Emergency Reserves

Right away you may wonder why we have listed 3 months of Emergency Reserves as one of our goals rather than 6 or more months. The answer is an embarrassing truth. We just don't believe we can put together 6 months of savings anytime soon.

Most searches we conducted state 3 to 6 months of Emergency Reserves should be on hand and most financial planners actually state 6 to 9 months. It's a lot of money when you add it it up. We settled on 3 months because we felt it was an obtainable goal for us.

Acknowledging that our goal is not adequate we have agreed to fund an extra month of Emergency Reserves per year. To do so we will set up automatic transfers of a set amount every pay period. We calculated our Emergency Reserves by listing all of our monthly living expenses while reviewing our bank statements to ensure we captured them all.

Our definition of living expenses is our house, car, utilities, food, and all recurring payments. We then took this amount and multiplied by 3 for our 2009 target. To fund the additional month of Emergency Reserves for 2010 throughout the year we simply divided our living expenses by the number of pay periods in 2009. This is the amount we will transfer every pay period.