Rethinking the emergency fund: How much do you need to save? / 70

If you’ve ever found yourself staring at your emergency fund, hesitant to spend a dime on something unexpected, this episode's for you. We’re unpacking the pressure, the gray areas, and the real-life moments where this money actually comes into play. Because spoiler: it’s probably not just for worst-case scenarios.

We share how we think about emergency funds in a more flexible, human way — from unexpected travel costs to medical bills to slow income seasons — and why this money is meant to be used, not just admired. We also dig into the classic “3–6 months” rule, where it falls short, and how to choose a number that actually supports your life (and your nervous system).

✨ Episode Highlights ✨

[00:00] What an emergency fund actually is — and why the name might be part of the problem
[02:00] The “fire extinguisher” mindset: your fund is meant to be used
[03:00] Real-life examples — travel surprises, medical bills, and pet emergencies
[06:00] Using an emergency fund during slow income seasons without panic
[09:00] The classic “3–6 months” rule — and why it’s not one-size-fits-all
[11:00] Why “bare bones expenses” might not mean cutting out all joy
[13:00] Factors that actually matter: job stability, support systems, and flexibility
[16:00] Choosing a number based on how you want to feel, not just math
[19:00] How emergency fund needs evolve over different life stages
[30:00] Reframing: should we call it a “comfort fund” instead?

✨ Resources ✨

• You Don’t Need a Budget by Dana Miranda
• Ally Bank (high-yield savings account option)
• Discover / Capital One (high-yield savings account options) 

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Transcript

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SPEAKER_01 0:00

Hey girlies, today we're talking about emergency funds. What it is, how much you really need, and whether the term emergency fund needs a rebrand.

SPEAKER_00 0:08

It's such a concrete piece of advice among financial experts to save three to six months of emergency expenses. But should we all follow that prescriptive advice or is there a little more nuance? Let's discuss. Welcome to the Finance Girlies, a podcast for millennial and Gen Z women who are curious about money but have never quite felt at home in traditional finance spaces.

SPEAKER_01 0:32

We are Emily Backdorf and Cassidy Horton, podcast hosts, longtime friends, and finance writers for brands like AOL and Yahoo Finance.

SPEAKER_00 0:40

Rather than giving you prescriptive advice, we talk about money the way friends actually do. With stories, questions, and a lot of figuring it out in real time.

SPEAKER_01 0:48

So before we get into numbers and strategies, let's talk about what an emergency fund actually is. Because I feel like the term can be a little more intense than it needs to be. And also if you're like me, you can find yourself totally up in your brain being like, does this actually constitute as an emergency or does it not? Like, should is this worthy of being used or is this not? And so if you're also an overthinker like I am, hi, hello, let's discuss.

SPEAKER_00 1:16

I think when people hear the term emergency fund or just emergency, they might think of things like losing your job, having some like huge medical bill that came out of the blue, or like something catastrophic with your home or your car, like a really big deal. I do think an emergency fund can be used to cover those types of things, but I do think there's like a wider net of situations that could call for using your so-called emergency fund. Yeah, so it's less about emergencies and more about just life happening because as diligently as you may budget, there's no way to predict every single expense that's coming your way.

SPEAKER_01 2:00

I also heard the advice years and years ago about emergency funds, or just like in terms of how I think of it, is that it's not this like trophy that you put up on a shelf and you're like, I have this thing and it's there and like I'm not allowed to touch it whatsoever. But it's more of like a fire extinguisher or like an axe behind glass or something, you know, it's like don't be afraid to break the glass and like use the thing when you need to. That's kind of the the point of it.

SPEAKER_00 2:27

So yeah, I like that reframe. Another I like thinking of it as like an emergency fund can take like these catastrophes in your life and turn them into just a mild an annoyance instead of like being just big thing that like derails all of your other plans.

SPEAKER_01 2:47

Mm-hmm. Yeah, I kind of think that's like the biggest gift of having an emergency fund in terms of what it does for you because there have been so many times in the past where I'm like, I I don't know, like the first example that pops into my brain is like I'm on vacation and this rental car that was supposed to cost you $100, like something happened, I need a last-minute reservation, now it's like $700. This isn't necessarily an emergency fund situation. Maybe this is like more money from a travel fund, but I've thought this would probably feel like a little bit world-ending in this moment. Like, what am I gonna do? There's no way I can afford that, but because you have the money there, you're like, okay, like this is annoying and I would rather spend this money on something else, but like the money is there.

SPEAKER_02 3:25

Mm-hmm.

SPEAKER_01 3:26

And I feel like that kind of applies to all these other things too.

SPEAKER_00 3:31

Yes. Yeah, that's a good example. So, speaking of examples, do you want to share sometimes you have dipped into your emergency fund?

SPEAKER_01 3:39

Most recently, I believe I've mentioned this on another episode. Moved to Minneapolis last year, got set up with all of my like new primary care doctor and all of that stuff. Those appointments are covered, but like just like all the little extra things that I needed on top of what's covered as preventative care ended up costing me originally was going to be fifteen hundred dollars. I ended up getting a 20% discount, brought the total price down to twelve hundred dollars, but I did not I my medical bills category of my budget only ever has enough money to cover like my therapy and medication for that month. She is not built out in any capacity, so I was like, I know that these expenses will have to come from my emergency fund, but I also don't want to sacrifice like my long-term health because I short term like don't want to pay for something, you know? So even though, like, is it maybe just a teeny tiny bit predictable? Sure, like should I focus on building out medical bills, like kind of cushion in my budget? Sure, that would be the dream. But for now, I'm like, if I have this medical expense pop up that I didn't truly expect, like I'm perfectly okay with using my emergency fund to cover that thing. So that's been the most recent. And then also, like last August, my cat had a UTI, ended up taking him to the emergency vet at like 2 a.m. Um, and then I had to find another vet to take him to for a follow-up like three days later. So I don't know, I forget how much that bill was, but I think he ended up costing me at least six or seven hundred dollars. Um, which seems to be like kind of par for the course when you take your vet to the vet these days. Yeah. But then also in the past, like a few years ago, my dad had a medical emergency, and I like got a phone call and 30 minutes later was at the airport, like heading to see him, and I, because of my emergency fund, I was like, I don't care how much this flight costs, like I'm hopping on this plane and going. Yeah. The last one that comes to mind is that truthfully lately, I do feel like because my freelance work has slowed down so much that I've been just ever so skimming, just like a little teeny bit off the top of my emergency fund to help cover my monthly expenses, which I don't want to do long term. And I hope that that stops soon, but it feels good to like have that money there. Like I'm experiencing a season of flow work and I'm able to be okay with it and just see it more as an annoyance versus I don't have enough money to pay my bills, like I don't know what I'm gonna do. So I feel like my stress is like a fraction of what it would be because I do have this to fall back on a little bit.

SPEAKER_00 6:14

Yeah, totally. That's such a relief to be able to have. I was gonna say something about what you said about medical bills. Just that we do try to save extra each month specifically for medical costs, but if we ever like don't have enough in that account for, you know, whatever charge it is, just like you, like we totally would dip into our emergency fund, no questions asked, just because those are the kind of things that I feel like again, you're not happy about how much it is costing, but you're not going to like ideally, you like you're not gonna go without if you ca if you have the money to like make it happen. So I'm with you on that. Um, my most recent uh dip into my emergency fund was a $900 vet bill after Clover broke a tooth. I think most of my emergency fund spending over the last two and a half years has been on my dog emergency vet things. And then I also think that we probably dipped into emergen the emergency fund um when we moved because we it was kind of like a last-minute thing. It's not like we had been planning for on moving for months and like had been steadily saving up for it. It was kind of like this opportunity came up, can we make it happen? And we needed like a deposit for the new place before we got our, you know, previous deposit back, all that kind of like logistical things that you have to deal with when you move. And so I don't totally remember exactly where that money came from, but I'm guessing it came from our emergency fund.

SPEAKER_01 8:06

Also, we haven't talked about this yet, but I feel like I've totally used my emergency fund to cover a deductible for something, like a a car accident or something, and all of a sudden you need to pay $500 before insurance will kick in or something. Those are that's happened to me a few times, and those are always situations where I'm like, to the emergency fund.

SPEAKER_00 8:24

Yeah, and I think some of them, like for example, your dad's medical emergency, like some of these are totally like classic emergencies, but not all of them are. They're just those moments when you feel really grateful to have some money set aside in savings.

SPEAKER_02 8:41

Mm-hmm.

SPEAKER_00 8:42

Yeah.

SPEAKER_01 8:42

I like the point that you made earlier too. It's like life is so unpredictable in like the most beautiful ways and the most horrific ways, and you truly just can't plan for everything good or bad, you know. So it's it's so nice just to have a bucket of money to know like if something unpredictable happens and that thing requires some money to deal with it, I've got some of that to use. So just yeah, it's a really great gift to be able to give yourself. Totally.

SPEAKER_00 9:11

So let's talk about how much you actually need. If you Google this question, how much do I need in my emergency fund? You'll almost certainly find the advice to save three to six months worth of essential expenses. This assumes, like, if you know, you are resigned to using your emergency fund, you are cutting out all bare bones expenses, like dining out, any exception, shopping subscriptions, yes, all of these things.

SPEAKER_01 9:42

Emily and I have written about emergency funds so much for our clients. I cannot tell you how many times I've written out the words three to six months of bare bones expenses, and here's what you could include as bare bones expenses, and these expenses you would probably totally cut if like you lost your job and had no income. But the more I sit with it, the more I'm like, okay, Cassidy, if you truly lost your job, had not a penny of income coming in, you were only living off of your savings, would you truly neglect yourself of every single little joy and pleasure that cost money? Like, would you become a hermit who only stays at home until your financial situation changes? And I think the very, very realistic answer to that is no. Like, I would still find myself wanting to eat out like just a little teeny bit. So I'm like, I need more clarity on what I feel like bare bones can mean something for different people. Like maybe bare bones is like instead of spending $300 a month on dining out, you try to limit yourself to $50 or something. But I feel like it's unrealistic to go cold turkey.

SPEAKER_00 10:43

No, I think I agree with that. And it's also like for me, this is bringing up the kind of like cultural phenomenon in the US that is a deep discomfort with not working and like being out of work. So, like, to me, this is advice reads like, if you lose your job, you should stop everything you're doing and like focus 100% of your energy on getting another job. Like, you don't need to be having fun, you don't need to be like seeing your friends, you don't need to do all these things. When in reality, like those are probably the things that you need the most during that time. Right. Right. So I'm with you. I don't love that like bare bones mentality necessarily either. However, if you're intimidated by like, you know, how much you need to save if you have no emergency fund and you're just starting to save, maybe like a bare bones emergency fund is a good place to start.

SPEAKER_01 11:43

Yeah.

SPEAKER_00 11:44

You know, that's valid too.

SPEAKER_01 11:46

Just to speak to that advice in general, it's like as you're calculating, if you decide you want a three-month emergency fund or a six-month emergency fund, traditional advice is like figure out how much money you need to keep your lights on and your belly fed. Like what are your true necessary expenses and multiply that number by three or by six or however many months you want your emergency fund to last. So it's not like, you know, you're not having to use such a big number that includes all of the extra things that you probably bring into your life on on an everyday basis, which can make you feel really good if you, you know, spend $5,000 a month usually, but if you dig into it, maybe like only 4,000 of it is truly essential or something. Can just help you create a goal that feels a little more realistic. But to mind and Emily's point, if you choose to do that exercise to build out your own number, you might still want to include some little bitty buffers here for things that you know you would still do. Because to Emily's point, I think if you are going through something a little bit catastrophic where you truly don't have an income and you're having to live off your savings, you probably need to be like spending a little bit of money on self-care and stuff more than you think just to get through.

SPEAKER_00 12:57

Yeah. And back to how much you need to save. If you say you're going the bare bones route, you want a six-month emergency fund, and your bare bones spending is three thousand dollars a month, that's still eighteen thousand dollars in an um in a bare bones emergency fund, and that is a lot of money to just save and set aside. So I think this is kind of where we want to add some nuance and talk about how that typical advice that you'll see is not a one-size fits-all solution.

SPEAKER_01 13:33

Yeah. So I think um, as if you're in the position where you're like, I truly don't know how big my emergency fund should be, some things that you could consider thinking about is like how stable is your income? Do you feel like you have a lot of job security? If you freelance, do you feel like your income is pretty consistent? Do you have a partner? Are you a dual-income household to where if you lost your income, like you would still have some money coming in? Do you have family support that you could fall back on if you truly needed it? How flexible are your expenses truly? Like what could you immediately cut if you needed to? Like, for example, someone with a super stable job and low expenses and they live with a partner who also brings in an income, like they might be totally okay with a smaller cushion than someone who is like single, self-employed, and kind of like doesn't have like a family safety net to fall back on if they needed to.

SPEAKER_00 14:26

Like the job stability. I think that's a really tough thing to measure. Like, for example, if you just think back to COVID, like so many people lost their jobs overnight. And I've experienced it, and people close to me in my life have experienced it. And yeah, I don't think that's like a reason you need to be hoarding cash and like creating this ginormous emergency fund. I just feel like there's always a chance of losing your income, and you should just remember that that is a possibility.

SPEAKER_01 14:59

Yeah, but like history has proven that there are plenty of people who probably would have swore to your face that they are in the most stable job ever, and then they go on to lose that job for some unfortunate circumstance.

SPEAKER_00 15:08

Yeah, think of all the people who had stable government jobs that lost them in the beginning of 2026.

SPEAKER_01 15:19

So, yeah, just a just a thought. So maybe job stability really comes down to like how many baskets are your eggs in? And by that I just mean like, is it just your income? Or you know, maybe you have multiple jobs. Like I'm currently in a season of life where like I have my freelance job, but I also have a part-time job. A part-time job wouldn't pay much, but it would be better than nothing at the end of the day. So I don't think I would lose both at the same time. Yeah. That's possible too, I guess. But and then if you had a partner as well, like it's just Yeah.

SPEAKER_00 15:50

Yeah. I think it's also like how quickly do you think you could get another job? Like, I know there are some industries right now that like, you know, people are applying to hundreds of jobs and not hearing anything back. And obviously there are other industries, jobs that are in much higher demand. So I think that's almost a factor worth considering as well. Yeah. But all that to say, I think when you're trying to figure out how much money to put in your emergency fund, or like at what point do you stop putting money in your emergency fund? I think the more helpful question is what number would make me feel like I can sleep at night or breathe a little easier, rather than what does the internet tell me I should save.

SPEAKER_01 16:33

Do you want to walk us through how you kind of think about your number?

SPEAKER_00 16:37

Yeah. So honestly, when I first like came across this concept and was building my own emergency fund, I was very attached to like the six months of essential expenses rule. And I do feel like that that served me at the time. Like I think partially because of that, I was able to navigate a season of like multiple months of unemployment in the wake of COVID without too much financial stress, which I think is like I'm I'm really grateful that I wasn't financially stressed on top of all the other stress that was going on at that time. And and that was like six years ago, which is wild. Now I'm a little actually a lot, I'm a lot looser with like my emergency fund than I used to be. And that's for a few reasons. One is like I think I have more confidence in my ability to like be okay. I feel like I've just had yeah, exactly. I have proof that like things will work out and I'll figure them out. So that's one, I think is just like a mental I've relaxed a little bit. That's really beautiful. Yeah. But then the more like tangible reasons or things I'm thinking about are like one, I'm married, so we have two incomes in our household. Two, our expenses are pretty flexible. Like we rent, for example, we don't own a house and have a mortgage. I freelance, so I'm not worried about losing all of my income at once, even if things do kind of fluctuate. And now that I've been, you know, running my own business for several years, I've like built up a buffer there that we could also fall back on. We also don't have any dependents aside from our dog. We have really good credit, so like if we needed to borrow money, that would be an option. We also have been saving for other things over the years, so we have like these different savings buckets to pull from if we really needed to, like saving for a house, a new car, vacations. And then, like, truly, I think a part of this is like the peace of mind that we have like parents and family who would help if we really needed it. Like, obviously, that's such a privilege. However, all that said, we are kind of starting to think about buying a house in the near future. And I think I'll think about an emergency fund really differently when that day comes. I think I will kind of revert back to wanting a bigger emergency fund to be able to sleep at night.

SPEAKER_01 19:11

That makes sense.

SPEAKER_00 19:11

Yeah. What about you? How have you thought about your emergency fund over the years?

SPEAKER_01 19:16

Okay. I let me just kind of take you through my journey of how I've built my emergency fund over the years. So I started building my emergency fund probably in grad school. And at this point in my life, really my only exposure to personal finance was Dave Ramsey. And his advice is to build the $1,000 starter emergency fund, pay off high interest debt, you know, or all your debt, I guess essentially, and then like beef up your emergency fund after that to do three or six months of expenses. Early tw early to mid-20s, Cassidy started off with just a thousand dollars. And honestly, whenever whenever you have a thousand dollars when you're starting from nothing, I was like, the thousand dollars gave me so much peace of mind, just knowing that like there is something there. Also, I was a college kid, like my expenses were so low, my rent was super cheap. $1,000 was enough to cover my rent and then some, you know. So it felt okay. And then started to beef it up over the years, and I think that this number was a little bit mathematical, but truthfully, like $30,000 just felt like a nice round number to have in an emergency fund. I was living in Seattle where my rent was like almost $3,000 a month, you know, like living expenses. I think the math did work out to where $30,000 was like a six-ish month emergency fund or something. So like that has that's been like my baseline and my number for a super, super long time. And I feel like I've become more relaxed with it over time. That is the emergency fund like amount that I kind of brought with me into this next chapter of my life where I'm like, you know, divorced and like budgeting by myself and doing all of this stuff. But now I'm at a point where I constantly find myself reflecting on like, do I actually need this much? Especially when I'm in a season where like life feels really slow. And so that's why I've allowed myself permission to like skim a little bit off the top. Like it's okay if it's smaller. So I do think um I I've officially decided to like knock it back to $25,000 and see if that feels good. I could potentially knock it back a little bit more. We'll see. But I I think similar to you, like I I'm not in a dual income household, so I don't have that piece of it. But because we freelance and we have multiple clients, like history has proven over the past seven or so years that I've never been in a season where I've lost 100% of my freelance clients at once. And so just based on that proof, I'm like, I will still have some money coming in. I also now have like a part time job where I work 10 or 15 hours a week. Like that is a little bit of money too. So I have that to fall back on. I also think similar to you, I there's just been enough evidence in my life that like your work can feel slow, slow right now. And then all of a sudden, just like take off at lightning speed. And I also trust myself enough to know that like in those really, really busy seasons where I feel like I'm making way more money than I need, I'm really good about saving that money. Like I don't just go out and blow it all because I have like $6,000 extra dollars one month or something. And so I also trust myself to like pull from these resources in the slow seasons, like knowing that when things change, because I think that they will, like I will replace that and build it back up. And so I think I'm just easier on myself in that way as a result. But then yeah, similar to you, I, you know, I do have good credit and I'm like, is taking out a loan ideal? No, but also I would do it if I needed to. So I think just having all of those things. I also don't have any kids, don't have a house. Like, you know, I feel like if at the end of the day I truly needed to cut some stuff, as long as I'm still paying my rent and paying for my car and like covering my insurance premiums, sending some money on groceries, I'm like, you would be okay. So that's kind of how I thought about it. But I am constantly thinking, like, what number do you actually need? And I kind of think at the end of the day, it most for me it's been mostly a gut decision, more than anything, of like what feels right versus this is the exact mathematical calculation of how much I need down to the penny.

SPEAKER_00 23:21

Yeah. Just logistical question. Was the 30K like your personal emergency fund? Or was that when you were married, was that like for the two of you, or how did you think about that?

SPEAKER_01 23:32

Yeah, I guess it was just our, I mean, our our finances were 100% combined. So I think that like that was just our emergency fund amount. And then whenever I lived on my own, I was like, well, this is the amount that I have always had, technically, we had. So I was like, well, I'll just stick with the same amount for myself. But I also do have a cash cushion fund in my business bank account as well that I can fall back on too. So I don't know. I think my thing is I'm constantly like, do you maybe have like a little too much cash on hand? Would you like to do that?

SPEAKER_00 24:02

I was gonna say it sounds like a lot. I mean, going from like 3k for two people to 2k to one. Not saying like yeah. I mean, it's all about how you feel. That was just my impression.

SPEAKER_01 24:16

Do you feel comfortable sharing how much is in your emergency fund versus your like business cash cushion?

SPEAKER_00 24:22

Ours is our joint emergency fund is like okay, okay on there. And like as our rent has gone up, we haven't like adjusted that. But I think I feel okay with it because we've built out all these other savings categories to like bigger amounts that like if we need it, like if we had to push one of those goals aside, we would just use that money. Yeah. So I feel like you're down. Cumulatively we have I feel like more than enough that I feel fine. Like we've talked about like, do we need to increase our emergency savings? And it just hasn't felt like I don't want to jinx anything, but it hasn't felt like we've needed to, like, we're comfortable with it.

SPEAKER_01 25:05

Okay. Yeah, maybe I need to go back and revisit mine. I feel like the opposite is true, where I was like, well, this is my baseline, so I'll just continue this without being like, is this actually whatever I need.

SPEAKER_00 25:15

Whatever makes you sleep at night, really. But that but then on top of a c a business cash cushion. Right.

SPEAKER_01 25:21

Which that I think is like $17,000. You're fine.

SPEAKER_00 25:27

I'm just a girl who's living on her own for the very first time and she's scared. See, that makes sense. I I don't know how I would feel if it was just me. So that's totally fair.

SPEAKER_01 25:38

Well, in better news, I have been actually using the money, so the amount is getting smaller. Like my cash cushion was originally like $20 something thousand dollars in my business fund, and now I'm like, well, you actually don't have enough to pay yourself this month, so we're just gonna pretend like that cushion's a little bit smaller. That's what it's there for. So it's doing its job. Thank you. This is like a helpful reframe.

SPEAKER_00 25:59

Good.

SPEAKER_01 26:00

So I'll continue skimming off of it until it gets down to a nice normal amount.

SPEAKER_00 26:04

Yeah.

SPEAKER_01 26:04

Whatever. My income means really increases.

SPEAKER_00 26:07

This is why we talk about this stuff. I was also gonna say part of what I think switched my thinking on this a little bit is listening to some Money with Katie episode where she mentioned how little of an emergency fund she has. And like, not that we're the same, obviously. Like she has like a much higher income and like I think more just assets in general that she could tap into, but just like hearing someone be kind of a little bit casual about it. Someone who like I think of her as someone who's like traditionally pretty conservative financially in terms of like how she talks about saving for retirement and things like that, and for her to just be like, yeah, like we have this much, and if things go south, like we'll figure it out. I felt like that was healthy for me to hear, maybe.

SPEAKER_01 26:59

I know not everyone would agree with it, but I also feel like in that same vein, it's so healthy to remind yourself that, like, no, we are no longer prescribing to the belief that all debt is bad debt. And if crap truly hit the fan and you have credit enough to get a loan, even if it's like a I mean, they have several like zero percent APR credit cards where you don't pay anything for some of them, are like 21 months, you know. Yeah, most of them are a little bit shorter than that, but it's like that buys you a lot of leeway to like yeah, figure out what you're gonna do. Like, not saying that should be your first choice or that you would want to, but like you have other options. You don't have to 100% fully rely on your personal ability to save X amount of money.

SPEAKER_00 27:40

Right. Especially when you have competing goals, like yeah, investing for retirement or buying a house, or sometimes you just truly have other time-sensitive priorities and which brings me to you kind of mentioned this, but I think it's worth talking about. Like, do you build up your emergency fund or pay off debt first? Like, what is the order there? And I know there's some very conflicting advice on this topic. So, what is your take on that?

SPEAKER_01 28:10

I think if if I were starting from complete scratch, I feel like I would need to set a very easy goal for myself because chances are I don't have anything in savings at all if I don't have an emergency fund. So I think my first goal would be like, let's just say the thousand dollars. But ultimately, I think once I hit that goal, it would just feel like a mini win. And then I would be like, okay, let's actually just have like one month of living expenses. I think one one having one month of living expenses in the bank is like my definition of like a starter bare bones emergency funds. Like you know that you have a 30-day ramp if like something ever happened. So I think that's how I would start.

SPEAKER_00 28:47

Yeah, like and then after you have the 30 days, you would start tackling debt.

SPEAKER_01 28:52

Mm. Yes, yeah. I think so. I I will say though, if I had credit card debt and the credit card, I mean those payments just like snowball so much, I probably would do the thousand dollars in the bank, then try to get my credit card debt under control as much as I could, and then try to beef it up because I mean, credit cards are just like so predatory the way it's all set up with like the way the interest snowballs and stuff.

SPEAKER_00 29:16

Yeah.

SPEAKER_01 29:17

So I don't know. I I feel like I would be incredibly stressed about that.

SPEAKER_00 29:20

Yeah. I think one thing you could do in that situation is try to negotiate your interest rate with your credit card provider. Like it never hurts to ask.

SPEAKER_01 29:30

Yeah. You could also open up a 0% APR credit card and roll over, like do the balance transfer thing. Yeah.

SPEAKER_00 29:38

Yeah. Yeah.

SPEAKER_01 29:38

Yeah. That's an option. How how do you feel like you would tackle it?

SPEAKER_00 29:41

I think I liked what you initially said about building up a one-month emergency fund while making minimum payments on any debt. And then once I have a month's buffer start to like put any extra toward that debt, I think that's what I would do.

SPEAKER_01 29:58

I do feel like that general plan, though, would give me the the most peace, you know. That's kind of like what you're chasing in those situations. It's like, what's gonna bring me the most calm? Yeah. Should we talk about whether it should still be called an emergency fund or whether we should call it something else? Because you are currently reading a book that suggests we should not be calling it an emergency fund at all. So you have the floor. Please tell us all about it.

SPEAKER_00 30:20

Yeah. So I mentioned this in a recent newsletter and maybe even in a recent episode. But I recent recently read the book You Don't Need a Budget by Dana Miranda. And there are a lot of hot takes in this book. If you want to like have everything you've ever learned about personal finance just kind of turned on its head, read this book. But I think she has some interesting things to say about emergency funds. And one of the points she makes is that we should stop calling it an emergency fund. And this is a quote directly from the book. Building an emergency fund implies that a change in your financial circumstances constitutes an emergency in your life. A budget-free approach rejects that narrative. The most financial fluctuations can do is make you uncomfortable. They don't control you. Money is one of the many realities in your life. It's not the defining force. Calling your store of money a comfort fund is an ongoing reminder of that fact. It's also a small step to quiet one piece of the ticker that can cause daily stress and make money management challenges feel more severe than they are. So what's your initial impression? I don't think you've heard this take before.

SPEAKER_01 31:27

Yeah, I haven't. And my initial I like the way she's thinking about money in general. I like the store of money phrase. Like you kind of have this warehouse of money that you can fall back on, and that should bring you comfort.

SPEAKER_00 31:42

Yeah, one of the like ongoing themes of the book that she talks about is like how I I mean, if you can't tell by the title of the book, she is very against what we call budget culture. And part of the reason is because she thinks that it is like perpetuating the stress and constant thinking you have to do around money. And she kind of argues that like financial freedom is being free from like thinking about money all of the time and like weighing all of your decisions against how much they're gonna cost and all of these things. So I kind of like how reframing, how she's reframing it as like you don't need to call this store of money an emergency fund because that's another just like red flag that's like setting off these sirens in your brain. Instead, thinking about a comfort fund like almost lowers the stakes a little bit, like this is here for you if you need it, it's not a big deal. Like, yeah, yeah, you know? So I kind of like that reframe in that sense of it, like making money feel less stressful.

SPEAKER_01 32:51

Yeah, I do think the branding and reframing of some of these terms is so, so important, even just to your point, like how your body responds to it. And I do think by calling it an emergency fund, it's like if you want to associate a word with a color, I'm like, that's screaming red. Yeah. You know, but comfort fund, I'm like, ooh, calm.

SPEAKER_00 33:11

Yeah. The other thing that she says that I really like is that your finances change all the time, and that's a part of life that's not necessarily an emergency. And like, for instance, we've had Jillian Johns Root on the show before, who talks about mini retirements, and like, if you take a mini retirement, you're probably not earning money for, you know, three months, six months, a year. And maybe that's because you took a leave from your job, or maybe that's because you lost your job, and like that doesn't have to be an emergency, especially with how we think about work and how it's like such a part of our identities. Not working isn't always an emergency.

SPEAKER_01 33:51

Yeah, I know. And also, like you, you and I both use the app You Need a Budget. We both prescribed to zero-based budgeting, which is where you're giving literally every single dollar a job. And if those jobs don't pan out in that month, you know, you're like rearranging your dollars and trying to figure out how to still make everything work. And I do often wonder if it just is a bit too rigid, even and I think even if you try to be intentional about like, I'm only gonna have these like broader categories, so I feel, you know, like I have more room to cover the unpredictableness of life and stuff like that. You know, it's like, are we just adding a lot of stress to ourselves by being like, I allocated this much money to this one specific thing, and if I end up needing more money in this thing that's over here, like I'm stressed about it, and I've gotta like figure out how to, you know, I like I did it wrong. Yeah, I kind of get hurt I I get the author's point of like maybe to an extent this just is causing a little more stress than it needs to. Mm-hmm. And then also seasons change and maybe you pull from your stuff more one month.

SPEAKER_00 35:02

And that's okay. Yeah, I think you're a perfect example of that over the last six or eight months or however long. But yeah, I I totally recommend the book if you like want to think of things like your emergency fund and your budget in potentially healthier ways. I do think there are some views in the book that are I'm like not totally behind, but it's it makes you think, that's for sure. So okay.

SPEAKER_01 35:32

In conclusion, we want to talk real quick about how to build an emergency fund realistically. We've already talked about a little bit of this, but yeah, I think if you are starting from a place where you have zero dollars saved, I think step number one should be pick a small goal that feels manageable, knowing that once you hit that milestone, you can move on to another goal, but just do something that feels realistic and exciting. Like you'd be so proud of yourself when you reached it, but it's not too far out of reach.

SPEAKER_00 35:56

Mm-hmm. Yeah, that's a great first step. If you're able to, it helps to automate savings. So even if it's a tiny amount, just automating like regular transfers from your checking into your savings account. Um, and also saving in a high yield savings account just to earn a little bit of extra interest on those savings.

SPEAKER_01 36:16

Yes, highly, highly, highly recommend keeping your comfort fund or emergency fund in a high yield savings account with a high annual percentage yield and preferably no fees. I use Ally Bank, just gonna plug that out. They're not a sponsor, but I've used them for well over a decade. Truly love them. Emily, you use I use Discover, which is now owned by Capital One. Yeah. Capital One's still a very solid option as well. But other than those two things, I think another thing is to like use random windfalls to your ex to your advantage. We are fresh in the midst of tax refund season. We just did an episode last week on what to do with your tax refund. If you get a tax refund, use it to jump start or beef up or whatever your emergency fund or your comfort fund. I did this a few times in college and I really felt like it helped a great deal, just like accelerate just by using money that you maybe weren't expecting to get in the first place.

SPEAKER_00 37:16

Yeah, totally. And then the last piece of advice, and I I think this might be more of a personal preference, but if you truly want to like separate out this savings from some of your other savings categories, like maybe you have shorter-term savings goals, you can always keep your emergency or comfort fund in a separate savings account. Like have it all, just have it completely on its own.

SPEAKER_01 37:41

And also just a reminder if you are someone who traditionally kind of thinks in like all or nothings, which I feel like I have in the past, especially when it comes to financial goals, just a reminder that you can continue to build your emergency fund or comfort fund out alongside your life. So you can still keep money to go out, to travel, to dine out, to live your life. Uh, it does not have to be like I am going to deprive myself of every single little joy in pursuit of building your emergency fund. I think that only leads to burnout. And also, I feel like we're just kind of in a state in our society where you just need some little comforts and some little wins. Like, don't neglect yourself of those in pursuit of this one specific thing.

SPEAKER_00 38:25

And with that, we'll see you next week, girlies. That's a wrap on another episode of the Finance Girlies podcast. Nothing in this episode is meant to be taken as financial advice.

SPEAKER_01 38:37

Please do your own research and talk to a professional if you need advice. If you like this episode, consider leaving a review. Better yet, send it a show to a friend who might enjoy it too. Love ya. Bye. Nailed it.