How do you calculate 3-6 months living expenses for an emergency fund?

[Sally C]

When working to save up 3-6 months emergency fund, what items do you use to calculate this? Do you calculate simply based on income or do you subtract expenses you wouldn't pay for during an emergency? Example: during a financial emergency we would not put money in saving. This amount would decrease what I normally calculate as regular expenses. There are several other items that I'm not sure about. I put away a certain amount of money for car repairs from each paycheck. Would this be considered an expenses (and thus part of the 3-month's expenses) or would it be considered savings (and not included in the 3-month expenses figure).

Am I making sense? I really, REALLY want to move on to paying extra on our mortgage (no other debts for us) but I don't want be to caught short in an emergency with a skimpy savings account.

Thank you!

Sally

[jonjaktez]

Take your current out going list and subtract the list of items and amounts you would cut out if you had no income or less income coming into the house.

In an emergency, you want to make sure you're able to pay all your bills and living expese that are necessary. You can add in some extra savings but try not to go overboard or stay at the same amount that you're at now.

So if your household income is $5000 a month and you're saving $2000 a month and you then your income goes to $3000 a month, you can't keep saving $2000 a month, but you can try and save $200 a month.

[jonjaktez]

If it's possible you could also just take what your current outgoing expenses are right now and just multiply by 3 or 6 and divide by 12 and start saving that amount. Then if you do lose any income and cut out unnecessary expense, you have extra money in savings. This is a simply way to do it.

So if your current outgoing expenses are $2000 * 6 = $12,000 / 12 = $1,000 a month in savings.

In an emergency you cut out $500 a month of uncessary expenses, then you'll have $3,000 extra which is 2 extra months of necessary expenses.

I hope my math is correct.

2,000 of expenses -500 of unnecessary expenses = 1500 exp.
500 of unnec exp * 6 = 3000 / 1500 = 2 month of expenses.

[queenofthehivemomof5]

I personally figure in everything excluding savings. I figure it is better to have a bit more padding than to come up short.

[loladooder99]

When calculating your expenses you are supposed to account for all the bills. Which is rent/mortgage/utilities/food/copays/ins,etc. Everything that is neccessary not things like savings,eating out,etc. Because the emergency fund is used for when you get layed off or you have a car crash and can't pay the out of pocket. I know for me its going to take years to save up my 8 month emergency expense fund that is recommended. But hey i can only try.