| How To Tell if Your Emergency Fund is AdequateEvery retirement plan should include an emergency fund equal to about 6 months of your annual cost of living. This emergency savings fund can see you through some lean times. Do you have enough in your fund for an emergency? Calculate the status of your emergency fund and then set some goals for getting or maintaining the fund. Difficulty: Easy Time Required: 15 minutes Here's How:- Your yearly cost of living ____________________
(Enter what your yearly cost of living is or will be)
- Amount needed in your emergency fund_______________
(Divide your yearly cost of living by 2)
- Amount you actually have in your emergency fund_____________
(This could surprise you or cause you some worry)
- Enter your surplus or shortage here___________________
(If you have a surplus, congratulations. If you have a shortage, you need to set some goals to correct this)
- To correct a shortage, divide the shortage by the amount of money you can afford to put aside each week. This will tell you how long you must save to reach your emergency fund goal. For example, if you need $1000 to reach your goal and can afford to put aside $20 each week, it will take you 50 weeks to reach your goal.
$1000/$20=50 weeks
Tips:- Be honest when figuring your yearly cost of living.
- Think of this emergency fund as an insurance policy.
- Treat your emergency fund as you would any bill.
- Put aside as much as you can afford and don't be afraid to put in some extra money from time to time.
- A pack of cigarettes or a couple of cups of coffee each day might provide enough money to reach your emergency fund goal.
What You Need:- An estimate of your yearly cost of living
- The amount in your current emergency fund
- A desire to protect your quality of living
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