hello. i am 25, i work a warehouse job making 19.75 an hour. it is the ONLY job i could find after 7 months of searching, so getting a higher paying job is mostly off the table for now. i have saved $6,000 as an emergency fund, i was aiming for $8,000 as that is 6 months of expenses (before making/adhering to a budget). my question is whether this is too much money or not for my circumstances. i live with my parents and don’t pay rent, and the $8,000 figure includes an imaginary rent payment that i put away every month into my savings (because i want to move out asap). i could lose my job at any moment i feel, i have little job security as i work in an entry level, low skill role. sorry for the disorganized post, my head has been in a bad spot lately. just trying to stabilize and get everything sorted out. thanks.
how much emergency fund before investing?
byu/EquenimeusW inpersonalfinance
Posted by EquenimeusW
11 Comments
6months is the guideline. But if you’re in a tougher situation with more risk/unknown, then do more. There’s not really a ‘too much’. Too much just means the money isn’t earning more elsewhere, but thats the only downside.
Given your situation, stocking it all in an emergency fund isn’t that unreasonable. If your job offers a 401k match, I’d take advantage of that. Otherwise, getting yourself on solid ground before investing is fine.
6 months of expenses given unstable job situation and you wanting to move out ASAP.
>i live with my parents and don’t pay rent, and the $8,000 figure includes an imaginary rent payment that i put away every month into my savings (because i want to move out asap)
A smart move.
That being said, as long as you do live at home, your emergency fund needs are probably very low as if you lose your job, you don’t need to pay rent.
Size your emergency fund based on expenses and job security.
3 months expenses, minimum. 6 months rule of thumb. 12 months if you feel your job/lifestyle/industry is precarious.
>i live with my parents and don’t pay rent
If your expenses are very low, then you don’t need much in emergency savings.
However if you plan to move out, then save based on those future estimated expenses.
>i could lose my job at any moment i feel, i have little job security as i work in an entry level, low skill role
Fair concern. What would the impact of that job loss be?
If Mom and Dad are paying for housing and groceries, probably not much of an impact. If your income is helping to keep the household afloat, then maybe there would be an impact.
That’s way better planning and saving than I had at 25. I would say if the job is not satisfactory I would recommend getting some trainings and certifications. Invest in that such as AWD, Salesforce admin certi and in a year you could get a good desk job. Investing in market with that money will not have a big return unless you are satisfied with small returns.
Start investing. You need only 3 months of expenses save based on your situation and could make a case 1-2 months is fine since you live at home which is nice. Hope this helps!
There’s a way to do both at the same time at your stage. It’s called a Roth IRA.
6k is not enough, I would wait until 15k and keep it in a high interest savings like SOFI 3.6% interest.
If your employer has any type of match, invest enough to get the full match (free 100% return on your investment) regardless of emergency fund amount right now.
Also, your warehouse job, wait until you have been there for 14 months, and then go apply at your companies competition down the street or another warehouse job, they will often pay you a bit more to steal you from your employer, you are already trained also, so you would be a higher value candidate.
If you are finding you might be stuck in a warehouse role for the foreseeable future, lean into it. Take Community college courses that can teach you about logistics, technology, shipping etc.
In today’s job market I recommend 12 months of expenses in your emergency fund.
If you’re planning to move out I’d consider saving a bit more than you’re expecting. Most places will have deposit requirements anywhere from $500 to $1000 and then you have to consider the starter stuff you need for your first place. For example, just an entry level washer/dryer would run you $1000. Even an uncomfortable IKEA couch is upwards of $600+. Kitchenwares are expensive, the list goes on. Id plan out how you’re going to furnish this place before you make the move and make sure your emergency fund isn’t going to be depleted by all the stuff you’ll need.