When saving for an emergency fund, do we include money we'd use to pay debts (car loan, student loan, etc.)? Or just money for necessities (rent, food, utilities, etc.)?
ANSWER:
You should definitely include at least the minimum amount that you would pay for all debts. One purpose of the emergency fund is to keep your financial lives in order during a crisis.
Hope this helps!
So then a 3-month emergency fund would be 3-months worth of expenses and not 3-months of salary?
ReplyDeleteYes, a three month emergency fund would be interpreted as one month of expenses multiplied by three. This is because the money of interest is not so much what you will miss earning during that time, but rather what you will need to spend during that time.
ReplyDeleteVery helpful! Thanks again for sharing your wisdom!
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