this wasn't in the plan |but life is still pretty good

This post is in response to a post on the same topic over at I've Paid Twice For This Already


I've recently written that we're trying to build back up our emergency fund after accidentally depleting it. We've always had a pretty large emergency fund, so large at one point that we were pretty much able to live off of it for nearly two years while The Tall One went back to school.

At the beginning of the year, it was at about $7000 and in February we were introduced to Dave Ramsey, who encourages a $1000 emergency fund until non-mortgage debt is paid off. We decided that that made sense to us and started aggressively paying off our car loan and then my student loan. But, we made sure to keep $3000 in our emergency fund at all times. This is the max out of pocket for our insurance and since I was expecting Monkey, we knew we'd have some big medical bills in our near future. After Monkey was born, we decided it was okay to pull back our emergency fund to $1000 and toss the remainder at TTOs student loan. We feel fairly confident that TTO isn't going to loose his job anytime soon and if something big were to happen both our parents are financially able to help us out.

But then I screwed up. We took out too much and didn't account for having to pay our car insurance the next month. So paying that knocked our emergency fund down below $1000. It's almost back there though, at which point I'll stop sticking every extra penny in it and put those extra pennies towards either TTOs student loan or our mortgage so we can get rid of our PMI. I'll still throw some money to the emergency fund, because really I want it to be back at $3000 so we could cover most medical emergencies that would come our way (I'm really hoping our tax refund will help that, if it turns out that it won't, I might change my plan and put the student loan and mortgage on the side burner for awhile).

Ultimately, I want it to cover 6 months of living expenses. But that's quite far off and we don't really have an action plan in place to get it to that point.

So, that's the long answer. The short answer is I'm quite comfortable with $3000 in my emergency fund.