Archive link: https://archive.ph/PgtUk
That makes a ton of sense. To add some numbers to it:
- $1k in the bank - should be enough for any one emergency
- 1 month e-fund - no longer impacted by payday being late
- 3 month e-fund
Getting to step 1 can be very difficult, especially for the lower class, but $10 or $20 at a time can get there. But it needs to be intentional, and that’s really hard when working two (or three) jobs, so many just don’t put in the consistent effort needed to get there. But once that first buffer is there, the rest becomes a lot easier since you’re no longer getting pushed backwards.
I disagree strongly that $1k is enough for any one emergency. My healthcare deductible is higher than that. The last two times I’ve needed car repairs, the bill was $2-3k to get the thing back on the road. If one of our appliances breaks down, we might be able to replace it for $1,000 if it’s the dryer or the dishwasher, but if it’s the fridge, that’s not close to enough.
$1,000 was plenty when I was in college back in the mid-00s, but I was single with no kids. That’s just not a realistic emergency fund in 2024, and even less so if you have a family.
$1k is enough for any one emergency
I never said it would definitely cover all emergencies, but it should cover most emergencies. For example:
- car issue - usually $400-1000 - my last FE strut replacement cost $800-900, and that’s on the more expensive end (certainly wouldn’t handle engine work though)
- washing machine/dishwasher/refrigerator dies - new one costs a few hundred, maybe slightly more (my fridge this year cost ~$1300, cheaper options exist)
- surprise funeral of a loved one - plane tickets/gas and a hotel for a couple nights should be under $1k
It’s not going to solve everything, but it’s a nice milestone that means you can weather most emergencies, provided they come one at a time. The goal here isn’t to guarantee that you’re safe from everything (nobody should stop at this step), but to protect you from most of the small things that would otherwise go to debt.
If we raise the bar too high, people will get discouraged and give up. $1k is a pretty decent goal and can do a lot of good.
And it fucking SUCKS in the beginning, because for a very long time it keeps getting wiped out by emergencies. But the more emergencies you weather, eventually the fewer you’ll have, and your buffer will grow.
Emergency funds are the most important tool for financial stability (after securing a living wage).
