The Big Question: How Much of an E-fund

I thought I had this all figured out, but it turns out I don’t.

I have NO IDEA how much money I will ultimately need in my Emergency Fund. None. It seems like the more I think about it, the more I need.

Let’s say that I end up needing $5,000 for each of my pets. Well, there is $15,000 right there! Well, I should also have $5,000 for any sort of car problems. Now we’re at $20,000. Also, what if I don’t have a job? I should have at least 6 months of money saved up? Right?! Well, based on my standard of living now (assuming that I STOP saving during that time) – I’d need another $9,000 right there. What if I’m in some horrible trauma of some sort and I need medical coverage that is beyond what I current have? Well, I imagine that I should have another $10,000 saved up for that as well. Now we’re looking at having an emergency fund of *gulp* $40,000.

And that’s just for “Emergencies” — what if I include the money I should save up for “planned expenses” — money for a down payment on a house? Another $20,000. Money for a new car? Another $20,000. Money to get married? How about we just throw another $20,000 in the mix. Heck, before you know it… I need to save $100,000… just to make the next 10 years of my life work and be FULLY PREPARED for any emergency and planned expense. And this is without even THINKING about children!

How long would it take me to save this much money? Oh easy… just a short… 15 years at this rate! All without contributing any more to my retirement.

That just seems… IMPOSSIBLE!

I know there is an element of exaggeration here and one of downright stupidity – but at the same time, if I follow the advice of every financial advisor ever I’m left saving all of my money for the next 15 years – past the time I would even need it. I mean, there’s NO WAY that my cats will live that long, nor Jack, or that I’ll be able to make my current car last another 15 years of life past the 7 it has already given me.

It seems, in some ways, that we’re NOT SUPPOSED to prepare this much. We’re supposed to take it one or two emergencies at a time, and not worry about the rest.

So, at the end of the day, it seems like $10,000 is a sufficient emergency fund – and when I use it – and I will use it, eventually – then I start saving again to get it back at this point. And who knows, maybe nothing bad will ever happen and I’ll never need that fund. But life typically doesn’t work that way – emergencies happen, life happens – I just need to be prepared for SOME of it. Not all of it, the rest I can worry about then, but rest assured that I’ll be covered for the first one and that will give me time to prepare for the second. =)

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