How Much Do You Need In Your Emergency Fund?
In this episode, Jeffrey Levine of Buckingham Wealth Partners discusses how to determine if your emergency fund is sufficient
Key Takeaways
- Don't count your HELOC toward your emergency fund because banks can call or reduce HELOCs during economic downturns, as happened in 2008-2009
- Use 3-6 months of expenses as a baseline, but adjust based on income stability: retirees with guaranteed income may need only 3 months, while commission-based salespeople or those with seasonal work should target 9 months
- Consider what level of expenses you're covering—basic survival needs only, or maintaining your normal lifestyle—since more conservative coverage means money not invested for long-term growth
- Income volatility is the key variable: the more unpredictable your income, the larger your emergency fund should be to protect against extended periods without earnings
How Much Do You Need In Your Emergency Fund? In this episode of Ask The Hammer, Jeffrey Levine of Buckingham Wealth Partners, discusses how to determine if your emergency fund is sufficient and whether it is okay to count a HELOC (home equity line of credit) towards your emergency fund. Levine recommends that you have at least three to 6 months worth of expenses saved in your emergency fund, but that the amount you need will vary depending on your individual circumstances. For example, if you have a stable income, you may be able to get by with a smaller emergency fund. However, if your income is more variable or you have a job that is sensitive to economic downturns, you may need a larger emergency fund. Levine also advises against counting a HELOC towards your emergency fund, as it is a revolving line of credit that the bank could call at any time.
Jeffrey Levine is a nationally recognized thought leader within the financial planning community. He is the lead financial planning nerd for kitces.com, home of the popular Nerd’s Eye View blog, and the founder of Fully Vested Advice, Inc., which provides financial education and consulting services to industry professionals. Prior to joining Buckingham Strategic Wealth in 2020, Jeffrey Levine served as CEO of BluePrint Wealth Alliance, where he was responsible for spearheading the company’s vision and ensuring the firm and its advisors delivered a unique, modern approach to financial, tax and estate planning. He is an active speaker, traveling the country each year to educate thousands of financial advisors, CPAs, attorneys and consumers on retirement, tax and estate planning strategies.
Watch this free video to answer the question "How much do you need in your Emergency Fund?" and find more episodes of Ask The Hammer on FinStream at this link: https://www.finstream.tv/videos/ask-the-hammer/
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