What does a fully funded emergency fund mean?

What does a fully funded emergency fund mean to you? 


There is a lot of banter among personal finance blogs, writers, experts, and even everyday people about the fully funded emergency fund.  The general wisdom is that a fully funded emergency fund is 3 to 6 months of expenses in savings or another easily liquidated account. David Ramsey recommends 3-6 months and Suze Orman after years of recommending 3 months has bumped it up to 8 months.   Besides 3 to 6 months being a wide range for even the average person, it begs the question - what does the “fully funded” emergency fund mean to you?  Is 3 to 6 months enough?  Is it too much?  Do you trend towards the 3 or the 6 or something else entirely?  What do you do if you have debt?

I personally am pushing towards almost double that amount. I always had the 3-6 months for many years while working the Dave Ramsey plan after we got out of debt.  However in the fall of 2009, my husband got laid off from work.  We had 6 months of living expenses at that time. We went into super super frugal mode. No eating out, no school fundraisers  saying no to some social obligations. I picked up some extra freelance work and we had unemployment pay plus a small severance pay. Eight months later my husband was able to get a new job-at a 25% pay cut.  We spent about 1/2 of the emergency fund. I  really  hated that feeling and stress that came with it.    My security gland has been triggered and we are slowly building up to 12 months of living expenses. 

What if you have credit card debt-what should your emergency fund be?

If you have credit card debt and no savings, its definitely worth putting some towards each. Perhaps half towards debt and half towards the savings. Maybe 1/4 towards one and 3/4 towards the other to build up the 3 to 6 months. 

It may also depend, realistically, on how bad off you would be if you lost your job (or needed to tap that fund for another reason). If you’re renting an apartment and could just as easily move in with family (even if that would only be a last resort), that’s different than if you either have a mortgage or don’t really have someone else’s couch to crash on.