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For those of you who are employed, how many months savings do you have in your emergency account? And do you equal the total to X amount of gross or net monthly wages?

Damn good question, Shirehobbit. I’m a contractor, contracting through my own limited company, so my affairs are a little more mixed up than most peoples. I pay myself a good salary, (£45k which is 50% more than the average London wage). Goal number one for the company is to have a float of 3 month’s salary, payroll taxes and pension contributions (401K). This time next year, when I do the 2020 corporate tax return, I’m hoping it’ll be up to 6 months. I consider this the company’s money, not mine. (In Britain, I can’t claim the derisory unemployment benefit - “Jobseeker’s Allowance” of £76/week - unless I make myself redundant from my own company.)

On a personal level, I have a £10k proper Emergency Fund, which sits in a harder-to-reach bank account. That equates to 6 months living expenses. Everything else is quarantined into their own little pots (e.g. holiday money, glasses replacement fund, IT replacement fund). I’m saving a reasonable proportion of my takehome pay each month (25%) towards all those pots of money.

I think one of the best concepts I ever learned on these boards is to Quarantine my savings and investments. I don’t think of this money as mine - it belongs to whatever is the designated savings goal. For instance my car has his own account, into which I pay the mileage I can claim when I travel for work plus (currently) £100/month. The current balance is just over £5,500, which will pay for insurance, repairs, etc, and part of the way to a replacement when the worst happens. It’s not my money, it’s Lucky Car’s.

Another example: my rental property’s emergency fund (£5k) is held separately. The current tenants are moving out soon and I expect to pay £3k in refurbishment costs. That will be replenished by the rent I receive from the new tenants.


- Pip
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