6 months expenses, not 6 months salary.
When you are living paycheck to paycheck, that number is probably the same.
And for the people who that is the value?
Then you save 6 months expenses.
Also, 6 months may be more than needed depending on your field. If you lost your job today how long would it take you to find a new one? It could be six month but maybe less. I keep 3 months of expenses on hand because it has never taken me more than a month to find a different job.
Do- do you think I don't have to spend most of my pay every month just to survive...?
Didn't anyone notice during covid these "highly responsible business people" couldn't make it a couple months without the "to big to fail" bailouts or free covid money?
Months? Dune couldn't make it 2 weeks. Just standard issue capitalist hypocrisy.
The restaurant chain sweet tomatoes didn't even last the two weeks. MFs where running on fumes.
"too". I'm sorry to be a Grammar Nazi, but I see this all the time here and I'm literally only trying to elucidate...
It isn't 6 months salary, it is 6 months worth of expenses
So 9 month's salary - got it.
Oooff bruh
So if I want to accomplish this in a year I should be putting away half of every paycheck? Between rent, bills and groceries, who the fuck can afford that?
You can't accomplish it in a year.
Also, maxing out the $23.5K of the 401K retirement account.
Easy, have a side hustle selling drugs and pay everything cash.
"Just start a small business."
That's what I keep hearing from Republicans.
I actually owned a small business, which is why I understand what bullshit advice that is.
Just stop eating and photosynthesize like the rest of us responsible adults
Psh look at this sun breather. I just de-evolved myself by my bootstraps and float near a hydrothermal vent like a real adult
People with less expenses, people with a higher salary, people who live in a less expensive area, etc, etc.
Most people don't accomplish 6 months emergency fund in 1 year, no. It's a marathon, not a sprint.
6 months of expenses, not income.
Most people can. I make $40k per year in a major city, and I'm getting there.
Considering rent or mortgages alone takes a vast percentage of many people's paychecks before you factor in things like student loan and medical debts, most people cannot.
And I have no idea how you can even live on $40k a year in a major city unless you're eating beans and rice with every meal and living in a studio apartment with 4 other people.
Joke's on you, i spend all my income
I make plenty of money and it took 15 years for me to get my emergency fund up to scratch.
Edit: of course, you can probably do it faster if you don't have any emergencies while funding the account lol.
It's supposed to be living expenses, not salary.
I don't have 6 hours of my salary in savings most days.
Yeah, im glad if I manage to play off my debt by 30 lmao
I'm nearly there, I'm about -8 months away!
Great job, Dumbass!
Are you LARPing as his dad
It's remarkable how this is basically exactly where I'm at, too. I'm two months of salary away from zero.
I'm exactly there too. Same as it's been for 8 years.
I had 9 months saved in 2020. I'm taking out loans this month because it's at zero. It's been a hell of a ride. This economy is fucked though.
Hey man, you live in a democracy. Go vote to change it. Oh wait. You can’t because you don’t live in a democracy.
Yeah! Take THAT person in an unfortunate situation. I bet you feel stupid for not having enough money to move, poor-y
You are so smart. Why don't poor people just move to a democracy? Its only requires a bunch of money and sacrifice. Poor people should just abandon all of their friends, families, and connections by spending all of that money that poor people are known to have. That way they can live in a democracy and vote not to be poor, or whatever.
In what universe is this even possible for most people? Because it's not this one.
Its possible in this one, it just isn't easy, takes a while, and generally isnt super pleasant.
When people say to "live within your means", they don't mean "don't spend more than you make", they mean "save enough to maintain your financial security".
I was that person until mid 2019.
Then some unexpected huge home expenses vaporized the emergency savings.
Then COVID happened and I lost my job! TWICE! This was after being an engineer at the same company for 16 years. My shit was stable AF before it all started.
Now I’m a much happier person with a much better job, but my finances are LOLfukt. Fortunately due to me trying to be careful in the past, I already owned a small cheap home in a reasonable COL area, so I can’t complain.
It is in this one. Unfortuanlty its not easy, and any medical event, car issue, house issue, or girlfriend can wreck that in a day.
If you stay home with your parents for a year or two, you'd get plenty of savings if you're careful. I know I did.
I know in more individualistic countries not moving out by 18 or 20s has traditionally been seen as taboo, but the current housing situation makes that traditional social rule very impractical for many. Besides, from what I heard in the USA, still living at home with parents is less stigmatised than before.
My savings where wiped out buying a house. Now it’s fucking impossible between maintenance and god knows whatever else is flung at me.
Moving out at a young age is only a norm in just a handful of countries, mainly the English speaking ones. Reason being that they were more developed than the rest of the world, making it possible for them to move out when they turn 18. Poverty is a big reason why families are closer and live together for a much longer period. But many of these developed nations seem to be regressing these days, with more money flowing upwards than downwards.
I agree though. The best time to move out is after you've worked and saved up enough for a down payment for your own place. Those few years are perhaps the best opportunity to save up that most of us may never get again.
I have about $10k socked away into an HSA account from when I had a high deductible insurance plan. With an HSA you can leave the money in an investment account, you don't have to withdraw it when the cost occurs. You just need to have receipts for the amounts you withdraw so you can show them to the IRS is bed be. So I save all my receipts for doctors visits, prescriptions, OTC medicine, glasses, dental, and anything else allowed. Then I have tax free money sitting in an investment account that I can withdraw tax free if I have a real emergency.
You can also put money into a Roth IRA and you can withdraw your contributions tax free.
There's a bunch of ways to make your money work for you and still have access to it in a true emergency.
In any universe. Just stop wasting money for a change.
Lots of good reasons why someone might end up in debt. I got divorced and laid off. Dog needed $2k surgery to not have a terrible quality of life. Got a terrible staph infection on my chest after losing health insurance. This all happened in a four month period. I moved to a cheaper apartment, cut off any subscription aside from internet, which I need for two of my four jobs, got a cheaper phone plan, and mostly ate rice and beans every day. Still, it's taken a year just to get back to zero.
Meanwhile giant megacorps after 2 weeks of lockdown go bust bcs free money.
I honestly think the "6 months of salary in an emergency fund"-advice is a bit overblown and certainly not universally applicable.
An emergency fund must per definition be very liquid in order to fulfill its purpose, hence you can only really place the money in a simple savings account with a not-so-spectacular interest rate. This means that the opportunity cost of having 6 months of salary in an emergency fund is the delta of expected return on investment in a higher-yield method of savings, such as placing the money in index funds. This can be quite significant, in particular since saving up 6 months of salary is not an easy task for the average person.
If you had the money placed in investments, the money would be less liquid, and there's the chance that you may have to liquidate it during a downturn, which would of course suck a little. Consider carefully under which scenarios you would have to liquidate, though:
- Lost your job? I have unemployment insurance to cover this scenario for me, meaning that I will get 80% of my current salary for close to a year, a period during which I would have to liquidate nothing.
- Disaster strikes my home? My home insurance policy covers this more than enough for me.
- Medical emergency? I'm lucky enough to live in a country where health care is free, but I have additional health insurance on top of that as well.
- Emergency while traveling? I have great travel insurance. They cover all medical expenses and would even fly me back home post-haste in disaster scenarios.
- Other accidents where I hurt myself? You guessed it, I have insurance for that too.
Now, there's an argument to be made that these insurance policies might be a bit slow to pay out, and that I might need to be a bit more liquid to cover the expenses temporarily. I have a solution for that too - credit cards. With credit cards I can make a short-term loan that should bridge over most issues until I can either get money from any of my insurance policies, or worst case have time to liquidate some of my higher-yield investments.
So yeah, that's my plan. It does not involve 6 months of salary being invested in a low-yield savings account, because that'd lose me a lot of money. I dislike the fact that the 6 months emergency fund is basically parroted as religious gospel, and it feels like people who repeat it have not thought about the issue thoroughly.
You seem to be in a very unique situation. And to have a pretty good understanding of personal finance and of your risk appetite. What you say works for you and a few people that happen to have access to universal healthcare, what looks like four separate insurance policies, and that can manage not to fuck it up with credit cards.
6 months liquid emergency fund remains the best strategy for most people out there.
Not a unique situation. It's pretty much the average for millions of adult to middle aged people in several countries.
Not nearly the norm globally but calling it unique is pretty ridiculous.
It's a generalized thing that is healthy advice for most people, especially Americans who have very little of a social safety net.
Stocks and mutual funds are liquid enough to act as an emergency fund; you don't need to rely on a savings account only to hold your emergency fund.
Would certainly suck if those six months worth of emergency fund had temporarily gone down to four months because of a downturn in the stock market though.
Accidentally there might also be some correlation with stock markets going down, and an emergency happening. Eg large company laying staff off.
That said you can do the math and see how much that money would return on average on etfs compared to a bank account, and decide if that's worth the risk to you.
Experts say no, I agree with them but I see your point, and it's definitely worth to challenge these suggestions.
Some say a good rule of thumb is 3–6 months of mandatory expenses depending on personal situations and it looks like you're safe with the lesser amount.
I usually hover around 3–4,5 months but have decided to increase a bit because of the current instability of everything
It's not 6 months salary, it's 6 months of expenses, although those numbers are likely close for most people now.
You could also consider a ladder of cds as an example, but then you either have to continually re-up 6 month cds or go for a year of them, each for about your monthly expenses.
I just take the 4% interest (or whatever rapidly changing amount ally bank offers me on savings since they update a lot) and roll with it. For now it's a similar ROI to renting a property without all the fuss of... Buying a property and doing the work lol.
Man, where do you live where unemployment is nearly a year at 80% of your salary? When I was unemployed here in Washington, it was six months and more like 50% of my salary. And from what I understand, Washington is a lot more generous than most states.
Sweden. You pay around $12 for the basic coverage which covers 80% of your salary up to a cap of around $2500 a month, for 250 working days. My union membership, which costs approximately $25 per month, then includes an additional coverage for if you go over the cap of $2500 a month for the basic coverage. These combined then cover you for income up to around $4500 a month. It's also possible to get additional coverage on top of that to cover incomes above this amount through the union, again for around $12 a month.
I've simplified the terms greatly, so in practice they are a bit worse - in particular, the compensation amounts get lower after a certain amount of days spent unemployed - but the general idea holds. To qualify, you need to have been employed already for a year, and you are required to look for work as a condition to get payouts on the insurance. You lose the right to payouts if you decline an appropriate job offer.
Multiple times now, I've had people on Lemmy tell me that I am either not caring about my future or not caring about my child's future because I buy myself an occasional chai latte and her an occasional smoothie or some Taco Bell food.
I hate this idea that you should deny yourself any and all pleasures in life so that you can have a decent 10-20 end-of-life years when you retire. People made fun of the avocado toast guy, but suddenly now he's got the right idea?
I'm not going to have major retirement savings if I put the maybe $20 a month at most that this costs and it makes our lives a little less miserable right now.
Yeah, generally agreed.
I think more people should actually track what they're spending, though. Sometimes what feels like "just $20 every once in a while" isn't. A coworker of mine realized he was spending a lot more than he thought on fun food and drink when he actually added it up and put it in a spreadsheet.
Not saying that's you! But actually checking your spending in detail every once in a while I think is a good idea for everyone.
I definitely track spending. I'm just tired of people acting like that. I'm talking to someone in this very thread who is saying $7.99 for a Netflix account is not something you should pay for if you're poor as if not spending $7.99 a month to make your life a little better would cover any medical bills or car repairs or anything else that might qualify as an emergency.
Their reasoning was "I was poor once and I saved money and I did fine." Too bad they mentioned that they had a color TV when they were poor, as if you could still even buy a black and white TV in the last 20 years.
I put $25/ week into a college savings account for my 4 year old. I do weekly for dollar cost averaging, rather than trying to time the market. I started it with a few $k and it's up to about $5k right now. It's tax deductible and is invested with a target date fund. Even if the investment only keeps up with inflation, that's $25k or so in today's money. Probably enough for at least a semester or two.
Taco Bell used to be what you bought because it was dirt cheap. Is it supposed to be a luxury now?
No, is basically dog food.
I'm 38 and I just achieved that goal.
Don't stress about this shit (too much).
Go to concerts, take trips, eat your avocado toast. Indulge.
You're only young once, and everyone is poor in their 20's. Unless you're lucky or it's given to you.
It sounds trite, but success will come. However you measure it.
I bet less than 25% of people actively do this. It's not that easy to do lol
True. But the meme is wrong. It's expenses not income.
The idea is you should be able to survive without working for 6 months.
This is to cover losing your job, injuries, illness, family emergencies.
True. But the meme is wrong. It’s expenses not income.
The idea is you should be able to survive without working for 6 months.
Yeah, I get that, that's why I meant I doubt that more than 25% of people can survive without working for 6 months. I don't think more than 25% of people have more than 6 months of expenses saved up.
I am 46 years old. I have never had enough to be able to survive without working for 6 months. Thank god for unemployment payments.
If you can't bring the savings side of the equation up, then bring the salary side down. Easy.
I did it by living well below my means for my first job.
That's all fine but at 16 you don't really have expenses.
It's like 50% that can't afford 1k, let alone 6 months of expenses.
I'd bet less than 5%.
Yeah man I got it saved up and then some, I was able to stretch it 11 months without work most of last year. I got lucky.
Nobody else I know has that luxury.
I got 12k debt and 300 in the bank haha
I have a little more in my account today, but last week I had the fun of saying, "I have $36 in my bank account but I'm still richer than Donald Trump."
I still consider that a victory.
Could... C-Could this be one of my people? It is! It is one of my people, hello! \o/
6 month of work just sitting thete getting eaten away by inflation doesn't spund smart. Either invest that shit or boof that shit while getting your dick sucked.
It is very smart. If you lose your job or have a major expense, not having to put it on credit provides you with a lot of stability, and you don't have to pay interest.
-someone still paying off 4 months of unemployment a year ago
You can have your emergency funds in a high savings account as long as you can withdraw it without a pnealty
I have my emergency fund in a savings account with 3% interest rate. So my bank is giving me money each month for doing nothing really and I can withdraw my money whenever I want.
USD Inflation is ~3% per year currently, which is easy to beat with a high yield savings account. Anything more than 6 months should definitely go into an index fund though.
Pretty fucking difficult when you're living paycheck to paycheck
Living paycheck to the Monday after the paycheck. Then it's just survival until the next one.
Consider crimes against the state
Just uh, you know, buy less avocado toast!
You should have an emergency fund. You never know when something bad will happen. For all you know your house could get bulldozed or you car could get damaged by something the insurance doesn't cover
That's my problem: I start saving and then suddenly I have a huge expense and I need to empty out my savings. Happens at least every six months.
I'd argue that's proof of your emergency fund working! You were able to save enough money to cover an unexpected expense/emergency without having to go into credit card debt.
Kudos! You should feel proud of yourself!
It sounds like you built and then benefitted from an emergency fund. Nice!
That means it’s working. You’re doing exactly what you need to and it’s absolutely paying off!
I agree with the others, you sound like the type of person that the emergency fund is designed for.
What happens if I don't own a car or house :(
Well you still should have some sort of emergency fund
You'll save a bundle. Cars and houses cost a fortune to keep.
My "emergency fund" is basically whichever of my organs I can sell.
You might need this
Do people actually do that?
Recent surveys find that 3/4ths of Americans live paycheck to paycheck so no.
Yeah, "advice" like this always just comes across as "well have you tried not being poor?"
If they're able to and understand that it's important, yeah. If you can't afford to save (ie can't pay basic expenses with money left over for savings), then no.
If you're spending everything you earn, then if you miss a paycheck/get fired you're screwed. If there's nothing you can cut back on to start to save money and there's not a sufficient government safety net - then that's a really dangerous spot to be in.
The first priority when it comes to financial planning is having enough saved so that if you have an unexpected expense or get fired you won't be out on the streets.
This hit a lot harder than I feel comfortable with.
If you're under 30, full-time job, no looming debts, no kids, then the 6 months can really be 3 months or around $10,000. If you have a partner, you are even more secure. Remember this is a figure derived from very conservative financial commentators who assume you have a linear college and job progression (which is rarely the case). Even a 1 month savings buffer will save you for 90% of the unexpected expenses.
If you're in your late 50s, finding a new job will be tough, especially if you are laid off during a recession. In that case a generous buffer beyond 6 months would be good.
Either way, having savings is a good thing. Yes you will miss out on those "epic Bitcoin gains", but once you have made an emergency savings buffer, then you can really knuckle down on contributions to retirement.
You should've told me earlier when I could've. Now I learned the hard way.
It's generally 3 - 6 months of living expenses depending on your situation (generally on the low side unless layoffs are likely) which is very different than salary of an equivalent time frame
In my life it was either I could not save anything or I could save a lot, the expenses are basically the same but the income changed. Once the income was higher than the expenses the saving happened automatically and are steadily growing over time.
I’ve got 6 minutes of salary saved, this is adulting!
I found a much easier method that was told to me is, (dont make a purchase unless you can afford to buy it twice)
I cant afford to fill up two tanks of gas, but i still gotta go to work. The economy is absolutely fucked no matter what economists say about avoiding a recession.
I've developed a bit of a variation on this: Don't buy it unless you're willing to put that number again into savings/investment. A little more strict, but also forces a careful analysis of short term-wants vs. long-term goals. Caveat: obviously some major expenses don't qualify, but are necessary regardless.
I tried that but my landlord said if I didn't pay the rent they'd kick me to the street.
Lmao i mean it's just a general guideline not a hard rule
Consider the value of your purchases, that doesn't mean buying the cheapest thing. It means buy the things that give you the most benefit. Price compare, don't just blindly go to the store and buy something.
Don't drive to the store to buy one thing. Go to the store if you're already going past it or need to do a full run.
If you think you want to buy something you don't necessarily need, don't buy it immediately, put it in your online shopping cart and leave it there for a few days, then decide if you still want it.
Sell stuff that you don't want or use anymore.
Never go out to eat/ order food if you can help it.
Stop drinking soda/energy drinks.
Stop smoking, doing drugs, and drinking alcohol.
Never go inside the gas station to pay, always pay at the pump. You'll avoid impulse purchases and don't buy lottery tickets.
Stop caring what other people think, you don't need to buy a bunch of fancy clothes, shoes, the latest iPhone, etc. The only time you need to dress nice is a job interview and special occasions.
Show up to work on time, don't complain out loud, and have a willingness to learn something new. You don't have to be the best to get more money. Don't stay at the same job if you're not getting promoted or regular pay raises.
Buy a bicycle.
Floss your teeth, dental work is expensive.
Move to a higher cost of living area to get jobs that pay more. Rent is higher, but everything else costs pretty much the same so you're better off and have more job opportunities.
Put as much money into your retirement account while you're young, time in the market is better than timing the market.
Take care of your things, especially if you have a car. Maintenance costs less than a new engine.
Learn to fix things yourself
Go to thrift stores
Take advantage of free services, go to the library, they have access to a lot of online subscriptions.
Stay away from predatory loans from places like rentacenter, buy here pay here car lots and payday loans. Just don't.
Don't take out a car loan if you can't afford it.
Get a savings/checking account with the highest interest you can find. It doesn't have to be a local credit union/bank.
Do your own taxes for free, don't pay someone to do them if you only have a regular job.
Get a roommate and split rent.
Take the bus/train.
Coupons/ deals/ rewards points.
Never talk to the cops.
Man, you've just sucked all of the fun out of life.
Touch grass 😘
Start running a zero balance with a set amount. So if you ste your zero at $100. If you have $200 you only have 100. Raise this over time until you have enough
How is this different than using a savings account?
It's built with the assumption that poor people are just irresponsible and if they just had more discipline and mindset they could be a billionaire. 👍
Easiest way to do it is with your direct deposit.
Go to your work. Fill out a change form for your direct deposit. Have $X sent directly to your savings account.
It's much less tempting to spend the money when it's already in your savings account.
I think there is a whole lot of variability in this equation. I do try to keep some "cushion" in the bank, but I can borrow if I have to. So if I have drained the savings I can still get by via borrowing for a while if necessary.
I'm fortunate that my employment is very steady. The chances of me losing my job are slim. If it were less steady I'd be better about keeping that cash stashed.
If the unlikely did happen and I lost my job I would pretty quickly have access to a large stash of cash. Which I'd rather save but would spend if it saves my ass from starving and foreclosure.
I don't have anything remotely close to 6 months savings in the bank. It doesn't make economic sense for me to do so. I'm far better off talking any would-be savings and put it towards all this debt I'm still carrying from my college days.
You will never make more interest on an investment than you will get charged interest for the same amount as a loan. Ever. It does not happen. So for me to sit on money that could go towards paying down debts, I'm just needlessly paying more in interest than I would be otherwise.
My current plan is to pay down or pay off all by debts (ultimately paying them off but if they're close then ok); then consolidate all of my remaining debt into a line of credit, and close out all of my other debt accounts. When that's paid, it will hopefully be enough that I can put that available credit towards any spontaneous costs, and if no such costs occur, save as much as I can so I won't need the line of credit if I have incidentals. Hopefully saving up to 6 months or more, plus investing into a retirement fund.
The retirement fund is an afterthought because at this point in my life I expect that I will be financially incapable of retiring. I'll just work until either I go crazy (dementia or similar), or I simply die at my job. I'll just work until I'm dead.
I've been so financially fucked by all the once-in-a-(insert large amount of time here) events that just coincidentally all happened during my life so far that this is what I'm expecting going forward. Record inflation, stagnant wages, everything as-a-service basically robbing you monthly for something you should have bought and long since paid off, but instead you're paying for in perpetuity for no good reason....
Everything has turned into a monthly charge. It's terrible, and you think "oh, it's only $20 a month". Yeah, that's $240/yr. For something that probably doesn't make you any money and probably doesn't help you with your employment or any earnings you may bring in... It's just a stupid tax. We're stupid.
You will never make more interest on an investment than you will get charged interest for the same amount as a loan. Ever. It does not happen.
This is barely more accurate than a coin flip. Until 2021, it wasn't that difficult to find loans with rates under 5%. Anything under 4% is basically free money and you're normally better off investing in something low risk than to pay extra.
So for me to sit on money that could go towards paying down debts, I'm just needlessly paying more in interest than I would be otherwise.
If you don't have any emergency funds, or not enough to cover a single large emergency, this is dumb. Cars break, roofs leak, etc. Even if you have an emergency where you can pay on credit, you'll likely be looking at credit card interest rates. Or, you lose your job. Fun fact, most job loses occur when the economy is struggling. Another fun fact, most investments are doing really fucking poorly when the economy is struggling.
Keep some money on hand in case something happens.
It's not always true that you can't get a better interest rate for savings than a cost in interest. It is true that the money you could make in those scenarios is extremely small or at absurd levels of risk.
I have a bit of savings, but nowhere near 6 months worth. Just have had enough freak accidents and those "once-in-a-(insert large amount of time here)" events that having at least a month's worth of savings has saved me from taking out more debt enough times that I try to keep something saved.
That said, while I'm sure the interest I've spent on my debt over the years has been enormous, the one silver lining to it all is that with inflation, my debt feels more manageable than it did 10 years ago. Not that I can really afford pay it off that much faster since every other part of life is more expensive, but in comparison to everything else, it feels much less overwhelming than it used to.
You will never make more interest on an investment than you will get charged interest for the same amount as a loan.
The historical S&P500 average is 11.88% annualised. Unless your interest rate is above this, you’re better off investing. In reality it’s more complex as there are tax considerations, liquidity, risk, opportunity cost etc to calculate. If your interest rate approaches this, paying down debt is indeed the best course of action.
I am 26 and I have like 14 salaries saved up already but they are barely 10k dollars because of my stupid third world country currency :') am I doing well or should I just give up and wait for my next reincarnation? :')
Just in case you are looking for a serious answer: it all depends on your living expenses and how much support you will receive in case something happens. Where I live, we have a good (but still improvable) state support system. Here, the general rule is to have 3 months of expenses on the side. It's meant to cover your costs until you find a new job or be a buffer for unforseen expenses. Only you can determine how much you think you need.
I am not sure, I mean, people can survive with 270 dollars a month in here...somehow.
I have health insurance for the state hospitals but they are kinda crap. :")
Who can afford to put shit aside. Who the fuck says shit like this.
Bro if you can't make it in the richest nation on earth then no matter what you were going to fail. It was over before it began, just accept your fate as an economic incel.
People like you are why I can never quite convince myself that forced sterilization is a bad idea
Found the economic incel
