Dave Ramsey
is all about the emergency fund and I would most definitely agree with him. He advocates having $1000 in the bank until you pay off all your debts, excluding the mortgage. And then once that is done, build it up to 3-6 months of living expenses.
These past few years, I’ve been really focused on making and saving my income from the day-job to invest in Dividend Paying Stocks and must admit to neglecting my emergency fund. At times, I’ve had only around $1000, even though I paid off all my debts years ago.
However, in the past few months, I’ve been really committed to building my emergency fund up to $10 000, which is around 7-8 months of living expenses, and I could actually live off that for substantially longer-perhaps a year if I went extreme thrifty style and sold my car, etc. And, I’m happy to report that I will reach this goal on the 25th, when I get paid.
I like having a large emergency fund for the following reasons:
1. I live and work in a foreign country. I don’t exactly have the “safety-net” of family that most people do.
2. In Korea, interest rates are higher for bank accounts than in North America, which makes it not such a terrible place to store a bit of money.
3. My job is semi-unstable. While I just signed a 2-year contract at my uni, it would quite likely be cancelled in case of serious illness, where I would need to take more than a month or two off.
4. I have 2 cats. While they’re healthy, I of course want to be prepared in case they get sick and need surgery or something. That kind of thing isn’t cheap in Korea.
5. And, of course I need the same thing for myself. Although I do have health coverage, the way the Korean system works is that it’s partly user-pay, so you still have to pay out of pocket for many things.
6. My time in Korea is perhaps coming to a close and I need a stockpile of cash to facilitate my next move. Changing countries, with 2 cats and all my worldly possessions won’t be cheap.
Anyway, now that I’ve reached my goal of $10 000: all efforts will be focused on saving more of my day-job money to invest. Motivation has returned! I’d way rather be saving to invest, than saving for an emergency.
