Emergency Fund or One Month Buffer?

Greetings everyone,

I need a little clarity and a couple of questions answered. I have about 6K in a savings account that is on budget.  This money is basically my emergency fund.  I'm not sure how much I should have as an emergency fund. My monthly expenses, including Netflix and a few other subscriptions total about 4K. 

First question: Should I take 4K from savings (EF)and use that toward my one month buffer (and have about 2K EF left) or should I keep the 6K EF and forget about the buffer for now?

2nd question: If I should go with the buffer, how do I proceed? My logic tells me that I should have an INM (income next month) category. I would deposit my paychecks weekly to that category. At the beginning of each month, I would then assign those monies to their proper categories and start the process all over again as paychecks come in.....is this proper and is this making sense?

3rd and last question: Is there ant way to duplicate my budget so I can try different scenarios with mucking up my real budget?

Thanks in advance to all responders

Tony

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  • DosBoss57 said:
    3rd and last question: Is there ant way to duplicate my budget so I can try different scenarios with mucking up my real budget

     Make a Fresh Start and rename it Sandbox. Rename the original budget that now says archived so that it doesn't say archived.

    Like 3
  • DosBoss57 said:
    I'm not sure how much I should have as an emergency fund. My monthly expenses, including Netflix and a few other subscriptions total about 4K. 

     It seems to be a general consensus that 3-9 months of income (or expenses?) is a good goal for a Loss of Income fund.

    As someone else said, it's a beastly slog to get there!

    As for other "emergency" type funds, most YNABers get to where the contingency expenses are funded with Rule #2. Be specific about the purpose of savings and have separate categories for medical, car repair, roof, car replacement, tech replacement, veterinary, home maintenance, etc, etc 

    Like 2
  • DosBoss57 said:
    First question: Should I take 4K from savings (EF)and use that toward my one month buffer (and have about 2K EF left) or should I keep the 6K EF and forget about the buffer for now?

     I'd go with the buffer. It greatly simplifies your budgeting process, gives you a more holistic to make planning decisions, gives you a temporal Buffer against income changes, and saves you time/work/errors.

    Besides, if push comes to shove, you can always reallocate from INM if a true emergency hits before you're built up again. Most people try to protect the buffer, though.

    Like 3
  • DosBoss57 said:
    2nd question: If I should go with the buffer, how do I proceed?

    1.  Stick whatever you need to fund September in your August INM category. Use the Assigned cell. Be as stingy as you want, keeping in mind that if you don't use the whole 4K, you can keep more in your emergency category.

    2. In two days (or now, depending on if you use those pesky spending targets or not), move the money from the August INM category to RTA, flip to September, and assign your money to categories. 

    3. As paychecks come in in September, schedule them (helps to watch cash-flow and save work and prevent errors) as categorized to INM. 

    4. At the end of the month, go to All Accounts and filter for only INM transactions. Select the pertinent ones (not the scheduled ones) and change the category to RTA.

    5. Flip to the next month and assign money there. 

    Repeat steps 3-5 for each month.

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    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 3 mths ago
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    DosBoss57 said:
    My monthly expenses, including Netflix and a few other subscriptions total about 4K. 

     What about your True Expenses? How much money do you actually need to fund your budget for a month all in? That's the amount needed to make the transition (unless you are willing to skip funding the True Expenses for a month, but that's not usually agood idea).

    Remember that the concept is to be able to send ALL income earned in a month to the next month, not just enough to cover monthly expenses.

    Like 5
    • nolesrule To be fair, on my transition, I kept funding the long-term expenses I had with dates, and I skipped the savings categories that didn't have deadlines. 

      If I'd funded them all, I'd have had less to keep in the big category I reallocated from. Six of one, half a dozen of the other. It depends on the priorities.

      Good to think about, though. 

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      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
      • 3 mths ago
      • 1
      • Reported - view

      Move Light Sound Life yeah, you just need to truly understand the ones with deadlines don't have deadlines. 😉

      It's certainly a way to make the transition faster, you just have to understand what that means to the budget.

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      • DosBoss57
      • Sales Manager
      • Sky_Blue_Drum.14
      • 3 mths ago
      • Reported - view

      nolesrule ...My true expenses are included in that 4K

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      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
      • 3 mths ago
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      DosBoss57 then yeah, definitely move to the Next Month workflow. it'll make it easier to build the EF to whatever target you need when you are no longer budgeting each paycheck.

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      • DosBoss57
      • Sales Manager
      • Sky_Blue_Drum.14
      • 3 mths ago
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      nolesrule Thanks for all the advice....I will apply those suggestions and thanks to everyone who took the time to accommodate me in this matter....this community ROCKS!!!

      Like 3
  • Yep, one more vote for the one month buffer. You can always repurpose it in the case of an emergency. As far as how much to bring over for the buffer, an easy way is to just use one month's average salary.

    Like 1
  • Agreed on the buffer. One way is to think of it as the first month of your emergency fund/job loss fund. It does the first month of the work so you can keep up with the budget while sorting out what to do next in the job hunt, review and potential reduction of expenses if necessary. It gives you breathing room for some normality when it comes to the first month rather than panicking right away.

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  • 1st question: A hundred times yes.

    2nd question: This is how I do it. 

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  • I think it is commonly excepted wisdom that (depending on your circumstances) anything from 3-9 months should be your target EF. This means a liquid fund that is readily accessible (maybe in a savings account you cannot touch immediately but not in the form of shares which need to be sold).

    Your marital status, parental status, industry, job market locally, financial commitments etc will all govern how much you need. I am a single woman, no dependants, in a field which is always calling for people and I don't have a mortgage so for me currently anything more than 3 months on hand would have an opportunity cost. That said do you have debt? While I think everybody should have an emergency Fund of some sort - I would suggest if you have high interest date, I would keep my fund low and focus on debt. I have credit card debt so currently am focused on paying that off and have only 1 month's expenses on hand while I slog off this debt (that I curse myself for getting into!)

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  • Also I never really understood the point of a buffer. Or rather I don't see the huge difference between a buffer and an EF!

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