“Am I going to get sick or even die if I catch this virus?” ; “How am I going to pay rent? Am I going to be evicted, lose my home, become homeless?!? ” ; “Will I have food on the table to feed my family and kids tomorrow?” You may be asking yourself all these questions right now.

In addition to your health and safety, one of your biggest stressors right now may also be your finances. According to an article by CNN, as of April 30, 2020 30 million of Americans have filed for unemployment.

No one could have predicted how huge and how fast the economic impact of this global pandemic would become.

Despite this economic slump, you can still take charge of your life, come out better when this is all over and into an opportunity to grow. In the following blog, we’d like to discuss the importance of an emergency fund, why you should have one, and how to start one.



The Importance of an Emergency Fund

Question: So why is an emergency fund so important?

If you’re like most fellow Americans feeling the financial impact of COVID, your income has most likely been affected to some degree.  It may have been a decrease or cut to your work hours, a percentage cut to your salary, or a forced furlough. If you are self employed it may be loss of contracts or a decrease in foot traffic to your business, or you may even have just lost your job entirely. We are all experiencing some type of financial strain at this point in time. (I can’t imagine one single person who has not been affected financially by this pandemic, and if you weren’t you are very fortunate).

Its been close to 3 full months of people experiencing some level of disruption to their income. 

The bad news, like you or similarly, my work hours were significantly reduced. The good news: luckily, I had about a 3 month emergency savings saved before the crisis started. (If you already had an emergency fund already saved up, then you’re ahead of the game. This blog may be just a reminder for you).

Answer: An emergency fund helps protect you during unforeseen events and affords you flexibility.  The mere act of contributing to an emergency fund is stating “I live in the present but prepare for the future, where anything can happen.”By NOT contributing even a little bit to an emergency fund, you are stating “My financial future is guaranteed and I don’t need to worry.” ..hmm

UP TO THIS POINT, this emergency fund has definitely saved my a** from having to accumulate debt on credit cards and dig myself into a deep financial hole.  Although the situation has me worried, I am much less stressed than I would have been had I not prepared. 

Considering the Shelter-In-Place (SIP) advisories changing day to day, week to week, month to month, the future is unpredictable as to how much longer it will take to find a cure for this  COVID-19 virus and for a safe reopening of the country and the economy. It could be “x” amount months more or even a year, who knows.

So as this crisis approaches its third month and as the emergency fund bucket is quickly drying up, I have learned yet another lesson: my 3 months worth of Emergency Savings may not be enough. Moving forward I will save for a larger emergency fund for the future should another spontaneous and unexpected event happen.

Which leads us to ask the next question:

HOW MUCH is actually enough to save for an emergency fund?

Dave Ramsey (a famous, rich old dude, author, TV and radio show host, and business man) recommends starting with $1000 and after paying off all your debts, have 3-6 months worth of emergency funds.  This can vary depending on your situation i.e. single versus dual income , how stable your job is etc. (Read article: Dave Ramsey- A Quick Guide to Your Emergency Fund)

Suze Orman (another famous financial advisor) took a more conservative perspective,  recommends 8- 12 months because that’s about the length of time if takes for someone to find a new job again, which was from an article/video back in 2018.

The point is, there is no hard and fast answer to this, it all depends on what works for you. Our personal goal now is to build 6 months of reserves.  More so, the answer would be :

How safe/prepared do you want feel in regards to your financial stability and financial well-being?

The amount you need to save depends on how conservative you want to be and how much of a safety net is comfortable for you.

How do I calculate that amount?



First you would need to assess how much your basic, fundamental, unavoidable monthly bills are. This includes your essentials :

  • rent /mortgage
  • utilities- water, gas, electricity.
  • phone and internet.
  • insurances- health, life, home, car.
  • loan payments- car, credit cards, student.

We may know what each one of these are but have you taken the time to add it all up?  It takes less than 5 minutes, do it now if you haven’t!For example, let’s say your essential / necessities per month costs $2000/month. Therefore, for a 6 month emergency savings, you would need $12000 saved for your emergency fund.

When to use an emergency fund/ When not to use your emergency fund.

It’s called an emergency fund because it’s only to be used only for emergencies!

Examples: You lost your job. An unexpected medical or hospital bills arise. You have to pay automobile repairs from a car accident. You have an unexpected loss of a family member and have to take the next flight out for their funeral. You can now add state mandated business closures to this list of warranted reasons to use your emergency savings.

What is NOT warranted or considered valuable use of your emergency fund are anticipated, expected expenses. This might include maintenance expenses like oil changes or new tires on your car which are expected, wear and tear on replacement parts for your car are things you can expect to run into eventually and can and should be planned for. Another may be that there was a flash sale online lasting only for the next 24 hours going on for flights and accommodations to Europe, Asia or wherever. Maybe some type of elective surgical procedure, maybe you wanted a nose or boob job, some lip fillers, whatever your flavor is. The latter two examples, are NOT urgent and can be anticipated and planned for.

Ask yourself: Is this expense crucial? Is it essential or absolutely necessary? Was this expense expected? Could it wait or could have been planned for in advance?

Where to put an emergency fund.

You want this money to be liquid. Liquid to mean, easily obtainable, a place where you can park your money and where you can get your money quickly should that emergency occur. And I don’t mean the inside of your mattress or cutting a hole in one of the cushions of your sofa.

You want it such that it’s not easily accessible where you’ll be tempted to make a transfer or dip into it.   Keep this emergency savings account separate from your primary banking accounts to avoid the temptation. Out of sight out of mind. 

“But but.. opening up a new account is such a hassle, I have to drive there and..” NOPE! Welcome to the world of online savings accounts.  The blog, moneyunder30.com recommends Money market savings account or high yield savings account.  I personally use a Certificate of Deposit (CD) account at a separate bank from my primary bank.  Capital One 360 Online savings account is also amazing.  Signing up is quick and is all done online in less than 5 minutes.

Final thoughts

I would like to acknowledge maybe it might be hard for some of you to save even a little. Times are tough, and it may have been difficult for you to save even before Covid19. Maybe you were already barely scraping by and living paycheck to paycheck. Our intent is to help you be proactive and prevent financial hardship during unforeseen events.  Start small, even just 5% of your paycheck direct deposited to your emergency fund is a great start.

In short, have an emergency fund! Start on it ASAP if you haven’t already and keep it in a separate savings account.  Use it only for emergencies. And when an unexpected emergency shows up, you’ll be thinking “Hey past self, thanks for looking out for me and being responsible with our money 🙂  I can get through this.”

Thank you for reading 🙂

Cover your cough, wash your hands, respect social distancing.

-Vince & A Z Flor