How much should you keep in an emergency fund?

How much should you keep in an emergency fund?

Lillian talks about how much you really need in your emergency funds in response to a listener question, and she tries to get Chase, our engineer, to stop spending all his money.

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Episode Transcript (supported by our Patrons and provided by DSW Transcription)

Lillian Karabaic: [00:00:00] Welcome to Oh My Dollar!, a personal finance show with a dash of glitter. Dealing with money can be scary, and stressful. Here we give practical, friendly advice about money that helps you tackle the financial overwhelm. I’m your host, Lillian Karabaic and, today, we’re joined by Chase, who’s in studio.

Chase Spross: [00:00:16] Hi. Hi, Lillian.

Lillian Karabaic: [00:00:19] You’re usually behind the board, so there’s-

Chase Spross: [00:00:22] I am.

Lillian Karabaic: [00:00:22] -some hesitation, but we roped you in.

Chase Spross: [00:00:24] I’m nervous.

Lillian Karabaic: [00:00:25] You shouldn’t be nervous.

Chase Spross: [00:00:27] Okay. Gone …

Lillian Karabaic: [00:00:28] Great! Before we start the show, I wanted to remind you this show is supported by listeners like you through our Purrsonal Finance Society, which is a fancy name for our Patreon members. You can join up with other Oh My Dollar! community members to support episode transcripts and more by making a pledge of $1 or more per month. Patrons get cool perks, like cat stickers, discounts, and a special badge on our forums. Learn more at

[00:00:55] Welcome to all of our new patrons that joined during the Patron Drive!  Thank you to Lauren, Beate, Lindsay, Steph, Cassie, sadnessandjoy, Jordan, Illathrael, Clare, Jody, Nicole, Irene, Rosemary, Chelsea, Denise, Annaleise, Bethany, Mary, Sarah, Kenna, Katherine, Carrie, and Sarah!

Chase Spross: [00:01:20] That was!

Lillian Karabaic: [00:01:20] Yeah! Thanks so much! If you want to be one of them and get your name read on the show, you can go to All right, emergency funds.

Chase Spross: [00:01:32] Mm-hmm.

Lillian Karabaic: [00:01:32] To some, it sounds like a far-off fantasy.

Chase Spross: [00:01:34] Yes.

Lillian Karabaic: [00:01:36] You know, how long would it possibly take to save up enough to have a “six-month emergency fund,” and six months of what? For others, it just seems like a waste of money. If you’re financially stable, you’re like, “Why would I have a pile of my hard-earned money just sitting there in an account, earning me whatever pittance of interest the bank is giving me instead of having it invested in things that are either fun or are making me more money in some other way?”

[00:02:02] Having a Kitten Emergency Fund of one month’s expenses is my first recommendation I give to anybody who’s trying to get their finances on track. It’s the first thing I recommend to folks that just got their first job and started earning money. But it’s hard! How do you prioritize saving money, especially if you’re not earning a lot of money, and you need that for, you know, rent, and bills, and feeding yourself?

[00:02:26] 40 percent of Americans would struggle to come up with $400 for an unexpected expense, according to the Federal Reserve’s 2018 Survey of Household Economics and Decisionmaking. It can be really challenging to prioritize saving, even if you’ve got those basic bills covered. If you’ve got debt that’s taunting you there with compound interest, it’s really challenging to say, “Why would I just have money sitting there doing nothing? I could be giving that money a job.” I think it’s really important to have some kind of an emergency fund, and I think it looks different for everyone. One of the reasons I recommend having an emergency fund is if you don’t, bad things happen.

Chase Spross: [00:03:07] Yeah.

Lillian Karabaic: [00:03:07] There’s a law of the universe that says Murphy comes knocking on your door, if you don’t have anything there waiting for Murphy.

Chase Spross: [00:03:19] Yeah, sure.

Lillian Karabaic: [00:03:19] There’s some sort of cosmic protection that just happens in place. There’s another law of the universe, which is when you’ve saved your first emergency fund, you will immediately have a reason to use it.

Chase Spross: [00:03:30] Yeah.

Lillian Karabaic: [00:03:30] But we’re going to ignore that law of the universe, first. We had a listener question- write in about emergency funds, and I thought it would be a good time to talk about how you structure them … How do you figure out what your expenses are? So, Chase is going to play the part of Ken, our new listener!

Chase Spross: [00:03:45] [As Ken] Okay. So, apologies in advance for the novel. My name is Ken. I’m a recent Oh My Dollar! fanatic. I think I started listening to your podcast in early September and have since listened to nearly every episode, whether I thought the topic applied to me or not. I also just purr-chased – see what I did there, huh? – a copy of A Cat’s Guide to Money, and while I consider myself more of a dog person, I found it to be delightful.

[00:04:13] I’ve had a question on my mind for a while, and I’ve come through your book, and the forums, as well as tried to find answers on Reddit, but I’ve come up a bit short. I was wondering what you typically include in your monthly expenses when calculating your one-month buffer and emergency fund. Is it every single expense or a funded category in YNAB? Is it expenses to keep me alive? Are there maybe things that are automatically pulled out of my paycheck that I should also keep in mind for my emergency fund?

[00:04:39] I also would like to know what YNAB is …

[00:04:40] I’m currently trying to establish a buffer now before I attack some high-interest debt and, in my mind, this should cover essential expenses to keep my dog and I alive should I lose my job, or the ability to work for a month. I’m currently including things like rent, utilities, groceries, and pet food; I’m also including some of my living, and future expenses, i.e. barbershop fees, monthly contributions for vet, auto, and bike fees, et cetera.

[00:05:04] I’m not including things like my vacation or fun-money budgets, thinking if I were to lose my job, or be disabled, I’d likely de-prioritize those and focus on essentials while I get on my feet. That said. I set a temporary one-month buffer goal, and I don’t have a lot of confidence in it. Any thoughts on essentials to make sure are covered?

Lillian Karabaic: [00:05:22] Well, thank you, one, Chase, for Ken.

Chase Spross: [00:05:24] Yes!

Lillian Karabaic: [00:05:24] Two, Ken, for writing in. This is a question that I feel is challenging for a lot of people to wrap their head around because when you say ‘one-month,’ or ‘six-month’ emergency fund, a lot of people assume that it’s income, right? Like it’s six months of income. On the show, usually we recommend spending less than you earn.

Chase Spross: [00:05:44] Okay …

Lillian Karabaic: [00:05:44] In which case, your emergency fund doesn’t need to be one month of income because, theoretically, you would have some savings.

Chase Spross: [00:05:51] Sure.

Lillian Karabaic: [00:05:51] Ken is totally on the right track here. I think it’s really, when you first start getting finances in order, and if you’re someone who’s listened to every back episode, and is going on Reddit, and the forums, and trying to find answers, it’s really easy to make this stuff way more complicated than it needs to be!

Chase Spross: [00:06:09] Yeah, yeah.

Lillian Karabaic: [00:06:09] Ken is totally on the right track here, which is that my recommendation is go with your essential expenses. So, fun money, and the kind of things that you’re going to de-prioritize, if an emergency really does come up, would not be in the one-month category.

Chase Spross: [00:06:30] Yeah.

Lillian Karabaic: [00:06:30] Chase asked, “What is YNAB?” It is an app called You Need a Budget, which we have talked about before on the show. It’s what I use for my budgeting. It’s great for people that are really nitpicky, and it’s very good at what we call sinking funds, which is saving a little bit each month for some expense that occurs quarterly, or annually. I save a little bit each month in a sinking fund for my renter’s insurance because I only pay it once a year, or something like car owner’s insurance. Quite often I’ve noticed people act like things are an emergency that they have known about.

Chase Spross: [00:07:08] Yeah.

Lillian Karabaic: [00:07:09] Right? Car insurance, usually you pay every six months.

Chase Spross: [00:07:12] Yeah.

Lillian Karabaic: [00:07:12] I know so many people who treat it like it’s an emergency, and they have to rearrange everything; but when you signed that contract, they said, “Oh, it’s just $60 a month!” If you’d been putting $60 aside each month, no problem, right?

Chase Spross: [00:07:24] I’m doing that with my car registration right now.

Lillian Karabaic: [00:07:27] Acting like it’s an emergency, or putting aside money?

Chase Spross: [00:07:29] No, I got the piece of mail, and I’ve known for two years. I was like, “Oh, yeah … I spent all that.”

Lillian Karabaic: [00:07:36] Yeah, like, “Oh, I knew that was coming!” .

Chase Spross: [00:07:39] I spent all that on speeding tickets. I knew that was coming.

Lillian Karabaic: [00:07:43] Yeah. I think that one of the challenging parts of figuring this out is you – when you’re calculating that one-month buffer (or the Kitten Emergency Fund, like I like to call it) – you don’t want to end up in the position where you don’t put enough in it and you spend  especially if you’re trying to  pay off debt or something where you end up getting your account down to this very low level, then an unexpected emergency happens. Sure, you manage to get it covered because you have all your essentials in there, but then six months from now, you took all this money out of your car insurance sinking fund and then you’ve got another emergency, right?

Chase Spross: [00:08:21] Yeah

Lillian Karabaic: [00:08:21] That being said, I think the key for me is what things are flexible. So, when I’m calculating it out – my one-month buffer – I usually include things like renter’s insurance because I have to have that to stay in my house. It’s the kind of thing where, sure, it’s really tempting to see that $200 in there and pull it out for something else, especially if it’s some kind of emergency, and be like, “Oh, I need that $200!” But I know that that is kind of … That sinking fund I include in my one-month expense because I don’t want to end up in that position of not being able to pay that renter’s insurance, and then my property manager going, “Uh, yeah … Where’s your insurance certificate?”

Chase Spross: [00:09:06] Gotta get out.

Lillian Karabaic: [00:09:06] That being said, I have a lot of travel, and even figure skating expenses, which I do pay monthly, but are not included in my one-month buffer, kind of Kitten Emergency Fund, for me, because if a real emergency happened, I would probably de-prioritize figure skating for a month or two. It’s a very expensive sport. I don’t recommend it to anybody, from a financial perspective. Not to mention the fact that I broke my wrist from it, so that was $29,000, but …

Chase Spross: [00:09:32] Oh, wow! Eeeew.

Lillian Karabaic: [00:09:32] Choose less-expensive sports is my- .

Chase Spross: [00:09:39] Yep. I can make a recommendation to Ken – cut your own hair.

Lillian Karabaic: [00:09:43] Cut your own hair?

Chase Spross: [00:09:44] Yeah.

Lillian Karabaic: [00:09:44] Yeah, that … I did that.

Chase Spross: [00:09:44] Might not be a popular one, but …

Lillian Karabaic: [00:09:48] I did that for most of my 20s. Now, I look back, and I see-

Chase Spross: [00:09:50] Pictures of yourself?

Lillian Karabaic: [00:09:52] I see pictures of myself, and I go, “Yeah, I’m glad I started paying someone else to cut my hair.” Yeah, so I think you’re on the right track. I think one of the things about emergency funds – both the one-month buffer and regular emergency funds – is there’s no magic number.

[00:10:10] Right after this break, we’re going to talk more about how a listener completely turned her budget on her head and redid her emergency funds, and we’re going to help you figure out what your precise number is for your six-month emergency fund. Reminder – Oh My Dollar! is supported by listeners like you, and advertisers. Here’s a note …

All right, we’re back from break. So-

Chase Spross: [00:10:32] That was a good break.

Lillian Karabaic: [00:10:32] That’s a good break!

Chase Spross: [00:10:32] It was a good break.

Lillian Karabaic: [00:10:32] It felt like seconds in the studio!

Chase Spross: [00:10:32] I know. It was amazing. Time really travels strangely in here.

Lillian Karabaic: [00:10:43] Yeah, it really does. Question – how do you figure out that precise number for your emergency fund? Once you’ve kind of figured out that one-month fund, if you’re using something like YNAB, it’s pretty easy to do. But if you’re now in the situation where you’re trying to save up that six-month emergency fund, should it be six months? What does that really mean?

[00:11:03] Here’s the top things to consider. Your assets, particularly your assets you need for day-to-day living. How much does your transportation cost to replace? If you lose your bus pass, it might be $40 to $150 to replace that, depending on how expensive your city is. I know how much it costs to lose my bus pass because I lost it very early in a month, and I had to replace it-

Chase Spross: [00:11:22] Oh …

Lillian Karabaic: [00:11:22] -and I do not recommend that.

Chase Spross: [00:11:24] Yeah.

Lillian Karabaic: [00:11:24] If your bike gets stolen, that’s maybe $500 to replace it and get back on the road. Obviously, for me, my bike is a lot more expensive and, often, it is covered by your renter’s or your homeowner’s insurance, which is a good thing to know. But to get a functional bike – a functional commuting bike, for me, – it’d be about $500, which would be what it would take to get me back to rolling with a bike. I might own more than one bike, too, so that’s a different problem. If your car gets totaled or stolen, how much would it cost you to pay your car insurance deductible and get another functional car?

Chase Spross: [00:11:56] Yeah. Okay.

Lillian Karabaic: [00:11:56] Usually, the average deductible is around $500 for car insurance. That’s $550 to, say, $2000. If you need your laptop to do your paying work, or finish your coursework, or your phone to safely walk to the bus, and pay for the train, consider those essential assets because if you didn’t have your phone, you would immediately replace it.

Chase Spross: [00:12:18] I didn’t even think about that.

Lillian Karabaic: [00:12:19] Yeah, phones are expensive now.

Chase Spross: [00:12:21] They are!

Lillian Karabaic: [00:12:21] Yeah, and you don’t have to … If you’ve got an $800 fancy Pixel, or iPhone,  you don’t need to say, “Oh, I need $800 to replace it.” You need what it would take to get you functional again, if we’re calculating an emergency fund, right?

Chase Spross: [00:12:38] Yeah.


Lillian Karabaic: [00:12:38] Then, you need to consider your dependents. I’m talking about adults, childrens, pets – anyone that relies on you, at least in part. So, consider, if they got in a crash, or had a medical event, would you be on the hook for their rent or medical bills? Do you pay for their health insurance expenses? If you do pay for their health insurance expenses, what is their co-pays, and how likely are they to injure themselves or get sick? If you have an eight-year-old, you know they get sick all the time-

Chase Spross: [00:13:07] Yeah.

Lillian Karabaic: [00:13:07] -and are very likely to injure themselves depending on their proclivity towards real games or video games. That’s the kind of thing that you need to consider. When you’re looking at your dependents, usually you want to kind of do a little mental math on the likelihood. Pets are also included in this. So, I have a friend who has a cat, who likes to eat lots of non-food objects; has eaten multiple bicycle inner tubes.

Chase Spross: [00:13:36] Oh!

Lillian Karabaic: [00:13:36] They’re very expensive to get replaced, or taken out, I guess.

Chase Spross: [00:13:38] Yeah, you don’t put it back in.

Lillian Karabaic: [00:13:42] You don’t put it back in … The inner tube is not that expensive.

Chase Spross: [00:13:44] Yeah, no …

Lillian Karabaic: [00:13:44] It’s like $8-

Chase Spross: [00:13:44] It’s the cat removal.

Lillian Karabaic: [00:13:44] The cat removal is very expensive. They actually have two pet insurance premiums out on this one cat-

Chase Spross: [00:13:54] Oh, wow …

Lillian Karabaic: [00:13:54] -because the cat is so expensive.

Chase Spross: [00:13:56] Is it like a life insurance payout?

Lillian Karabaic: [00:13:58] Well, no, pet insurance is actually kind of like … It’s like bad health insurance.

Chase Spross: [00:14:04] Okay.

Lillian Karabaic: [00:14:04] It can be really great if you have a accident-prone cat or dog [crosstalk]

Chase Spross: [00:14:09] -yeah, because Gigi might need some insurance.

Lillian Karabaic: [00:14:13] Yeah, yeah, if you have some … We have an office dog, Gigi, who’s just … Shaky is the best description?

Chase Spross: [00:14:22] Yeah, shaky is a good description.

Lillian Karabaic: [00:14:22] A little … Just clumsy around life-

Chase Spross: [00:14:26] Yeah.

Lillian Karabaic: [00:14:26] -and objects.

Chase Spross: [00:14:27] She’s prone to eating non-food objects.

Lillian Karabaic: [00:14:31] Yeah, definitely. In the middle of a meeting we had yesterday at the station, she hocked something up on the carpet. We don’t know what it was, but it definitely wasn’t food.

Chase Spross: [00:14:41] No.

Lillian Karabaic: [00:14:41] Then she just goes on with her day.

Chase Spross: [00:14:43] Yeah, she’s-

Lillian Karabaic: [00:14:43] If we had to take her to the hospital, I think she would be a good candidate for pet insurance. So, this is the same thing – health insurance and pet insurance. The great thing is that there is an actual number on this, so despite all of my fuzzy-wuzziness about, ‘it’s really hard to come up with this number,’ you know what your deductible is?

Chase Spross: [00:15:00] Yeah.

Lillian Karabaic: [00:15:00] You also know what your out-of-pocket maximum is. That stuff is listed on whatever your insurance premium is, for any kind of insurance – for your car, for your health care, for your pet insurance. So, know that. In my case, I’m in a situation where I have a high deductible plan, which means my out-of-pocket maximum is $8,000.

Chase Spross: [00:15:21] Wow.

Lillian Karabaic: [00:15:21] Which sounds like a lot to have in an emergency fund.

Chase Spross: [00:15:24] Yes.

Lillian Karabaic: [00:15:25] If you have a high deductible plan, be aware of that. We’ve talked before about health savings accounts, which can be an excellent way to save up for that deductible if you do have high deductible health insurance plan. In my case, most of my expenses are paid for by this thing called co-pay assistance. So, I hit my out-of-pocket maximum for my insurance really early in the year because my drug is $4,000 a month.

Chase Spross: [00:15:49] Okay.

Lillian Karabaic: [00:15:49] So, I actually don’t have a lot of money in savings because I know that if I don’t get injured, or very sick in the first two months of the year, the rest of the year, I will not owe anything because my out-of-pocket maximum is hit on my insurance-

Chase Spross: [00:16:03] Okay.

Lillian Karabaic: [00:16:04] -and paid for by someone else; by co-pay assistance from the drug company. That’s a different rant. I’ve gotten into it before. But that is one of the things … I broke my wrist. It was $29,000 to the insurance company, but it happened in May, and I had hit my out-of-pocket maximum in February of that year. So, that’s a thing to consider – the likelihood you’ll hit your out-of-pocket maximum.

Chase Spross: [00:16:23] Yeah, so you just play it fast and loose after February.

Lillian Karabaic: [00:16:26] Yes, and I schedule all my appointments for after February [crosstalk] I don’t get any routine human maintenance work done, including  therapists. Everything happens after that.

Chase Spross: [00:16:36] Yeah. Leave your bike helmet at home.

Lillian Karabaic: [00:16:38] Yeah. I just try not to do anything dangerous for the first two months of the year. That’s my … Then, after that, it’s fine. Injure yourself. Get a $29,000 wrist surgery. Everything’s fine. That’s one thing to consider is the likelihood you’ll injure yourself and look at that out-of-pocket maximum and deductible.

[00:16:59] I’ve talked about this before, but if you don’t have access to a lot of savings, it’s worth paying a little more on insurance because you won’t be able to come up with the cash for a high deductible. So, that $8,000 deductible sounds really, really hard if you’re living on minimum wage. For example, the difference between a $500 and a $2,000 deductible on your car insurance might be $30 a month, which sounds  why would I pay $30 extra on my car insurance? But if that means that you only have to work three extra hours a month to cover that premium, it’s a lot better than the two straight months you’d have to work to save up that extra $1,500 to get a deductible covered, and you’d be without a car that whole time while you’re trying to save that up.

Chase Spross: [00:17:39] Yeah.

Lillian Karabaic: [00:17:39] So, if you don’t have a lot of emergency fund, it can often be better to pay higher insurance premiums so that your deductible is lower; not to mention, cheaper insurance often can mean less comprehensive cover in car insurance, meaning you might not be covered it all, depending who’s at fault in the crash. That’s an important thing to know. Every state is different with how car insurance works and what you’re required to have. Now, here’s the thing – I want you to add up all these things we’ve talked about.

Chase Spross: [00:18:08] Okay.

Lillian Karabaic: [00:18:08] You know what your monthly expenses – core expenses – are. We’re going to say they’re $1,000 in this scenario.

Chase Spross: [00:18:14] Okay.

Lillian Karabaic: [00:18:14] You’ve got decent rent, and you don’t spend a lot on groceries, and it’s $1,000, let’s say.

Chase Spross: [00:18:18] Okay.

Lillian Karabaic: [00:18:18] Then, you have a dependent. That dependent is likely to injure themself, and the deductible on the health insurance is the average deductible in a health insurance plan, so it’s $800. So, that’s $1,800, right there, for one month’s expenses-

Chase Spross: [00:18:32] Yeah.

Lillian Karabaic: [00:18:32] -and your child that runs into things.

Chase Spross: [00:18:35] Yeah, your old cat that-

Lillian Karabaic: [00:18:35] Or your old cat, or whatever it is. So, now you’ve got $1,800. Then, you go, “Oh, well, my deductible on my car that I need to get to work is $1,000, and I also have a deductible on my renter’s insurance that – if something bad happened, if anything got stolen – is what covers it, and that’s a $500 deductible.

Chase Spross: [00:18:56] Okay.

Lillian Karabaic: [00:18:56] Now, we’ve added all this up together, and it’s [crosstalk] .

Chase Spross: [00:18:59] $3,300?

Lillian Karabaic: [00:18:59] $3,300. Good mental math [crosstalk]

Chase Spross: [00:18:59] All right. I’m following! Yeah!

Lillian Karabaic: [00:18:59] So, that’s $3,300, and you’re like, “Oh, my gosh, that’s kind of a lot!” Or, you’re like, “Wow, that was a really cheap person. I added it all up, and I need a $50,000 emergency fund [crosstalk] if I’m going to cover everything … I got a laptop. I got everything that I need to cover …” .

Chase Spross: [00:19:22] My zeppelin requires a lot of insurance. My zeppelin has a high deductible.

Lillian Karabaic: [00:19:27] Whatever these things are. Yeah, “I own a lot of jewelry, so my homeowner’s insurance is really expensive,” or, “I live in a flood zone.” Any of those things …

Chase Spross: [00:19:34] Yeah.

Lillian Karabaic: [00:19:34] Here’s what I want you to think about. Emergencies, while they often happen in threes, I would say – not to get, once again, weird and cosmic about it …

Chase Spross: [00:19:45] Yeah.

Lillian Karabaic: [00:19:46] Usually, everything that can go wrong doesn’t go wrong at the same time. So, when you’re calculating out your emergency fund, it doesn’t necessarily need to be enough to cover everything. If you’re super-nervous, and you’re trying to save up that fund, maybe you want to go for six months of expenses plus your deductible on your health insurance plan. You want to plan for three disasters to happen at once, right?

Chase Spross: [00:20:06] Okay. Yeah, yeah, yeah.

Lillian Karabaic: [00:20:06] If you’re willing to play it a little more fast and loose, what I would go for is I would go for one emergency, or one month’s expenses as sort of my goal.

Chase Spross: [00:20:17] Okay.

Lillian Karabaic: [00:20:18] The emergency – whatever that emergency cost is to you. So, definitely, if you can, the deductible on your car insurance, if you have it, or your renter’s insurance. If you’re kind of in the middle, what I like to say is that you should be able to cover your deductible on your health insurance plan because that’s one of the big ones in the United States. You should also be able to cover one other emergency. Two emergencies is sort of what I would say is the medium conservative line.

[00:20:46] So, for me, my six-month emergency fund is based on being able to pay my living expenses, which are roughly $1,500 a month, but I don’t … I play it kind of loose, and I don’t put my emergency fund … I don’t put anything that kind of calculates out my health insurance in there.

Chase Spross: [00:21:11] Yeah.

Lillian Karabaic: [00:21:11] The reason I have a whole six-month emergency fund is because I have variable income. I can have months where no money comes in whatsoever.

Chase Spross: [00:21:22] Sure.

Lillian Karabaic: [00:21:22] For me, the function of a six-month emergency fund is because my income is extremely variable, and I’ve had months where I’ve just been living off my savings. Someone that has a more stable income, you can go a little closer. So, when you’re setting that goal, you want to go on the lower end. The other thing to think about, because job loss tends to be an emergency where you’re going to start pulling from your savings-

Chase Spross: [00:21:47] Yeah.

Lillian Karabaic: [00:21:47] Think about how quickly it would take you to replace your current job. If you’re in a highly regulated industry- you’re a nuclear reactor operator, and you work at the only nuclear reactor for three states, it’s going to take you … You’ve been working in nuclear reactor operations for 20 years … It’s going to take you a lot longer to find a new role, if your nuclear reactor gets shut down, or whatever, right?

Chase Spross: [00:22:12] Yeah.

Lillian Karabaic: [00:22:12] Because you’re in a highly regulated industry. There’s long, slow hiring times. So, you probably want a bigger emergency fund. If you’re someone that is a software developer in Silicon Valley, and it’s a boom right now, it might take you a day to get hired somewhere. Therefore, you might be willing to play it a little less- a little closer to the sleeve on that.

Chase Spross: [00:22:36] Okay.

Lillian Karabaic: [00:22:36] Think about both how variable your income is and, so that … If you’re someone that works on commission, all that money that you made in December, if you’re in retail commission? Maybe save it up for when nobody’s buying anything in August.

Chase Spross: [00:22:50] Okay, yeah.

Lillian Karabaic: [00:22:50] So that that variable income is a little smoothed. Last but not least, this is the high level. You’ve got your debt paid off. You feel really solid about your industry. The economy’s been doing well, or your industry is doing well. Some people use a low-interest credit card as their emergency fund.

Chase Spross: [00:23:12] Okay.

Lillian Karabaic: [00:23:12] The idea there is that you would rather have that money invested in the stock market, earning it. I always recommend at least one month you need in liquid expenses. That being said, if you have a lot of savings buckets, if you have a lot of savings funds, where you save recurring amounts for your pet who likes to eat bike inner tubes, and you have just a vacation fund, or you have other sinking savings funds that aren’t technically emergency funds, but you have liquid cash available, and you know that you have enough earning potential, and variable enough income – as far as like you’ve got multiple sources of income – I think it can be okay to do that. It’s not my … I’m way too nervous to do that. I’m way too nervous to live without an emergency fund, but that is a thing you can do if you’re … This only applies if you have no other debt! If you know that … You can have a mortgage, but no other kind of debt; no high interest debt. Do not use a credit card as your emergency fund if you are still paying on debt because when an emergency happens, you’re just getting herself into more debt, right?

Chase Spross: [00:24:20] Yeah.

Lillian Karabaic: [00:24:20] But if you know that liquid cash is something that can happen, some people like to do that. It’s kind of an advanced version of it. So, Lady Duck on the forums says that the 20 in 2020 Savings Challenges that we’re doing on the forum, which I totally recommend, can be a great way to start building your first emergency fund. She said, “This challenge has prompted me to consider turning our budgeting on its head. Normally I tuck a bit away in a million sinking funds that worked for stuff like annual bills, but it isn’t working for us as needed spending. Instead, I’m going to actually dump all that money into our savings bucket and take money out if we actually spend it. I also use YNAB and budget a month ahead. So, for January, we’ve saved $980.” Congrats! I think that’s an interesting way to look at it – the emergency fund bucket versus that … Before we close out the show, which we’re going to wrap up right now, there are two things that both Chase and I did-

Chase Spross: [00:25:18] Oh, yeah …

Lillian Karabaic: [00:25:18] -that were dumb things that I think both of us kind of had to come out of emergency fund saving.

Chase Spross: [00:25:24] Yeah.

Lillian Karabaic: [00:25:25] So, what was your dumb thing?

Chase Spross: [00:25:26] My dumb thing was my speeding ticket that I didn’t pay, and then I got my wages … We got a letter that said it was … It ended up doubling my speeding ticket, essentially.

Lillian Karabaic: [00:25:37] Oh, no!

Chase Spross: [00:25:38] Yeah. So, the original ticket was like $227, and I refused to pay it because I don’t … All right, so I’m going to get … I’ll be a little candid, but I operate out of a P.O. box, and-

Lillian Karabaic: [00:25:50] So, you decided that-

Chase Spross: [00:25:53] Yeah, my speeding ticket was from a camera, so I was like, “Nobody was involved here. This ticket isn’t real.” Turns out that ticket was real, and I ignored it for too long, and it doubled. They sent me a letter, and I ended up having to pay almost $550 on my $230 ticket.

Lillian Karabaic: [00:26:07] Yeah, which is about what we calculated it would cost you if you lost your keys to your car, which is an interesting strategy when you’re thinking about your assets.

Chase Spross: [00:26:18] Yeah.

Lillian Karabaic: [00:26:19] Even if the car doesn’t get totaled, if you lose your key, how much is it going to cost you to get back into your car?

Chase Spross: [00:26:24] Yeah, exactly. Oh, so this is this is a good example. I was doing a little bit of a savings fund- emergency savings fund, and that’s about … I killed my savings; about 500 bucks … I was playing it fast and loose. I could do one emergency, you know?

Lillian Karabaic: [00:26:37] Right.

Chase Spross: [00:26:37] If I didn’t find my car key right behind my car the next morning, that would have been two. The car key was about $500 to replace-.

Lillian Karabaic: [00:26:46] Because it’s one of those electronic keys, and it’s- .

Chase Spross: [00:26:49] Yeah.

Lillian Karabaic: [00:26:49] This is one of the things … The more expensive your car, the more expensive it is to replace your keys. I know some cars, you have to replace the entire transmission, if you lose the keys.

Chase Spross: [00:26:58] So, if I had lost my … This is my only key, so if I ran out of keys entirely … I don’t even know. A few thousand dollars?

Lillian Karabaic: [00:27:03] Yep.

Chase Spross: [00:27:03] Yeah …

Lillian Karabaic: [00:27:06] That’s like a dumb [crosstalk] .

Chase Spross: [00:27:07] -make an insurance claim, I guess.

Lillian Karabaic: [00:27:10] Yeah. I live in an apartment, and I got my ID and my key stolen out-  not at my house.

Chase Spross: [00:27:18] Yeah.

Lillian Karabaic: [00:27:18] Stolen out of my jacket at the skating rink of all places, and I had to get my key replaced. It was $90 to get my key for my house replaced because it was a fob. So, they had to have someone come out, and reissue it, and deactivate the old one. I guess their time is worth more than a locksmith’s time, or something. So, yeah-

Chase Spross: [00:27:38] I think locks are harder than computers.

Lillian Karabaic: [00:27:42] Also, they can … Yeah, normally, they can do it remotely. I don’t know.

Chase Spross: [00:27:45] Yeah.

Lillian Karabaic: [00:27:45] It’s frustrating to me. But that was another thing where … I have this sub fund, which I’ve talked about before, which is called the Stupid Mistakes Fund.

Chase Spross: [00:27:53] All right.

Lillian Karabaic: [00:27:53] That’s what I use for things like that, even though [crosstalk] Someone stole my key, but I still consider it a stupid mistake.

Chase Spross: [00:27:59] Yeah. That’s my whole budget – my Stupid Mistakes Fund.

Lillian Karabaic: [00:28:00] Your what? Your Stupid Mistakes Fund? I had to use that when I accidentally booked a plane ticket for the wrong day.

Chase Spross: [00:28:08] Oh, no!

Lillian Karabaic: [00:28:08] I had to pay a change fee.

Chase Spross: [00:28:09] Oooh …

Lillian Karabaic: [00:28:09] Who does that? I booked it for the wrong month, and I lost my passport 10 days before an international trip.

Chase Spross: [00:28:16] Eeee …

Lillian Karabaic: [00:28:16] That was in the Stupid Mistakes Fund.

Chase Spross: [00:28:18] Yeah.

Lillian Karabaic: [00:28:18] Yeah, $270 total because I had to go to Seattle, get an emergency passport issued, get a new ID-

Chase Spross: [00:28:25] You have to go to Seattle to do that?

Lillian Karabaic: [00:28:26] Yeah because that’s where the passport office is.

Chase Spross: [00:28:27] Geez …

Lillian Karabaic: [00:28:27] At least we’re close!

Chase Spross: [00:28:29] Yeah.

Lillian Karabaic: [00:28:30] At least I didn’t have to go to D.C., or something. So, yeah … Well, I think that wraps our show for today.

Chase Spross: [00:28:36] Yeah.

Lillian Karabaic: [00:28:36] We’d love to hear about- what is your emergency fund number? If you’re frustrated that I didn’t give you a precise number, I’m sorry, but it varies for everyone … But we love hearing from you, so email us your financial worries, or successes, or stories of opportunity costs at, or tweet us @Anomalily, or @ohmydollar.

[00:29:00] Oh My Dollar! is recorded at XRAY.FM Studios in Portland, Oregon and is syndicated through PRX. This episode was engineered by Chase Spross, who was also our guest. Our intro music was by Aaron Parecki, and your host and personal finance educator is me, Lillian Karabaic. Thanks for listening. Until next time, remember to manage your money so it doesn’t manage you.