The True Purpose of an Emergency Fund Is.....

💬 To keep you out of temporary poverty when bad things happen – allowing you to borrow at zero interest from yourself without delay or questions asked. 💬

– Household Finance 101 - Your Flight Plan to Financial Independence


🔶 Because being poor is expensive - even if temporary 🔶

There are two types of emergency funds:

🔹 Short-term - $1,000-5,000 - takes care of car breakdowns, a leaking water heater, or a broken A/C (in the middle of July) + other "Gotcha" stuff.

🔹 Long-term - 3-6 months of living expenses - takes care of structural setbacks such as a job loss and large unexpected expenses (medical, legal, major car or home damage not insured, natural disaster, etc.)

🔹 When sizing the long-term emergency fund, here are some factors:
◾ Income stability and redundancy.
-Single person: aim to have at least two sources of income.
-Couples: Check if your income is from unrelated industries /
sectors of the economy.

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◾ Consider the age of your home and cars.
◾ Existing medical conditions within the household.
◾ Level of insurance versus deductibles across all areas.

🔹 If you do not have an emergency fund, begin with the short-term version as the first priority. Then pay off expensive debts - and after that - turn the short-term fund into a long-term fund.

🔹 Keep the funds in a separate high-yield savings account (might as well earn some interest)

💪 Navigate your finances like an aviator boss - Stay smart and safe.