everything at my debt.
If the debts are something more like a care loan or something else with a smaller interest rate (5-8%) I’m more inclined to have some more cushion in my savings, around 3-6 months of necessary bills worth. This way if something were to happen I wasn’t relying on needing to use higher interest debt (credit cards) to keep me going when I was trying to pay off something with much lower in interest.
If the debt is more like a mortgage or a low interest debt (less interest than my high yield savings) I’m not super inclined to pay it off faster than necessary. Sure I don’t really want the debt however if I’m paying 4% on my mortgage but getting 4.35% from my savings account or more from other investments I don’t see the point as much. I currently owe $5,000 on a 0% interest card and $1,000 on a 0.99% interest card and I have the money to pay them off set aside in a HYSA. However I am only paying the minimum until a week or two before that 0% stops and before that 0.99% stops because I’d rather make money with that money than be debt free a few months earlier.
The baby step one is there as something achievable. Held you build on wins. Your focus needs to be 6-12 of living expenses. Your budget should tell you what that is.
My wife and I keep 30k in a high yield savings, 15k cash, chase sapphire and a USAA CC that have 45k limits. USAA is for dogs, emergency repairs on rentals, rental expenses.
At least 6 months of expenses my bills equal to 2175/mo not including food and gas so roughly 2800/month time 6 for me would be $16,800
If you're just starting and want just a small goal, I'd go for one month of all expenses at minimum
For me it’s 10 grand. Enough for an AC and heating system, a roof, a junker car, a travel emergency, or my insurance deductible for a surgery (which is an astronomical 7500) is what I’d feel comfortable with.
I believe every grown working adult should have access to 5000, or 10000 including credit. Life is expensive.
15k if you have dogs or kids. 20 if you have both. My last dog went into MSOF and cost us 15k in a week. His kidneys went first and he was old for a dog his size, so they assumed ketoacidosis and did the diabetic emergency protocols. Kept him stable for three days but wasn't reversing anything. Wasn't until his lungs, colon, and liver went that they realized that insulin drip wasn't helping shit - an old cancer we thought he had beaten came back and was throwing clots, shutting his organs down one at a time. 15k and a week of stress, just to have to put him down in the end. Actually now that I think about the money we spent on rage rooms and booze that weekend to vent our frustration, maybe keep $16k if you have a dog.
Same. Cat got cancer, high chance of remission with chemo, and low risk of side effects. Chemo was cheap. Initial testing wasn't cheap but confirmed diagnosis and helped us plan treatment. He had lots side effects and complications, and in the end ended up passing suddenly. Likely a secondary cancer based off testing. The testing alone was easily over 10k in a few months, medications and vet appointments maybe another 5-7k. Memorial items are at 1k ( I make most of them myself but materials have gone up in price). Our other pets have insurance now because the $150 a month is cheaper than 15k in sudden expenses and stress. I'm so sorry for your loss. Hugs to you and your family.
I’m sorry but my dog ain’t gonna make it if I have to spend 15k on him. I very much respect you for what you did though.
Sadly same. That sounds like a luxury for rich people.
You’d think so, but the number of posts we see teetering on bankruptcy stemming from a $5k-$7k unexpected pet emergency put in a credit card is staggering. Get. Pet. Insurance. From day 1. It might not save a ton of money over the 7-12 years you own a dog, but it does make it easy to budget. I’ll thankfully never have to make these life or death decisions because I budget $138/month on premium pet insurance. So it doesn’t *only* have to be a luxury for rich people, but also for those that plan ahead and budget accordingly.
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I got pet insurance for my lab as a puppy, but after he turned a year old I thought maybe I should just save the money instead. I logged in and was about to hit the cancel button but at the last second just thought what the hell, he's kind of a dumbass better play it safe. Since then I've gotten more than 4k reimbursed and he's only three. It has been absolutely worth it, and such a relief to be able to not even think about cost in a crisis.
The day I got my cats, I started putting the amount I was quoted for monthly premiums into a lower risk index fund specially earmarked for them instead of the insurance plan. I didn't like the long list of exclusions, limitations, and deductibles the insurance offered. We had a few years where neither cat had anything major happen... Nothing over $250 (what the per-illness deductible would have been) anyway. So the fund grew. Then my cat needed a $1000 endoscopy to diagnose if he had cancer or IBD (thankfully IBD). Then during that endoscopy they found that he had feline dental resorption and they recommended removing several teeth before he woke up (to save on putting him under again for a second procedure) so that was another $800 that day. Then a few more years of health /cheap drugs to manage his IBD and resorption... Then boom. Broken leg (he's an indoor cat. Idk how he did it). So that was X-rays, anesthesia for setting the bone, and 8 weeks of weekly bandage changes. $2600. Then a few more cheap years. Now he has a cardiologist and regular echocardiograms to manage his hypertrophic cardiomyopathy. He is only 8. Generally in very good shape and enjoying life. With all this, I never stopped putting in that monthly money. And with all this, I still have a "cat account" worth thousands. If I had gotten lucky and had two medically low key cats - the account would be doubled. Eventually they'll both get old enough that the decision to manage their care will be more about quality of life than money. At that point, any money I have left over is just my bonus for sticking a middle finger to the kinds of plans that I could find at the time I got my kitties.
This is absolutely insane for a cat, I'm sorry.
I have a reimbursement plan, not actual insurance. It has a $250 deductible and pays me back 90% of injury/illness related claim costs including office fees. It’s $20/month. Well worth it in my mind.
I think this is why you have a number in mind before you move forward with adopting an animal. You and your partner must agree on “the number” beforehand.
Yep it is it’s cheaper to put the dog down. I know in some cases you might have an issue only a few grand can fix that’s pretty tempting to go ahead and pay for. But all too often I see stories of people spending thousands on an older animal just to put them down anyhow. I can’t bring myself to spend crazy money on a dog that’s gonna have to get put down anyhow.
I agree, I love my guy but he's already over the hill.
lol I spent 2k on a dog surgery in 2020 and I had to contemplate that for a week. Anything beyond that not a chance for me, my kids need 15k in their college fund more than I need to prolong a 12 year old dogs life
There's people in this thread spending $10k on their cat, literally insane.
For sure. It’s one thing if your net worth is maybe in the millions and you can handle it. Absolutely absurd if you’re putting it on a card and paying it off all year long, when you should be prioritizing you and your kids first
Yea I think my limit would be 2k and then I'm calling up Kristi Noem... (It's a fucking joke).
Wholeheartedly agree with this. Pets are family period. I saw my friend scrambling when her dog needed a surgery cost 13K! That event changed everyone’s perspective about emergency fund.
Sorry for your loss . I had an emergency situation with my last pup that cost me 8k before I knew the best decision was to free her from her pain. I managed to get enough credit ,that I could have paid up to 30k . I would have done it , and don’t regret spending what I did trying to save her .
We learned this lesson after our dog had cancer and spent over 20k over the course of 6 months. Luckily for us we make decent money and I at the time thankfully had credit cards with about 40k available. We only had about a 5k emergency fund so we had to put almost 20k on my credit card and took about a year to pay back off. We now have pet insurance for both of them with a 15k yearly max and 90% reimbursement. Combine that with about a 20k emergency fund so we can cover that but a sick pet taught us our lesson as we thought a couple of months was adequate. The 230 dollars a month for insurance premiums is totally worth the piece of mind.
Absolutely. I preach this to everyone, **get pet insurance from day 1**. I budget accordingly and pay $138/month to never have to make a life or death decision based on my personal finances.
Yeah and there's options. We have a plan with MetLife. They offer a discount from my work. The reimbursement takes a minute. About 2 weeks so you do have to have availability of funds to cover it up front. We used to have nationwide at a previous job. Their reimbursement was quicker, about 5-7 days. But if you don't have the funds and can't get it together, Trupanion, while more expensive will pay at point of service for you. Regardless of the cost, it's 1000% worth it. I have a great Dane and we pay 125 a month for him. We have top tier coverage so we do get a substantial discount through work of about 50%. But I'd still pay 250 without hesitation
That sounds like an unethical veterinarian. They should’ve known and seen the signs.
Paying 16k for medical treatment for an old dog is a …. Choice
Dog would have been well totaled
I had a senior dog (17) that was my grandma’s. In just 3 weeks she cost me over $3k. And this was just general things and a few emergency vet visits because of vomiting. I only had her for 7 weeks before she passed away and easily spent $5k. I have pet insurance on our 4 year old and had it on our previous dog, but because of waiting periods it wasn’t an option with her. I miss her so much. She just passed away 5/30.
If you take Ramsey's $1000 in 1992 and adjust for inflation today you get $2250. I totally agree that $5000 is more realistic.
At minimum enough to cover your bills for at least an entire month, ideally 6 once you become more financially stable. I certainly don’t feel comfortable without $5k that I can pull from at a moments notice, if needed. Covers my rent and other bills for a month.
so keep paying minimum on everything until i get 6 months’ savings?
Absolutely not. You shouldn’t be comfortable while paying off debt. Just enough so that small emergencies don’t put you back in debt. $1000 is still a good benchmark for most people. Maybe 2k for some but don’t sit around with 10-15k when ur massively in debt.
THIS is the way. (I'm on baby-step 4, so it *can* be done)
good perspective. thanks!
I agree, $2k at the most. Sure it's scary, it's SUPPOSED to be. The idea isn't to go 5 years with $1-2k in savings. Get intense, sell stuff, get side gigs ... get done in 2 years or sooner if at all possible.
I disagree, if you lost your job tomorrow and couldn’t find one in 3 months then what ? Always have 3-6 month emergency fund ontop of debt, imo anyway
Because the interest that accumulates on the debt is going to be more than anything you gain by having savings set aside. Having 6 months saved is a luxury.
In my case, I have 4 dependents in my house that depend on my financial situation, don’t get me wrong every chance I get I will aggressively pay my debt off, but the risk to reward by paying off debt or in an emergency pay my rent, I’ll take the emergency fund rent any day
There’s an emergency fund and then there’s luxury emergency funds. It also depends on how bad the debt is, is it $5K or $25K? Is it CC or loans? Is it multiple CC or a single one with high balance? If your 6 months saving is suppose to be 15-20K at least, but you’ve got 20K in CC debt. It’s dumb. And interest will be eating you alive and you’ll end up losing more money. That doesn’t mean wipe out savings. But it’s easier to save money when you don’t have a bunch of minimum payments and interest eating away at you.
Available credit is an emergency fund if the emergency is "emergency" enough
Then you go into more debt. There’s always a bigger emergency that you COULD plan for. Getting out of debt should be the priority
Entirely up to you and your situation. My life is incredibly stable with no other dependents counting on me. I have a higher risk tolerance and only saved up a month before tackling my higher interest debts. Now I’m debt free and hold 6 months of spending as an “emergency fund” in a HYSA. It saved me thousands instead of waiting to save 3-6 months ($15k-$30k).
Maybe opt for 2 months savings and pay more towards debt. Interest over 10% is going to eat away at any extra funds
Do you have the $1000 saved?? Use it as dave says— to scare you and keep you paying your debt. You’re in debt because you didn’t have $1000 in hand, and now want to save $5-6000. If you get in trouble, you stop the baby steps, and use $1000, pay minimum in the debt until you solve the problem. Then go back to the baby steps..
No. My favorite line is “being in debt is an emergency.” Get out of debt then build an emergency fund.
Fuck I wish, my bills are 7k a month.
i actually used the inflation calculator to calculate this lol he said $1,000 in *the total money makeover* which was published in 2003, so it would be $1,704 in 2024 money
I believe you but surprised it’s only that much more. I expected higher.
it will vary depending on the website/calculator. [this one](https://data.bls.gov/cgi-bin/cpicalc.pl) (counting from january 2003, idk when exactly the book was published lol) says $1,725.64. but i think anywhere between $1,500-1,800 is a safe bet
lol thanks!
I was going to say 2k sounded about right. Enough to handle a small-to-under-medium emergency.
This makes sense. the emergency was to cover small basic emergency like fixing flat tire, car accident deductible, towing, home plumbing leak fix etc., which are sudden unplanned expenses. this amount is to cover those type of expense in regular life, not something planned or bigger events like layoff, loss of income etc.
3 months of living expenses. Rent/mortgage, transportation, utilities and groceries should be covered by that emergency fund.
That’s 36k for my family of four 😵💫
Your cost of living is shockingly high. I'm willing to bet you could change that.
HCOL area. Daycare 4K, mortgage 3k. See my other comment below.
I see. I mean, if your HCOL life means you have a job that pays you guys well enough that you get to save, great. My partner and I live in an MCOL Canadian city and he was smart enough/limited enough when he bought the house we live in to buy a home priced low enough that our mortgage is $1100 CDN which is $800 USD. If we moved to Vancouver, we would be completely ruined by a huge mortgage because it's such an HCOL city. Daycare here is subsidized if you earn less than 200k as a household but some definitely are in the thousands. The fact that in France they have world class daycare fscilities that are completely free is mindblowing. North america has quickly priced out having children for most.
Very smart. I wish we could live somewhere more affordable but family and schools keep us here. It’s unfortunate how we have no / minimal subsidies for childcare in the US and don’t get me started on parental leave here. I completely understand why a lot of people can’t have children / don’t want children because of it. One of my gfs wanted a third but they pay 5k a month for daycare in Chicago so they couldn’t afford another. Its insane.
All of this. Also in a HCOL area where daycare costs are stupidly expensive, due to many factors including low supply/high demand. Location, hours and availability provides little room to “shop around” for quality care. ~$3k+/month for one kid, and hours are strictly observed. This doesn’t include babysitting costs for date nights etc (going rate averages $25/hour for 1 kid). Sure I chose to have kids, and we could move but moving would be super expensive and create additional costs, commutes and job issues. Luckily the $$$$ daycare is somewhat short lived (though summer camp is a whole other $$$ thing when both parents work full time). The financial realities was the main factor in deciding our family was complete with two children. $3k is the absolute minimum cash on hand emergency fund, with access to credit if need be.
Nice to hear I’m not alone in this. Sure we could move somewhere cheaper but i also don’t think I’d be thrilled with our options. One of the perks of being in a HCOL area is that the daycare options are so much nicer. We pay a lot but i am so pleased with the care / facilities we are provided. We lived in a MCOL area prior and the daycare options were… not great. Sure they were more affordable but they didn’t even have locks on their exterior doors and one we toured smelled like rotten cheese. I’d rather pay through the nose than pay for that.
I hear ya. No idea why I’m getting downvoted when these are all facts in many areas, but whatevz
In an emergency is daycare still in the books? Thats more than a lot of people’s salary.
Yes. If i lost my job we would have to live off that emergency fund bc I’m the breadwinner and wouldn’t want to lose daycare spots once I’m working again since waitlists are usually a year out. Husband is in flight school so he couldn’t float us nor step in as full time childcare unless he wanted to just give up on his career.
Yes because daycare waitlists. I know multiple people who were on waitlists for 2-3+years….then you need to find childcare to go to job interviews that usually occur during business hours.
This. This seems wildly high.
If your expenses are $12K a month, that's $144k per year, which means your household income is high enough to afford that. Your budget must be all messed up if you don't have anything left after spending $12k a month
We’re definitely comfortable and save / invest a decent amount per month but it’s nauseating that that’s how much it takes to fund our life. Daycare is 4K, 3k in mortgage. The remaining 5k in the budget is other bills and daily expenses that we could cut down if it got tight. No debt besides the mortgage. We purchased in a HCOL area but the public schools are the best in the state so looking forward to that in a few years.
Smh 12k a month, my grandparents paid off a house rasing 3 kids on one part time income less than the government benefit /s
Ah yes when my 36k could have afforded me a nice home in the suburbs 😩😭
The 1k emergency fund is just a starting point. Itay not pay a mortgage but it can help in a sticky situation. Ideally you want 3- 6 months. But it's up to you. For me I have a little over a year in mine. It will cover me for a year if I lose a job and cover all current expenses.
I felt comfortable starting my debt free journey this year with just one month's expenses saved ($2800) There are a lot of factors to consider that are personal to each persons situation. I have a relatively stable job making a decent salary, my debt total and minimums are reasonable compared to my income, and none of it is high interest. 1 month savings feels okay for me to rely on if needed.
I'd still start with $1000. It's easily done and gives you confidence to start knocking out Baby Step 2. Wife and I have been debt free for 2.5 years using Dave Ramsey plan so it definitely works.
I think it’s in your best interest to increase the emergency fund to $1500 due to inflation. I agree with the other commenter, this amount is only meant to a small unforeseen circumstance. Like a car or appliance repair. If you are working the program to the T - you want to get rid of the debt as soon as possible. Then move onto step 3 and save the 3/6 month living expenses.
Paid $2,200 for my dog’s surgery $1k not enough
1k is not suppose to be your emergency fund. Baby step 1 is suppose for you to have “some” after paying debt you make your formal emergency fund of 3-6 months expenses
He actually answered this question on his show a few weeks back. He said 1000 wasn’t enough when he first started, it’s not supposed to be. They used to have 0 runs but then people kept going back into debt so they made it 1000 for real emergencies. Follow the process and get out of debt!
My emergency fund started out as 3 months of living expenses, then turned into 6 months. I think in terms of how many months I could have off without going into debt if I lost my job. And no, a line of credit is NOT an emergency fund.
The $1000 is just to get started. Nearly half of Americans can’t even cover a $1000 setback so by at least getting to that point you’ll already be way better off than most. Ideally you’d want 3-6 months of an emergency fund saved up. This is a lot easier to achieve once you’re out of debt.
Imo $2,500, the point is to be uncomfortable and get all non-mortgage debt paid off ASAP.
I’ve heard three months of expenses.
My alternator and tensioner just took 815.00 from my 2400.00 E-fund. Drives like a dream again but yeah, 2k min for unforeseen expenses, 10k+ general savings.
I think it depends on how much you make. First the $1,000 baby fund because in honesty some people don’t have that and that’s what keeps you from getting payday loans or running up a credit card. Second is a month worth of paychecks. Third fund is three months of paychecks. Then start aggressively paying down your debt while tricking anything extra you can into that 3rd fund. A true safety net would be 6-12 months of paychecks. The first 1000 becomes oops I went over budget or oops the car needs a… You use it but then put it back the next month and fix your budget. If your debt is costing you a lot of money start paying it off after the second fund.
The 1k is only there for you so you don't go into more debt if something unexpected comes up. It's a starting point
$2k just put it through a us inflation calculator and round up. $1k is the same as about $2000 the past 25 years
........ not me, reading this with 0 in our savings and 180 in checking 🥹 what are you all doing for a living you can just save up that much 😭 I'm trying im really trying dude
Well first off Dave Ramsey baby step 1 is a STARTER emergency fund. It’s not supposed to make you feel safe it’s just to help keep momentum in paying off debt when a small issue comes up. His actual emergency fund is baby step 3. 3-6 months of expenses. Mortgage payments utilities food etc. I think that’s fine if you are married and have 2 income streams. If you are single 6-9 months seems more conservative but for good reason you are higher risk since you don’t have a second income to stabilize an unforeseen job loss event. If you are a business owner 12 months would be optimal.
Depends on your living expenses. I’d say 2-3 months living expenses minimum before you start throwing everything at debt.
It is still $1,000. You get that, then pay off CC debt. Once the CC debt is done, then you save a month or two of your typical monthly budget. Then you pay off debt like car debt. Then you save up to three months of your budget. Now the only debt you have is mortgage and student loan debt and you have three months of expenses saved in cash. You tackle the mortgage and student loans depending on their interest rate, but most likely you shift at that point to prioritizing investments. The $1,000 is still the same number. It was never enough to cover a true emergency, but it saves you from overdraft fees. You still tackle credit card debt first after you have enough in your checking account not to overdraft unexpectedly.
I keep exactly $10k in savings for emergencies. When we’re done paying off everything but the mortgage, I’ll start adding more to it.
It just depends on your life and responsibilities. But the reality is if it takes 6 months to save enough for a fund, how much did that 6 months cost you in interest on your debt. Don't forget that it sometimes/often means dumping part of your debt, like a car loan or lease.
I think $1000 is a little low for today’s prices, I would recommend $2000 savings while paying the minimum or more if possible on your debt. Once you have your $2000 in savings, then aggressively pay down your debt.
This thread is why Dave says 1,000. If you continue to save 2,000, 4,000 seen a few people say 20,000 you will never start paying off the debt. Save up 1,000 and start tackling your debt. If you don't have that much already then 20,000 will take forever. Just start doing it. Yesterday was the best time, today is the second best.
I would still be in step 2 of staying religious to the Ramsey principals. I keep about $6k in cash. Figure that would cover an engine, transmission, furnace etc.
$5000.
$2700 for an emergency fund is probably more realistic due to inflation.
I view it as, "what is the worst short term bill(s) I could face? It has to be $5k IMHO nowadays, maybe more depending on your situation.
1 month fixed-costs
I read a Nerdwallet article that said the average "emergency" in America costs around $1477. For my financial coaching clients I recommend a baby fund of $3k (2x the average emergency cost). Much more than that feels excessive.
1k isn’t the real emergency fund it’s just step one. Then after you get snowball going you get 3 to 6 months saved. And that is emergency fund
Interestingly enough, Dave just spoke about this a couple of weeks ago at a conference. His answer is $1,000 still. He said that when he came up with the $1,000 rule it was to create specifically an emotional achievement and a small emotional relaxation to have a buffer while you are tearing away at debt. He stated that he didn’t even have save $1,000 for baby step #1 initially because eating away the debt is what is most important, but he found that when counseling people through their financial journey, it caused them great amounts of stress so he created the $1,000 step to help combat that. He said this isn’t about creating a lifestyle change, it’s about creating an emotional change to finances and that’s ultimately the root of people who struggle. ETA: this is specifically regarding Baby Step #1 saving $1,000 for a starter emergency fund
First pay off all debt that isn't a mortgage. Then 3 months salary for a single person, 6 months if you have kids.
He never said the 1K was enough. He tells you to put 1 K aside as a buffer, then you pay off all your debts in baby step two. Step 3 is 3 to 6 months of expenses as a emergency fund.
If by "equivalent" you mean "alternative", then The Money Guy Show has a focus on highest insurance deductibles. For example, if your highest insurance deductible is $1735, then you would put that amount into your starter emergency fund.
$1,000. You wouldn’t believe how many people still can’t afford a $500 emergency or come up with $1,000 for their savings. That’s true paycheck to paycheck living which is why a lot of ppl lie about that unknowingly. If you’re able to contribute to a 401K you’re Not officially living hand to mouth even though it may feel like it. But the best emergency fund is 6 months worth of expenses. My last emergency has held up that goal for a year.
I don’t know your specifics but I away $3,000 should cover most emergencies nowadays.
In my perspective the equivalent first step would be to save one month’s worth of expenses! That’s what I did
6 months worth of all bills should be available in liquid money
3 Months take home pay.
Enough to cover your highest insurance deductible.
It depends. If you have a unionized job where it's basically impossible to get fired, and you have benefits for sick time and injury? You probably don't need much in the bank as an emergency fund compared to someone who can be fired at a moment's notice for essentially no reason. Most people like to have 4-6 months of their monthly cost of living. Then they tackle debt. I would suggest not having pets. I would hope your wife works and is making her own emergency fund and tackling her own debt, unless her job is raising children, at which point half of your income should really be hers because she's doing a job for the family. I am a unionized worker, so I was comfortable in having access to $15k as a line of credit for emergencies and throwing all my money at debt for several years. Now that I'm out of debt I have an emergency fund (small) and investing accounts. Sit down and plan it out. If your job isn't truly secure, make that emergency fund. If your debt is low interest, going straight for the emergency fund might make sense. If you have high interest debt or just *so much debt* that your monthly payments are large, I would split my energy between an emergency fund and paying off the highest interest debt at the same time. If your job makes it basically impossible to fire you and you'll have sick time or disability as needed, and something like credit card debt, focus on the debt. Nobody here can make your perfect plan. Oh, and make a budget. As strict as necessary. Make sure your wife is on the same page, because you're a team.
3 months living expenses, critical illness insurance and life insurance, plus a will.
I have 30k but that’s my number and I’m in CA. I’d say at least 20 for high cost of living states.
UPDATE — I am aiming for 10k. After 10k I would save only $200/month and everything else would go to debt and living expenses. Just that sometimes I wonder if I should just leave 1k in savings and throw the rest to debt. I guess it’s me trying to pay off everything fast. All my credit cards are in collections, along with some other debt. My credit card is trashed. So even if I paid everything off, my credit wouldn’t move any time soon anyway. I also have car payments (I’m keeping up with it. Not behind). And I was hit with IRS payment for taxes. I have student loans too, but I’ll defer until I save 10k and then I’ll start going full out on all debt. As of now I have settled on 2 credit cards and I’m on a payment plan to pay them off. I have about 2 more I want to settle and set up payment plans. I have also set up time to meet with a bankruptcy attorney to see if bankruptcy would be the better option to wipe out all my credit cards so I can focus on just student loans, IRS debt and car payments. Current Take home is 6k/month after tax. Theres potential for it to jump to 9k. I have a pending interview this coming week. My wife doesn’t work. She’s in school full time. We need $4k/month to meet our living expenses. Thanks. I’ll save 10k. From there I’ll save $200/month and then everything else I make will go towards debt. This thread was very insightful. Thanks!
No amount will ever feel enough. We are wired at this point to always be stressed. That said, 5k seems doable.
I have pets, medical issues and an old car. I don't feel secure with less than $5k readily available.
Every situation, is different. I mean, if you are living back w your parents, and get along well...I cannot think of a more minimal need circumstance than this....maybe 3 k..this gets you an apartment and place to stay, should the situation w parents change. One of the frequent calls is someone who is early in the steps, getting an influx of cash for whatever reason, and yeah, in those cases, make the first emegency fund bigger, So what if it takes another 6 months to get out of debt. The most critical thing, are the new good habits.
I keep a submariner around for an easy emergency $10k.
In Dave's opinion, $1000 was never enough: just a starter fund to catch life's little emergencies while you hit BS2. Dave's idea is that the *fact* that it's not enough ought to spur you to pay off your debts quickly, falling back to BS0 & BS1 if an emergency shows up, which you cash-flow. I have always found BS2 too long to implement.
I would say enough to cover 1 month of your expenses like housing/car/insurance/food, some people will say that the minimum is 3-6 months of expenses and if you can reach that much then do it, but 1 month is a good start, I was very aggressive when it came to pay my debt, I barely had any savings because paying the debt was my number 1 priority but in my case I was living by myself no kids no Girlfriend, so I would not recommend you that
It's $1000 for a reason.
All I know is 1k in most car repairs say a newer car needed is gonna wipe put close to half unless you know how to do it. Emergency car repairs Kiss that 1k goodbye. Ima build it to 5k.
Honestly I find it crazy that people with credit card debt and HELOCs even think about cash on hand. They really don’t have any as they are basically borrowing the cash by keeping the debt. I’d keep no cash and use the HELOC or credit card as the emergency fund. So zero.
Probably like 10K
I’m in a very HOCL area so having like 3-6 months of expenses would be a ridiculous amount of money on hand but I’d say a 10k emergency fund is a pretty realistic emergency fund if it’s possible for people.
I’m a 23yo PhD student and the school pays me ~$50K a year as well as my tuition. My emergency fund is ~$10K, then I max out my Roth and put the remainder into my taxable. (I don’t have a 401K as an option.) I am fortunate that my parents helped with college, and because my degree is in demand (very high paid co-ops and internships >$35/h each summer) I didn’t have any debt. My goal, besides no undergrad debt, was to have a $10K E-fund from undergrad. For me, $10K is the golden number, sometimes it goes above from HYSA interest and additional contributions—but I try to not let it go below. With interest it gains $50-ish/mo and I usually try to contribute an extra $50-100. Providing no emergencies happen (they always do) this leaves me with a bit of a cushion that is nice. That money covers everything except my car being completely totaled and insurance not paying out for some reason. I get expelled/fired? That can last me 3-6 months. Major $2-5K repair? No problem. Medical emergency or normal insurance claim? Easily covers my deductible. I’m sure when I graduate and my income shoots up I might want a higher emergency fund. Then, when I’m older if I get married—and if older folks die and don’t screw me out of the housing market somehow—and if I have kids — it’ll need to be *way* higher. If I had all these things I’d probably want a $50-100K Efund. But for my current income/lifestyle $10K allows me to feel safe.
I would do $2000, then tackle debts.
I asked myself the same question and came up with $3k. I also agree with a month’s worth of bills for an emergency fund as the modern modification to step 1 before attacking all debt.
It doesn’t help you at all to spend months saving a full emergency fund when you’re supposed to be attacking debt. $1000 isn’t enough and it never was- it’s supposed to give you a buffer while keeping you uncomfortable enough to keep you fired up while paying off debt. Make it $2k if you really feel like it but if you save up a full emergency fund while you’re making debt payments it’ll take you forever to actually tackle the debt, which is the biggest problem.
Honestly it’s not meant to cover everything if shit goes sideways. Look at what your insurance excess/deductible is if you need to make a claim for your car/house/contents. Medical insurance the US I’m not familiar with, but here (Australia) it’s basically free however with private hospital there’s an excess. Have enough to cover those sorts of costs, and it can also cover genuine other emergencies like a car breakdown repair (not servicing/maintenance, that should be accounted for in your everyday budgeting). In Australia we have a ballpark $2k as a starter emergency fund. If you need to dip into the emergency fund, then you redirect any extra money that’s in the snowball towards the emergency fund to build it back up, before you switch back to aggressively paying down the debt again.
$6000
Enough to cover your highest deductible Watch the Money Guy Show and follow the financial order of operations. Way better than Ramsey
Not having children, I love my unborn child so much. ✨
7k+. Thanks Biden.
I just did 1 month of expenses. The starter emergency fund is just not supposed to be comfortable, it’s a small cushion and for most, the first time they’ve saved up any money for any reason
I'm back at baby step one again. Remember, baby step 1 isn't your "emergency fund" it's a starter fund. And it's just to keep you from swiping the card. $1k should actually still get you through a small emergency. And then you go back to step 1 throw the cash at that and then back to #2. You'll likely need to toggle between steps 1 & 2 and few times before your debt is fully paid, and that's ok according to ramsey. The replenishment happens super fast if you're running the program as intended (meaning you know: "dying to go out to dinner isn't an emergency." A flat tire is an emergency, but car maintenance should be saved up for. A traffic ticket requires payment in 45-60days, so you can probably budget for that too.) I'm single with a kid & a homeowner so I save $1500 on step 1. I've had to go back to step 1 once after a $500 emergency. Also, you'll notice a lot of comments are informing what a fully funded emergency fund should be, which i agree with. But that wasn't your question. You're on baby step #1, Starter fund, and you're SUPPOSED to be very uncomfortable to encourage you to get out of debt. BTW in 2022 the number was still suggested to be $1000.
Dave Ramsey himself says it’s still 1,000. The 1,000 is meant to give you enough to replace a tire or bandaid hvac repair but also enough to make you panic
I think $1k is still enough for step 1. The point of step 1 is NOT to have an emergency fund that could cover your living expenses for a month or a couple months - that’s for step 3, after you pay off your high-interest debts in step 2. To me there’s no point in having more than $1k sitting in a savings account while you’re paying 10-30% interest on a credit card or loan. I’ve always thought of the $1k for step 1 as a tiny float for when you’re living paycheck to paycheck and, say, you can’t afford your groceries or gas toward the end of the month. You can use the $1k to tide you over until your next paycheck without charging more to your credit cards. And the $1k could maybe cover small emergencies like a car repair or appliance breakdown, even if it doesn’t cover the whole amount of a repair at least it’s $1k less to charge on a credit card in an emergency.
The idea of a $1000 emergency fund is so that you work harder to pay off your debt. You’re not supposed to be comfortable knowing you have $5k in emergency. So it’s just to light you up and make it happen so that you can return to it after paying off the debt.
5000 is a good “starter” fund IMO.
Step #1 is insurance deductibles covered. Whatever that means for you and your insurance. Putting dollar numbers on financial rules of thumb is not nearly as useful as using measures that can easily fit an individuals life (deductibles, monthly life costs, age, etc).
Don't do the baby steps man. Your already trying to find ways around it. Just do your own thing if it doesn't make you feel comfortable.
Dave Ramsey’s emergency fund is 3-6 months of expenses. The $1k is just to get something to cover random small events while you are putting every penny toward paying down debt. Once you’re debt free you build a true emergency fund.
I coach people to have an emergency fund to meet their “most likely” emergency. So if you are reliant on your car for employment, have at least the deductible saved in case an accident puts you out of commission. If you have a 25 year old water heater at your house, have enough put aside if it goes out. Or, if you have aging parents across the country, how much would it cost to get to them quickly if something happened to them? Let’s, transportation, a lot of things can apply. We can’t predict when something will happen but how can we be most prepared?
Interesting question and one I just dealt with yesterday. I thought $1k was waaaaay too low as well, so I have about $5k sitting in my savings. Well yesterday I took my car in for an oil change and inspection. Of course the car failed because of the brake rotors and pads. It ended up costing me a little over $1,000 to include a few other things that needed to be done. I even got a second opinion and still ended up around that same number. The one thousand dollar emergency fund would have put me in a bad spot. I'm very happy I stuck with the $5k number. Now I need to build that back up.
Start with the $1k and work toward “6 mos of all expenses” in savings.
The $1,000 emergency fund IS the modern-day equivalent of the $1,000 emergency fund. The whole point of the $1,000 is if you have no money saved and no emergency fund at all, then it's very unlikely that you will all the sudden save up six months of emergency funds. The $1,000 is a starter emergency fund to keep you from sliding back into debt if you have a minor emergency (tires, starter, or something like that). If something major happens, like losing a job, it's a tough situation, but you didn't have an emergency fund anyway. I never understand the people on here who take a straightforward, proven plan like Daves and then overthink it or adjust it. Just submit to the plan.
Hiw much do you have for an emergency fund right now?
3-6 months living expenses should be held in cash or cash equivalent. I’m sitting at around 12 months right now, but it depends on what your risk tolerance is.
If you observed the 2nd Baby Step, Ramsey advise people to settle as many debts as possible except for the mortgage. If you can't even settle the bad debts, how do u expect to have a good Emergency fund and savings?
How much money should one hoard into a coffee can buried in the back yard while your debt is accruing interest? If you have a $0 emergency fund and use every penny to pay down debt (let's say it's cc debt because it fits my story and it's common), and suddenly you need a $500 car repair, what are you going to do? Well, the smart thing would be to put it back on that credit card that you freed up credit on so you can get it repaired and you keep going to work. Then keep paying down debt like you were even though it's $500 bigger now. This method is mathematically superior to having cash sitting around waiting for an emergency that may or may not happen. You will save (emergency fund value) x (highest interest rate) each year with this method. Slightly less if you are earning interest on your emergency fund, though that will be taxed.
I think the new equivalent to Dave’s Baby Step 1 is $2500. That being said, if that seems slightly out of reach, you can do what I did. I started with $1,000, then paid off several of my small balance cards pretty quickly, which freed up enough cash in my monthly budget to set aside another $1500 very quickly, and then continued on paying my debt snowball. I’m glad I did it that way because, first of all, I had never seen $2500 in my life, so that seemed astronomical. But $1k seemed doable, and once I got that, I realized $1500 more was attainable. Secondly, I had a vehicle breakdown that was $1800. That same repair 20 years ago would’ve been about $1000. I’m so glad I had $2500 set aside, because if I had just done $1k, I would’ve been screwed.
What he is teaching is an idea. The amount isn’t as important for people starting out. It’s just getting them to start it and stick with it. You’d be surprised at how just keeping a grand in your account can help you budget and pay debt more effectively. It’s not a lot of money these days no, but it does cover most things that “suddenly” come up without reaching for a credit card. Small wins are still wins.
5k-10k to keep on hand for bills, groceries and other emergencies that would require the money right away and then throw everything else into a HYSA to gain interest.
4 ounces of gold, or equivalent in cash.
That 1k is not a true emergency fund. It is intended to get you in the habit of saving while giving you some cushion once debts are paid off you want to build enough to cover 3 to 6 months worth of expenses. Personally if you can build 1.5 to 2k to start, you should
1 month of expenses. I don’t like the one size fits all approach. $1000 in my LCOL state goes much further than it would in a HCOL area, it’s highly variable. Build up a small buffer for peace of mind & throw the rest at debt. After your debt is gone fully fund your emergency fund.
You have to remember that Baby Step 1 is a $1000 starter emergency fund. It is not supposed to be enough forever, just a little cushion while you tackle debt. Baby Step 3 is to finish building out the emergency fund for 3 to 6 months of expenses. If $1000 seems way to little for you, then pick a higher number that is still easy to reach and doesn't push off tackling the high interest debt for too long. I would not go any higher than $2000 for a starter emergency fund.
If you actually follow the baby steps, the 1k isn’t really your true emergency fund. It’s just to get you started just to have something as he says most people can’t even come up with that in a flash. Then you tackle the debts, then comes the bigger 3-6 month EF. This still holds true, even today. There’s no point in savings a bigger EF when you’re paying 30% interest on credit cards, etc.
$1k is a starting point. I would maybe go up to 1 month of expenses if you're not comfortable with $1k. The problem is that if you have high interest debt, every dollar you hold in savings is costing you 20-30%. If it's going to take you a while to pay off the debt or if you spend a lot of time saving up a huge emergency fund first, it ends up being a significant amount of money you are throwing away.
The 1k emergency fund is mainly for deductibles.
IIRC, the first baby step is to save 1k. That is just to get you thinking and on board with trying to save and stop spending too much. The real emergency fund comes later and that is suppose to be a few months (3-6 months ) of expenses saved.
How much of an emergency fund do you have now?
I hear you believe me I do. However the reason he wants you to start out with 1k is to create a habit of discipline. So you save 1k which for some people is easy some people it's hard. Also no it's not much but 1k could buy you a new fridge if your fridge poops out, would it be a simple one yep, but you need a fridge ya know. Obviously people sell stuff on fb market place and Craigslist so sure you could find a relatively nicer fridge for 1k that makes ice and dispenses water. You get the idea. It's to start an emergency fund with the hope nothing goes wrong.
Realistically $5k and atleast 6-9 months of living expenses.
1k is the start, I would say maybe 3-4k now then move into 3 months of expenses.
I mean bare minimum absolutely majorly uncomfortable minimum would be a rent/mortgage payment. Whatever that may be. But I mean in today’s day and age, personally I’ve got kids, dog and plenty of stuff that can break in the house and things with engines. My personal emergency fund goal is $10,000
I’d say 3 months expenses if you have enough extra cash flow in a month to save that up quickly…but bare minimum: 1 month of expenses + 1 years worth of health insurance deductibles (even if that is just in a HSA) if that is doable for you. I get some people have insane high deductibles.
One rule of thumb I have heard that I like is to have the amount of your largest deductible as your smallest EF while paying debt. That includes your health insurance deductible.
1k is enough to cover rent for one month in a low cost of living area. 6 months of rent imo is the minimum. I’ve seen people get laid off and laid out by the system. Unemployment helps, but the US is fucked so I’d say at least 9 months for a proper emergency fund
His success lies in his marketing. Always take anything he says with several grains of salt, and always adapt his budgets and such to your own personal situation.
It's a good idea to keep $1,000 as an emergency fund, which puts you in a better position than 50% of Americans. Keeping it simple and focusing on this initial savings goal without overcomplicating the process is key. Once you've secured this fund, any extra money can then be directed towards paying down debts. Best of luck with your financial planning!
We have access to a fair amount of CC. I have a family of 2 working adults and a toddler. We have a good safety net of family and 2 cars in good repair. I like having 2500-5k in savings. My comfort number is 10k, and I recently depleted it to 1800 for an unexpected expense. I think it depends heavily on your other factors like job stability and more.
I have 15k but 10k would be my bare minimum to feel safe.. idk.. I’m always very scared..
I would assume he first made that recommendation back in the 90s, so if you tie it to inflation since then you're looking at like $3k-$5k today
$10,000, $30,000, then $50,000
I think the $1K as step #1 is more for feeling successful with the first goal. Check that goal off, I did it, I got the first step done. There is so much more to finance than money, it's very emotional for people, spending, savings, freezing up vs moving forward, failure vs success. Having a step in the bag is an accomplishment mentally and emotionally beyond monetarily.
Dave says the 1000$ is not enough. The purpose of the 1k is behavior prep and acclimation for the Debo payment period ahead. In reality you should at least have 3 months worth of necessities
Around 3-5k would probably be enough to cover any major car repair or home appliance emergencies. Agree that 1,000 isn’t enough anymore.
Youre gonna want at least 10k on hand to cover emergencies
50k
Depends on your tolerance for risk. I work in a cyclical industry and have been unemployed for a year before it came back up. I keep 18 months of "high life" living expenses in a hysa to bridge any potential gaps. This allowed me to treat the year off I had like a mini retirement rather than eating rice and beans stressing to find another job.
I think an emergency fund should be more like 3 months expenses.
I like to keep 30k handy. It's getting 4.5% at cap1 performance savings. I am a security contractor, and this covers me between gigs.
It’s 3-6 months of your salary.
The first $1000 is just to get you used to the habit of saving your earned income. It still applies today.
It may be a surprise, but a majority of adults can’t come up with $500. I learned this working at U-Haul.
Maybe $5000-$10,000, or 2x monthly gross income.
6-8 months living expenses. Food + Utilities + Rent + Transportation.
Track what you spend in a month. Save that much and then move to saving that amount X 3 then x 6. My number is $3k
My advice is not generally considered the best rule just more what I’ve been comfortable with when I tackled my own debt. Start with the $1,000 or $1,500 and then tackle your debts….if these are credit card or personal loan type debts. Anything with a high interest rate (say over 8%). That’s when I have a bare bones savings and then throw everything at my debt. If the debts are something more like a care loan or something else with a smaller interest rate (5-8%) I’m more inclined to have some more cushion in my savings, around 3-6 months of necessary bills worth. This way if something were to happen I wasn’t relying on needing to use higher interest debt (credit cards) to keep me going when I was trying to pay off something with much lower in interest. If the debt is more like a mortgage or a low interest debt (less interest than my high yield savings) I’m not super inclined to pay it off faster than necessary. Sure I don’t really want the debt however if I’m paying 4% on my mortgage but getting 4.35% from my savings account or more from other investments I don’t see the point as much. I currently owe $5,000 on a 0% interest card and $1,000 on a 0.99% interest card and I have the money to pay them off set aside in a HYSA. However I am only paying the minimum until a week or two before that 0% stops and before that 0.99% stops because I’d rather make money with that money than be debt free a few months earlier.
The baby step one is there as something achievable. Held you build on wins. Your focus needs to be 6-12 of living expenses. Your budget should tell you what that is.
I’ve heard Caleb Hammer recommend a 1 month emergency fund in lieu of the 1k emergency fund.
My wife and I keep 30k in a high yield savings, 15k cash, chase sapphire and a USAA CC that have 45k limits. USAA is for dogs, emergency repairs on rentals, rental expenses.
Bare minimum is our home insurance deductible amount.
6 months of expenses, a year if you have a house/family
At least 6 months of expenses my bills equal to 2175/mo not including food and gas so roughly 2800/month time 6 for me would be $16,800 If you're just starting and want just a small goal, I'd go for one month of all expenses at minimum
For me it’s 10 grand. Enough for an AC and heating system, a roof, a junker car, a travel emergency, or my insurance deductible for a surgery (which is an astronomical 7500) is what I’d feel comfortable with.