Life doesn’t always go as planned. To that end, an emergency fund is important for everyone who owns a home. How much should I have? While it might vary, here are some thoughts on how I come up with my numbers.
It is important to determine my monthly “run rate.” How much does it cost me, at a minimum, to get through a month? This includes my mortgage payment, car payment, utilities, groceries, etc. This would not include things like monthly savings or savings. For this case, my run rate is $5000.
I suggest keeping two months’ worth of my monthly run in my checking account. For those of you who are wage earners, I would keep an additional six months of reserves in a money market account (think Capital One or AMEX). If you are self-employed, then 12 months is likely more appropriate. By keeping this money in a liquid account (like checking and money market), you will have no issues withdrawing from it should an event require its use.
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