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Author: tonyr007 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 398  
Subject: Emergency Funds Date: 12/15/1999 7:43 AM
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Barb,

I'm crushed. You post on more than just the Kansas Board? Say it's not so. ;^)

Ok I'm not really crushed. I think it's good to get several opinions. God knows I certainly don't know everything. 80)

So here's my 2 cents worth (adjusted for inflation of course).

Your emergency fund should equal 3 - 6 months worth of expenses. While some people will say salary instead of income. What you really need to cover are your expenses. You're not paying taxes or contributing to an IRA or other investment plan during this emergency period, so you don't really need it to cover your salary.

However, basing your fund requirements on your salary is certainly a time saver. You don't have to constantly recalculate your expenses to insure you have enough. If you're struggling to make ends meet, basing it on your salary is probably a Foolish decision. The down side to this is that you may have 10%-20% more than you need, but that's a personal decision.

You brought up the point that you don't need as large an emergency fund as a 45 year old pilot. While this is probably true, it is not necessarily so. If you use expense as the basis for your fund, you could actually require a larger fund than the pilot simply based on your life style. Of course in reality, since the pilot is approaching his peak earning years, and makes a ton more than you do, his expenses are probably more than yours.

You also mention being able to quickly get another job. This is true in this economy if you are laid off. But what kind of job will it be? How close to your present salary will it be? My guess is that a flight attendant, you probably make more than $10/hr. Even if you got job at another airline, you might not make as much as you do now.

Another thing to consider is illness or injury. What happens when you get hurt or sick and can't work for several weeks or months? Although you may have some type of insurance to cover you while you're out of work, these policies typically don't kick in immediately. So you need something to cover your expenses.

Finally, if you're married and die, your spouse will need enough money to get through at least 3 months. My mom's aunt just went through this last summer. Her husband died in April and she didn't receive payments until August.

Hope this helps. Let us know what you find out from the other boards.

tony- :^)
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