Emergency fund calculator
Your data
Six months is the number people repeat, and it is a starting point rather than a finding. How long it takes for income to come back depends on the trade, the contract and the country, so the box is yours to change.
Results
What the reserve needs to be
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| The hole it has to cover each month | — |
| Months what you already have would cover | — |
| Months until the reserve is complete | — |
| The share of your income you are not spending | — |
| What the same months of salary would come to, in months of spending | — |
How long the reserve lasts, and what changes it
| If you also cut spending by | The hole becomes | What you have lasts |
|---|
Notice that cutting spending buys more time than the size of the cut suggests. Taking a fifth off the spending makes the same money last a quarter longer, because the reserve is divided by what is left rather than multiplied by what was saved. In a month when the income has stopped, that is the lever that is still in your hands.
The other number worth staring at is the hole itself. A reserve is not spent at the rate you spend money; it is spent at the rate money leaves minus whatever still comes in. A small amount that keeps arriving stretches the reserve a long way, because it is the difference that is being divided.
This page counts, it does not advise. Whether the reserve belongs in something you can withdraw the same day, and whether it should come before or after paying off an expensive debt, are decisions with more than arithmetic in them, and they are yours.
Should the reserve be months of salary or months of spending?
Months of spending, and the difference is not small. What a reserve has to replace is the money leaving your account, and that is your spending, not your pay.
The gap between the two is exactly the part of your income you keep. Six months of salary comes to seven and a half months of spending for somebody saving a fifth, and to a full twelve months for somebody saving half. Follow the salary version and you spend an extra year of saving to reach a target you had already passed.
Why does income that keeps coming in change the answer so much?
Because the reserve is not spent at the rate money leaves, it is spent at the rate money leaves minus whatever still arrives. It is the difference that gets divided, and dividing by a small number gets big quickly.
With five thousand of spending, a reserve of twenty four thousand lasts just under five months on its own. Let a thousand a month keep arriving and the same money lasts six months; let four and a half thousand keep arriving and it lasts four years.
How much does cutting spending help once the income has stopped?
More than the size of the cut. Taking a fifth off the spending makes the same reserve last a quarter longer, and taking off three tenths makes it last over four tenths longer.
The reason is that the reserve is divided by what is left rather than multiplied by what was saved. It is also the only one of these levers still in your hands in the month it matters.
Is six months the right number?
It is a starting point that got repeated until it sounded like a finding. The honest input is how long your income would actually take to come back, and that depends on the trade, on the contract and on the country.
This page keeps it as a box you can change for that reason. It works out what the reserve has to be for the cover you asked for, and leaves the choice of cover where it belongs.
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