Dave Weighs in on How to Properly Budget Emergency Funds

April 13, 2018


Dear Dave,

I bring home $4,100 a month in military disability pay and Social Security combined.

My wife brings home an additional $2,000 each month.

Should we base our emergency fund level on her income only, since mine is guaranteed? 



Dear Lewis,

Your emergency fund shouldn’t be based on income.

I recommend folks have three to six months of household expenses set aside in an emergency fund.

What would it take to operate your household for that length of time if one or both of your incomes disappeared?

I don’t anticipate your income stopping, Lewis.

But income loss isn’t the only thing you’re guarding against with an emergency fund.

You’re also guarding against things like an illness in the family, if the transmission in the car goes out, or your home’s heating and cooling unit needs to be replaced.

There are many more crises that can come upon a family other than a loss of income.

I don’t mind if you two lean toward the three-month side of expenses, since your income is pretty stable.

But always remember, an emergency fund should contain three to six months of expenses, not income.

Thank you for your service, sir.