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Emergency Fund Calculator
Emergency funds can help you to navigate tough financial situations of all kinds. You might have found yourself in a bind where you need emergency money for a car repair, a medical bill, or some other kind of emergency cost. If you do not have any money in savings, this bill might result in real financial hardship for you.
The best way to prevent this kind of hardship is to have the right emergency funds on hand for these kinds of needs. But how do you know how much money to put aside for each kind of issue? If you are not sure what the answer to this is, you need to use an emergency fund calculator to help you determine the amount of money that you need to save for each kind of emergency.
If you are not sure how to use this handy tool, read on for more information!
What is an Emergency Fund Calculator?
This handy tool helps you to determine the amount of money that you need to set aside for different kinds of emergencies. There are various styles of this tool, but all of them will help you have three to six months’ worth of expenses put away to make sure that you will not have trouble paying for surprise expenses when they crop up.
A good emergency fund calculator will either be a 3-month calculator or a 6-month emergency fund calculator. All of these emergency fund ration calculator tools will help you to look at your total spending and your total income to help you budget a practical amount for your emergency fund.
You might be wondering how much should I have in my emergency fund calculator? This is a common question and the answer can depend on a variety of considerations related to your personal situation. There are many ways of using these kinds of tools, from the emergency fund set out by Dave Ramsey, to the advice that you can find on the emergency fund Reddit.
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What is a Good Emergency Fund Amount?
If you are wondering how much an emergency fund should be, a good baseline is that you should have no less than $500 in your savings account at any given time. The rest of the answer to the question is dependent in part upon your average monthly income as well as your monthly bills.
The emergency savings fund calculator will help you determine if you can set aside three or six months’ worth of your income for emergencies. You do not want to set aside so much of your income that you do not have enough money to live on, but you should have enough money in your savings in case you lose your job, suffer a major financial setback or end up dealing with a major incident that forces you to take time off of work.
Are There 8 Month Emergency Fund Calculators?
Any good calculator can be used to create as many months of an emergency fund as you want. You should be able to just extend the savings period to whatever term you would like to have set aside. You can do the math to calculate this process by hand if your 3-month emergency fund is not enough.
There is no limit to how much you can choose to have in savings. The calculator that you use can be exponentially calculated to add more to savings than the set period of the originally intended calculation period.
Free Emergency Fund Tracker Printable Download
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Where do I Save my Money for my Emergency Fund?
If you are wondering how much should I have in an emergency fund calculator, you should probably also consider where you are going to save your money that is to be used for your emergency fund. Some good options for your saved money are:
· A Savings Account With a High-Interest Rate
This kind of savings plan can be a great way to make your money work hard for you. Always make sure that this account provides easy access, however. Some savings accounts do not, and that makes your account inappropriate for use as a savings account. You do not want to have your emergency fund tied up in a long-term investment account.
High-yield accounts are always a good choice as they will create added savings as the account grows and matures for you while you are not using it. The money in these accounts accrues interest and you can gain access to this money whenever you need it without a delay.
· A Regular Savings Account
If you do not have access to a savings account that is high-yield, it is a good rule of thumb not to save your money as actual cash in your home. You do not want to have your stash of emergency cash stolen from you if your home suffers a break-in or if someone finds out that you are saving cash in your home.
A regular savings account will keep your money safe and you will not be as tempted to access it if it is in a separate account from your checking account. Savings accounts that are not high yield will not work as hard for you but you can still keep your money safe in this kind of account until it is needed.
Check out Varo Savings account.
Ways to Add to Your Emergency Fund
If you are using your emergency fund calculator but you think that you might have the chance to save even more money each month, you can use these tricks to add to your savings.
· Move Money Automatically
You can set your checking account to move a set amount from each paycheck into your savings. This will help you not to forget to move money to savings and you will be amazed at how fast even $50 can add up each month.
· Use a Savings App
Using a budgeting or savings app can help you to focus on saving money each month and also make sure that you follow the savings goals that you set out with your emergency fund calculator. Savings and budget apps can make you conscious about the amount that you are spending each month and help you to see areas where you can save money on a daily basis.
· Put Tax Refund in Savings
Your tax refund is money that you would not normally count on for your daily expenses and this lump sum can seem very tempting when you think about all the things that you can buy with it. Always consider putting this entire amount into savings and forgetting about it until a rainy day. You will be glad that you did this with your tax refund instead of buying some new toys, clothes, or having friends over for a party when an emergency happens.
· Consider Investing Some of Your Money
If you have not done so, consider getting the help of a financial advisor to see if there is an amount that you can invest that would help you to start building up an investment portfolio. The buy-in for different investment companies and stocks can vary, so having an investment expert on your side can be a big help to your investment process. Investing money can be a great way to move your money to an account that makes it work hard for you while you don’t even think about its existence.
You will have to pay taxes on money that you take out of these accounts, but if you are in a dire emergency, having your money work hard for your needs can be the difference between running into real financial hardship and being able to weather the storm. You can add a calculation to your emergency fund calculator to help you save for this need if you want.
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How to Use an Emergency Fund Calculator
To use your emergency fund calculator, you will need to enter some basic budgeting information first.
- Amount of your rent or your mortgage?
- Property taxes
- Insurance
- HOA
- Car payment
- Gas
- Car insurance
- Car Repairs
- Utilities
- Internet
- Gas
- Water
- Trash
- Electricity
- Medical insurance
- Average food costs
- Dental insurance and vision insurance
- Monthly prescriptions
- Credit card bills
You might have other monthly expenses that you can add to your spreadsheet as well. This amount will total at the bottom of each category. The number at the very bottom will be your total expenses for each month.
Figure out your income handicap. This is the amount that you should budget to help tide you over until you can get a new job. This might vary depending on your job, but for most people, this means that you want to have about 3-6 months of your total expenses saved up at any given time just in case you lose your job.
Income handicap can be calculated by taking half the number of years that you have been working at your job and then multiplying out the income that you would lose to get back to this income level.
The longer that you have been working at your job, the harder it will be to get back to the same income level. This is especially true if you own your own business.
Mathematical Calculations
The best way to calculate your emergency fund is to use this calculation:
Emergency Fund = (ME x6) + (IM x 3) + (ME x IH) + PE
This is roughly 6 months of your monthly expenses plus three months of your income margin, plus several months of your monthly expenses considering your income handicap.
You can also add additional cushion with your monthly transfers to savings and other ways to create an additional savings cushion.
Example:
ME= 18,000 in income a month
IM = 0 ( employee)
IH = 3
PE = 16,000
This means that the formula indicates that the emergency fund for this person should be around 178,000.
This might seem like a very steep number, but consider how much freedom you would have if you were able to save this much money before you lost your job. You would not have to panic in the slightest and you could consider moving to a new location, changing careers, and applying for your dream job!
The goal of any emergency fund is to provide you with the financial security to be protected from losing your home, car, or having to default on any of your bills and damage your credit. Even the smallest emergency room charges and hospital stay can amount to thousands of dollars. Car repairs can be thousands of dollars as well.
You can see how quickly your emergency fund would be eaten up if you had bad luck and needed to pay for medical bills, a mortgage, and some car repairs while you were not working!
Free Emergency Fund Calculator Spreadsheet Download
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Using an Emergency Fund Calculator Correctly Can Protect You From Hardship
While saving money can feel painful at first, you will be grateful that you took the time to do so when you need the money to help you recover from a setback in your life. It can be tempting to live paycheck to paycheck to enjoy your life and have lots of fun, but all of this fun will come to a crashing halt if you suffer an injury, need to pay major medical bills, or lose your job.
Preparing for worst-case scenarios can make your life much better when things happen that you cannot totally plan for. There is no exchange for financial security if you can create it for yourself. Remember that your emergency fund calculator can be adjusted to help you collect 3, 6, 9, or even 12 months of savings!
If you can prepare for the worst, you should always take the time to do so. Your future financial security might depend on the use of an effective savings plan and you would hate to find out that you did not budget enough money to take care of your needs once an emergency arises.
