What = 3 - 6 months' living expenses?

We all know you're *supposed* to have that Emergency Fund saved up and stashed away. And better to have more liquid funds, than less. But how do you calculate 3 months' "living expenses"?

1. The amount of your gross salary salary for 3 months
2. The amount of your net salary for 3 months, because if you lost your job you wouldn't be paying taxes and some other deductions
3. The amount of your usual budget for 3 months, minus amounts normally put in savings/investments accounts, and amounts spent on non-essentials such as clothing, vacations, etc.
4. The amount of your usual budget, minus the taxes, minus the transportation costs (because you're not driving to work) but plus the full cost of health insurance because it wouldn't be partially subsidized by your employer
5. Other ....

Can you see why I find this confusing and never feel like I have "enough"?

How much it costs you to live at the normal level you now enjoy, averaged on a monthly basis multiplied by 3-6 months.
Not minus anything, ie. taxes,savings, etc., not plus anything you don't "normally" have as an expense, ie. a once a year purchases.
Essentially ALL of the monies you're putting out on a monthly budget.
Don't over analyze this. Just roughly guess, it doesn't have to be exact.

Yes, it can be confusing. To make it simple, it's 6-9 months of Gross income that should be in your savings account.

I never feel like I have enough either... but in all honesty, what ever you feel comfortable with should do the trick.

number 3-- Just what it normaly take syou to get through an AVERAGE month.

For me, here's how I calculate it.

Take an 'average' month of expenses (including gas and other transportation) and multiply times 6. You wouldn't be driving to work, but you would be looking for work, going on interviews, and honestly taking some time to 'just get away from it all'.

Your salary really doesn't factor into it because you can always buy with credit cards. So figure out how much _should_ go out each month. (yeah, it'll be a very scary number)

You have to determine what you will spend per month taking into account all of your payments. If you are spending 30,000 per year to pay for everything you would divide by twele to determine how much you are paying per month and then if you want three months of a safety net you would have savings of $7,500 or $15,000 for six months.

It is very easy to over-analyze this situation, which is probably why you are getting so confused. Don't worry about deducting the costs that you would normally have if you were employed; that amount of money will probably be spent on unexpected expenses, even if you're not working, and possibly on an emergency that you weren't expecting. (My dog was recently bitten by another dog and she received a 1 1/2 inch laceration that required 8 staples to close the wound. $200 later, we were on our way out of the vet's office). Also, I wouldn't deduct the cost of transportation, becuase if you lose your job, in all likelihood, you will still be driving your car to look for another job, or at least to run errands, go to the grocery store, etc.. The exception to this would be if you had a long commute to work, so an hour or so, where the cost of gas would really add up. I would definitely add in the cost of health insurance because as you say, it won't be partially subsidized by your employer, and this expense can be costly. When I had insurance through my employer, I only paid $90 per month for it. Now that I own my own business and am respnsible for my own insurance, I am paying approximately 3 times that amount for similar coverage. So, I would think you would be fairly safe in calculating 3-6 months worth of living expenses based on your monthly net salary as well as factoring in the cost of health insurance. If you really want to play it safe, I would figure 3-6 months worth of living expenses based on your gross income - that way it gives you a little bit of cushion for emergencies and unexpected expenses. However, I don't know too many people that have that kind of money laying around in the savings account.

That depends on your budget.

If your monthly gross income is bigger than your monthly spending, then use your monthly gross income.

Though in average, use your monthly spending, not minus anything at all.


I have been advised to collect money for 40 years of living expenses, so the monthly spending times 480 months is used here. The trick is, get as much as you can, spend as much as you need. Keep doing that until your goal achieved.

Overkill, yes. But you would feel a lot better in life.

Also remember that a change in lifestyle means a change budget means a change in goal.


It should also be noted you could be not working for years, a less than a year safety net isn't good enough.

3 months living expenses = 25% of your total expenditures for an entire year. Include everything: food, transportation, entertainment, insurance, taxes, presents for holidays and special occasions, etc. Include all spending: cash, credit, debit, gift cards, barter, any outside assistance. Your income has nothing to do with it.