How It Works

Your emergency fund target depends on your monthly essential expenses and how many months of coverage you need. The standard advice is 3-6 months, but your specific situation may require more or less.

Basic Formula

=monthly_essential_expenses * months_of_coverage

Example

Monthly Essential Expenses:

Housing: $1,500
Utilities: $200
Food: $400
Insurance: $300
Transportation: $250
Minimum debt payments: $350
Total: $3,000

3-Month Fund: =$3,000 * 3 = $9,000 6-Month Fund: =$3,000 * 6 = $18,000

What Counts as Essential?

Include:

Rent/mortgage
Utilities (electric, water, gas, phone)
Groceries (not dining out)
Insurance premiums
Minimum debt payments
Transportation (gas, transit, car payment)
Childcare
Medications

Exclude:

Entertainment
Dining out
Subscriptions
Shopping
Savings contributions

Emergency fund covers survival mode, not normal lifestyle.

Risk-Adjusted Calculator

Your ideal coverage depends on job stability, income sources, and obligations:

Factor	Low Risk	High Risk
Job stability	Stable career	Gig/contract work
Income sources	Multiple	Single
Dependents	None	Several
Industry	Growing	Volatile
Skills	In-demand	Specialized
Health	Good	Chronic conditions

Scoring:

Mostly Low Risk: 3 months
Mixed: 4-5 months
Mostly High Risk: 6+ months

Building the Calculator

Essential Expenses	Monthly
Housing	$1,500
Utilities	$200
Groceries	$400
Insurance	$300
Transportation	$250
Debt Payments	$350
Other Essential	$100
Total	=SUM(B2:B8)

Coverage Needed
Risk Level	Medium
Months	4
Target	=B9*B12

Staged Approach

Building a full emergency fund takes time. Set milestones:

Stage	Target	Purpose
Starter	$1,000	Cover minor emergencies
Level 1	1 month	Breathing room
Level 2	3 months	Job loss buffer
Level 3	6 months	Full security

Formula for each:

Stage 1: =1000
Stage 2: =monthly_essential
Stage 3: =monthly_essential * 3
Stage 4: =monthly_essential * 6

Progress Tracking

Track your progress toward target:

=current_savings / target

Current	Target	Progress
$4,500	$18,000	25%

Visual: =REPT("●", ROUND(progress*10)) & REPT("○", 10-ROUND(progress*10))

Special Situations

Single Income Household

Consider 6-9 months:

=monthly_essential * 7.5

Dual Income, No Kids

3-4 months may suffice if both jobs are stable:

=monthly_essential * 3.5

Self-Employed

Aim for 6-12 months due to income volatility:

=monthly_essential * 9

Approaching Retirement

6-12 months protects against sequence-of-returns risk:

=monthly_essential * 12

Where to Keep It

Emergency funds should be:

Liquid (accessible within 1-2 days)
Safe (FDIC insured, no market risk)
Separate (not mixed with spending money)

Options:

High-yield savings account (4-5% APY)
Money market account
Short-term CDs (laddered)

Pro Tips

Start with $1,000 - this covers most common emergencies and builds the habit
Essential only - your emergency fund covers survival, not lifestyle
Keep it boring - this isn’t investment money; prioritize safety over returns
Replenish immediately - treat emergency fund withdrawals as temporary loans to yourself
Review annually - expenses change; update your target yearly

Common Errors

Including non-essentials: Entertainment isn’t essential in an emergency
Using gross income: Base on actual expenses, not income percentage
Forgetting insurance: Deductibles and premiums are essential expenses

Emergency Fund Target