During this global pandemic, many financial experts have offered advice on how much money should be in your emergency fund. Popular responses range from three to six months, with famed personal finance expert Suze Orman bucking that trend and recommending eight months.
In her recent LinkedIn post, Orman says, “I have long told everyone to build an eight month emergency fund. And my goodness, I get plenty of blowback for that. The critics say it is too much and too impossible.”
Adcock says, “A 2019 report from Ladder, a life insurance company, found that the average adult spends $1,497 per month on non-essentials. That’s roughly $18,000 a year on things we can do without — which is baffling considering how 78% of full-time American workers are living paycheck to paycheck.”
While $2,250 a month for eight months might not cover all of your expenses, it could go a long way towards helping you reach what many believe is an impossible emergency fund.
Non-essentials consist of eating out (including purchasing coffee), unnecessary cell phone upgrades, clothing and apparel, cable TV and other impulse buys which immediately drain money from your account and whose appeal fades even faster.
Far too many Americans believe they’re entitled and deserve everything they crave without having to make sacrifices. There’s no “waiting” for anything – it’s all expected to be here and now, which often leads to irresponsible financial decisions in order to placate their immediate gratification personality.
But we’re living in times of uncertainty and that’s not a time for naivety when it comes to an emergency fund. There are no guarantees in life – I repeat, none! All it takes is one drastic, uncontrollable change in our global society to impact our personal circumstances drastically.
Orman says, “It may take some time to get to eight months. That’s more than okay. Every week or month that you deposit money in a savings account is you standing strong and proud in your truth: you are building security.”
Instead of investing in luxuries and conveniences you’re convinced you need and deserve, why not invest in something far more valuable – yourself. Remember, every little bit counts towards the bottom line. And I don’t know about you, but $18,000 is an awful lot of money to waste on coffee and television.