Emergency Fund question

Toomuchtodo

Hi, just wondering if someone can advise me. I'm working on my SOA and new budget, (it's taking ages I don't want to miss anything), but I am wondering what the emergency fund budget is supposed to cover? The reason I'm asking is i know our washing machine is likely to die in the next year so want to put a bit away every month to cover buying a new one, we also live in a house that seems to have everything wrong with it and just had to do major rebuilding of the bay which was unplanned and unbudgeted work :eek: So naturally I'd like something to cover these kind of things however also want to hit the debts with as much left over money as we can to clear them quicker so don't want to be 'saving' too much every month.
Thanks for any advice in advance

Larac

ImUOTE=Toomuchtodo;discussion/5025356]Hi, just wondering if someone can advise me. I'm working on my SOA and new budget, (it's taking ages I don't want to miss anything), but I am wondering what the emergency fund budget is supposed to cover? The reason I'm asking is i know our washing machine is likely to die in the next year so want to put a bit away every month to cover buying a new one, we also live in a house that seems to have everything wrong with it and just had to do major rebuilding of the bay which was unplanned and unbudgeted work :eek: So naturally I'd like something to cover these kind of things however also want to hit the debts with as much left over money as we can to clear them quicker so don't want to be 'saving' too much every month.
Thanks for any advice in advance[/QUOTE]

In my case as I am on a DMP I need an emergency fund as I have no access to credit to cover unexpected events. In the last year it had to cover an unexpected tax bill and vets bill which although insured I had to pay up and then reclaim back which was an eye watering 700 pound for a minor op. Previous to that I have had to replace the gas cooker. You never know what is coming next so IMHO you need a reasonable reserve.

Mort

Our emergency fund was, if I remember correctly, around the £600 mark at it's highest. It coped with most events. It's when expensive things like central heating boilers and cars go wrong that things become unstuck. The level of the fund will depend upon how much you can squirrel away, how good you are at leaving it alone and how long your current financial situation will last.

A decent new washing machine, which is the item you are worried about can be got for about £250 so why not try to aim for that much over a year which is about £20 a month.

Meatloaf1981

If you can get it, a good rule of thumb is to have three months rent/mortgage stashed aside, just in case the worst ever happened. This isn't always possible though, because lord knows when you're in big time debt (And I am), then saving anything is hard going. My SO holds the keys to that purse, as it were, and now we're expecting a child next year it is going to be more key than ever!

Meat

[Deleted User]

Own or rent?

If renting, add together the cost of replacing the two most expensive essential items (FYI a large screen TV isn't an essential item ), then save that amount ASAP.

If owning, you need to aim for a lot more, as the potential breakdowns/failures can cost a lot more.

TrustyOven

I think many personal finance blogs say 3 to 6 months of total expenses.

So for e.g., my monthly expenses are £950.
So my emergency fund should be £2850 minimum, or ideally £5700 for 6 months.

But if one is in debt / is just starting out, then I hear amounts such as £500 or £1000, and also I come across what Bedsit Bob wrote above.

sourcrates

A lot of DMP`s, IVA`s etc fail at some point because the person concerned has had some kind of disaster where an expensive item has gone on the blink, and they simply didn't have the money to replace it, and make the debt re-payments.
A lot of people budget incorrectly, and save far too little into an emergency fund, and this can derail you big time.
So its always best to save a little more into the fund, than not enough, so if your going to be paying into a debt management plan for some years, you have to budget for possible replacement of tv, washing machine, fridge, etc.
Stuff breaks over time, so its imperative you budget correctly.

moohound

I would say that if you know something is on its last legs you should try and budget for its replacement separately to the emergency fund, which is for unexpected expenses.

Dave Ramsey reckons $1000, which is about £650 will cover most things, but once you get to that figure it would seem sensible to try and keep topping it up by a small amount each month to allow for rising costs, this is done before concentrating on paying off debts

He goes on to say once you are debt free THEN save for 3 to 6 months of expenditure - I think of this as a disaster fund (loss of income) rather than an emergency fund (having to fork out for stuff but still have a job)

Toomuchtodo

Thank you for all the advice. We own our house and have had to do a lot of unexpected work since we bought which is where the debt has come from. I would really like to have it sorted so if anything comes up I can cover it without borrowing.

Buffythedebtslayer

Bedsit_Bob wrote: »

Own or rent?

If renting, add together the cost of replacing the two most expensive essential items (FYI a large screen TV isn't an essential item ), then save that amount ASAP.

If owning, you need to aim for a lot more, as the potential breakdowns/failures can cost a lot more.

TrustyOven wrote: »

I think many personal finance blogs say 3 to 6 months of total expenses.

So for e.g., my monthly expenses are £950.
So my emergency fund should be £2850 minimum, or ideally £5700 for 6 months.

But if one is in debt / is just starting out, then I hear amounts such as £500 or £1000, and also I come across what Bedsit Bob wrote above.

I am aiming for 6 months(a tortuously slow process), I think when in the midst of heavy debt repayments I would consider things like car expenses (if you have one for work for example) as well as the above. I would aim for 500 pounds to a 1000 eventually.


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