Are You Living By the 3 Month Emergency Rule?


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While we all know savings give us peace of mind and something to fall back on if ever we need them, few of us actually live up to that knowledge. However if we don’t focus on providing enough for an emergency we could find ourselves in dire straits if that emergency ever made itself known.

The 3 month rule applies to the amount of money you need to get by for that period of time. The idea is you write down the net amount you receive from your job each month and multiply it by 3 so you know how much emergency cash you have to have on you. Most experts agree you should have at least three times your monthly salary tucked away just in case that source of income should suddenly be taken away from you. Since the stability of many jobs and industries is dubious at the moment to say the least, you never know how secure your own job might be.

This isn’t meant to alarm you, but it is wise to be prepared for anything. The question you need to ask yourself is this: how would you be able to cope financially if you lost your job tomorrow? Would you have at least 3 months worth of income saved up to see you through the next 3 months while you look for other work? If you can say yes, work on making that sum a little bigger if you can, to provide a bigger cushion. If the answer is no, make sure you work out how much you need to save and start saving, as soon as you can. Even if you cannot save the full amount before you need to start drawing on it (which hopefully won’t happen) at least you’ll have more than you would have had otherwise.

As you can see it makes good sense to prepare for the unexpected in case it does actually happen. It provides some breathing space in case you do lose your job, and therefore means you don’t have instant worries about bills or falling behind on your mortgage. The sooner you put these plans into place the easier it will be to get the peace of mind you want.

Of course, the other great thing about doing this is that it gives you an opportunity to sit down and take a closer look at the rest of your finances. How much do you currently spend each month on bills? Could you reduce this a little by looking for better deals elsewhere? If you could, you can put away a little less each month to cover those essential 3 months. Checking through all your finances means you can get a better picture of where you stand as well as preparing for the worst case scenario in the future. This will give you more security and make you feel calmer on a daily basis, even if your job does remain secure.