[E20] Why an “EF” is the Key to Fixing Your Money Problems (And Putting You On the Path to Wealth)

<p><strong>The Real Secret to Being Successful With Money</strong></p><ul><li>Successful personal finance is really just the combination of doing dozens of small things right – at first for days, then for weeks, then months, and then years. It’s not picking the right stocks or waiting until you start earning a higher income. </li></ul><p><strong>What is an Emergency Fund?</strong></p><ul><li>A pile of money that’s intentionally set aside to cover unforeseen emergency expenses that come your way. This includes things like car problems, medical expenses, and unexpected home repairs. </li></ul><p><strong>Why Do You Need an Emergency Fund?</strong></p><ul><li>Keeps you out of debt<ul><li>26% of people have unpaid medical bills</li></ul></li><li>Preservers your retirement and helps maintain momentum<ul><li>14% of people have had to take a loan against their retirement account</li><li>10% of people have taken a hardship withdrawal from a retirement account</li></ul></li><li>Provides peace of mind</li></ul><p><strong>How Much Do You Put In an Emergency Fund?</strong></p><ul><li>Conventional school of thought is 3-6 months of essential expenses. <ul><li>6 months is ideal if you’re single or in a one-income household.</li><li>3 months should be okay if you’re in a two-income household.</li></ul></li><li>What are essential expenses?<ul><li>Food</li><li>Shelter</li><li>Transportation</li><li>Medical</li></ul></li><li>Not essential:<ul><li>Eating out</li><li>Vacation</li><li>Amazon shopping</li><li>Investing</li></ul></li><li>In most households, only a percentage of monthly spending is essential. You might spend $5,000 per month, but don’t be surprised if just $3,000 is essential. (In that case, you’d need to set aside somewhere between $9,000 - $18,000.)</li><li>An emergency fund is not designed to “float” your normal lifestyle. It’s intended to keep you solvent when everything goes wrong. Ideally, it’s used as a stopgap for random emergencies. In a worst-case scenario, it should be able to cover you for a period of several