fbpx
Emergency Fund Calculator

PEACE OF MIND IN AN EMERGENCY

An emergency fund is what gives me peace of mind when unexpected events happen. Check out my emergency calculator and let me know what you think. Bookmark this page now for future use. And feel free to share it with anyone!

A reliable emergency fund is the most critical part of my investment strategy. Check out this article for the best places to park your emergency fund. I created this emergency fund calculator to help you pinpoint exactly how much you need in your emergency fund.

Advertisements

ABOUT THE CALCULATOR

When creating this calculator, my goal was to make the most comprehensive emergency fund calculator. I based it on my own experiences and what I thought that most people would deem essential if they lost their job or ran into some other emergency.

After viewing other sites, I found their calculators to be lacking. So I ventured to make the best emergency fund calculator on the internet.

First, type in your monthly expense in each box. If the cost doesn’t pertain to you, either leave it blank or type “0”.

Advertisements

Type in the number of months that you’d like to calculate. The default is at 6, but you can change it to however many months you’d like.

And presto, you’ve got your emergency fund goal staring right at you.

EMERGENCY FUND ACTION PLAN

Now that you’ve got it calculated, do you have enough saved up for a rainy day? If so, congratulations! You are one of the elite few on your way to financial freedom.

If not, then start a game plan to get there. Set aside some money every month to stash away in your high-yield savings account. Keep it simple.

Every year when you get a pay raise at work, increase the amount you put away. If you’re starting from scratch, it may take you a few years to reach your goal. But don’t worry, even a 1-month emergency fund is better than nothing.

Advertisements

Sometimes, you’ll come up with additional money to put away. Here are some life situations that will allow you to save even more every month. Not all of them will pertain to you. But if any of them do, it’s like getting a pay raise at work!

  • Paying off a car loan
  • Paying off a student loan
  • Paying off your high-interest credit cards
  • Paying off a mortgage
  • Getting a bonus at work
  • Your child graduating from daycare to a free public kindergarten
  • Moving to a home with lower rent or mortgage
  • Eating out one less day a week
  • Giving up or decreasing an expensive habit
  • Inheriting money from a rich relative
  • Picking up a side hustle

The list goes on. There are plenty of ways to increase your monthly income or decrease your expenses. By doing so, you’ll reach your emergency fund goal faster.

EMERGENCY FUND VERSUS INVESTING

What about investing? Should you give up entirely on investing while you’re building up your emergency fund?

No, you don’t have to. I believe that the best way to financial freedom is through investing. The earlier you start investing, the better.

Through the power of compound interest, it would be better to invest $10,000 at age 25 than to even invest $20,000 at age 35.

Advertisements

Consider this, $10,000 invested for 40 years with 10% theoretical returns would yield $452,592.56. 

Investing $20,000 for only 30 years would only yield $348,988.05.

That’s an additional $100,000 starting ten years earlier with just half the amount!

That’s why it’s so important to start investing early.

EMERGENCY FUND 80/20 RULE

So how do you start investing if you’re still saving for an emergency fund? I made up this process called the 80/20 rule. Note that 90/10 or 70/30 would also work just fine.

Advertisements
M1Finance.com

Quite simply, if you haven’t reached your emergency fund goal yet, then dedicate 80% of your monthly savings to your emergency fund and 20% to your investments (e.g., 401k, Roth IRA, low-cost S&P 500 ETFs, etc.)

Once you’ve reached your emergency fund goal, then switch to 80% investments and 20% emergency fund.

For example, if you have $100 leftover every month after paying your bills, you would stash $80 toward your emergency fund and $20 toward your investments. If you already reached your emergency fund goal, then you’d put $80 toward investments and $20 toward your emergency fund.

Why would you keep putting money in your emergency fund if you’ve already reached your goal? Because you never know what’s going to happen. Your emergency fund target is not an exact science. You may need more or less depending on what life throws at you.

I err on the side of caution and would rather be safe than sorry. Warren Buffett famously stated his first two rules for investing. “Rule number 1, Never lose money. Rule number 2, Never forget rule number 1!”

By having an emergency fund, you can rest assured that even if your stock investments fall or if you lose your job, you still have something to fall back on.

I hope that you enjoyed this article. If you did, please leave me a comment below and share this with someone who could benefit from my free emergency calculator. Feel free to share it on your favorite social media site. 

Happy saving and investing!

Want to learn the principles that help me to consistently beat the market? Check out my free eBook, 5 Things I Wish I Knew Before Buying My First Stock.

Stock of the Month: Bank Of America (BAC)

Stock of the Month: Bank Of America (BAC)

Bank of America (NYSE: BAC) is the November stock of the month. With promising news of a coronavirus vaccine, the theme lately has been about the “reopening stocks”. As I scrutinized stock of the month candidates that will benefit the most from the vaccine, it was...

Beyond Meat Stock Fried – Time to Buy?

Beyond Meat Stock Fried – Time to Buy?

Beyond Meat stock (NASDAQ: BYND) got fried after releasing its Q3 2020 earnings on Monday (November 9, 2020). Beyond Meat stock was down 36.7% from last month's highs of $197.50 as of yesterday's closing price of $125.01. In this video, I discuss two reasons why the...

3 SPAC Stocks to Buy Now (November 2020)

3 SPAC Stocks to Buy Now (November 2020)

SPAC stocks continue to rise in popularity. These special purpose acquisition companies make it easier for a private company to go public than the traditional initial public offering (IPO) process. In this video, I review three pre-merger SPACs in their searching...

Lordstown Motors Down 60 Percent – Time to Buy?

Lordstown Motors Down 60 Percent – Time to Buy?

Lordstown Motors (NASDAQ: RIDE) went public on October 26, 2020, via a special purpose acquisition company (SPAC) merger with Diamond Peak Holdings Corporation. The stock was down nearly 60% from its highs set just 2 months ago (based on the November 2nd close of...

Subscribe
Notify of
guest
6 Comments
oldest
newest most voted
Inline Feedbacks
View all comments
Ildiko
Ildiko
4 months ago
Reply to  Donnie Nguyen

Loved your post and the calculator looks pretty inclusive. Your suggestions of putting money away early is spot on! I will share with my sons who are in their early 20s. Right now knowing where to invest your $$ is the challenging part for us!!

Simplylivingxob
Simplylivingxob
4 months ago

Love this post! My husband is a HUGE finance guy – talks about our stocks everyday! Fun for him, not so much me hahaha I shared this post with him and he loves it! Thanks for sharing!!!

Simplylivingxob
Simplylivingxob
4 months ago

Awesome post! I shared this with my husband who is a huge finance guy – that talks about our stocks every single day haha – he loves it. Thanks for sharing!!

Donnie Nguyen

Donnie Nguyen

Donnie Nguyen is the founder and CEO of Wolves of Investing. He started investing in the stock market in the early 2000s. He follows the teachings of Peter Lynch, Warren Buffett, and other investing legends. When he's not investing or blogging, he loves spending time with his family traveling and experiencing the world.

Follow Donnie on Facebook and Twitter!

0 0 vote
Article Rating

Pin It on Pinterest

Shares
Share This