{"id":123792,"date":"2021-08-25T15:04:00","date_gmt":"2021-08-25T21:04:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=123792"},"modified":"2023-03-23T09:03:34","modified_gmt":"2023-03-23T15:03:34","slug":"emergency-fund","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/emergency-fund","title":{"rendered":"What&#8217;s the Biggest Newbie Mistake? Investing Without an Emergency Fund"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC1172915567&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p>Financial experts recommend having between three and six months of basic living expenses in an \u201cemergency fund,\u201d whether you\u2019re an individual, business, or real estate investor. You never know when you\u2019ll lose your job or get sick, or when a global pandemic will crash the economy. Relying on government benefits, charities, or family and friends may be necessary, but it\u2019s not ideal. So how much emergency funds do you need? Here&#8217;s what to know.<\/p>\n\n\n\n<p>Only 40% of Americans can afford an unexpected $1,000 emergency, according to a <a href=\"https:\/\/www.bankrate.com\/banking\/savings\/financial-security-january-2019\/\" target=\"_blank\" rel=\"noopener\">Bankrate survey<\/a>. And a CareerBuilder survey found that <a href=\"http:\/\/press.careerbuilder.com\/2017-08-24-Living-Paycheck-to-Paycheck-is-a-Way-of-Life-for-Majority-of-U-S-Workers-According-to-New-CareerBuilder-Survey\" target=\"_blank\" rel=\"noopener\">78% live paycheck to paycheck<\/a>\u2014and this includes 18% of those who earn over $100,000 a year, <a href=\"https:\/\/www.willistowerswatson.com\/en-US\/News\/2020\/02\/despite-improvement-in-their-financial-wellbeing-US-workers-remain-worried\" target=\"_blank\" rel=\"noopener\">a report by Willis Towers Watson found<\/a>.<\/p>\n\n\n\n<p>Small businesses fare even worse when it comes to emergency savings. A <a rel=\"noopener noreferrer\" href=\"https:\/\/www.jpmorganchase.com\/content\/dam\/jpmc\/jpmorgan-chase-and-co\/institute\/pdf\/jpmc-institute-small-business-report-exec-summary.pdf\" target=\"_blank\">2016 study by JP Morgan Chase<\/a> found that only \u201chalf of all small businesses hold a cash buffer large enough to support 27 days of their typical outflows.\u201d Another disheartening analysis reported in The Street estimates that \u201c<a href=\"https:\/\/www.thestreet.com\/personal-finance\/pandemic-recession-impact-small-businesses\" target=\"_blank\" rel=\"noopener\">approximately 21 percent of all American small businesses will fail within 30 days of being quarantined<\/a>.\u201d (This is without government relief, of course.)<\/p>\n\n\n\n<p>Large corporations are in the same boat. <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-03-16\/u-s-airlines-spent-96-of-free-cash-flow-on-buybacks-chart\" target=\"_blank\" rel=\"noopener\">United and Delta Airlines used an average of 96%<\/a> of their cash reserves to buy back their own stock instead of saving for a rainy day, a report by Bloomberg found.<\/p>\n\n\n\n<p>Sometimes it\u2019s not even a problem of strategy, though. Many successful investors get the feeling that their cash is \u201cburning a hole in their wallet.\u201d After all, that cash could be earning a return!<\/p>\n\n\n\n<p>Using up that \u201ccash burning a hole in your wallet\u201d so it \u201cearns a return\u201d is the real estate investor\u2019s version of a stock buyback\u2014and we saw how well that decision worked for the airlines.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n  <div id=\"posts_lists-block_6108267eedce0\" class=\"  my-10\">\n    <div class=\"\">\n      <!-- Column One -->\n      <div>\n                  <h2 class=\"mt-0 mb-1 js-toc-ignore\">\n            More on disasters &#038; emergencies from BiggerPockets          <\/h2>  \n                  \n        \n        \n        <div class=\"grid grid-cols-1 gap-y-4 lg:gap-y-7 mt-5\">\n          \n<article \n\tid=\"post-93431\" \n\tclass=\"content-card mb-0 flex flex-col  post-93431 post type-post status-publish format-standard has-post-thumbnail hentry category-biggerpockets-daily category-real-estate-business-management\">\n\n\t<header class=\"entry-header\">\t\t\t\n\t\t<!-- Image -->\n        \t\t\t<a class=\"post-thumbnail\" href=\"https:\/\/www.biggerpockets.com\/blog\/disaster-insurance\" target=\"_blank\" aria-hidden=\"true\" tabindex=\"-1\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"332\" height=\"225\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/08\/Disaster-insurance-560x380.jpg\" class=\"size-card w-full  m-0 aspect-[68\/45] object-scale-down wp-post-image\" alt=\"Investors: Don&#8217;t Be Caught Unprepared! Here&#8217;s Why Disaster Insurance Is Essential\" title=\"\">\t\t\t<\/a>\n\t\t        \n\n\t\t<!-- Content Wrapper -->\n\t\t<div class=\"py-4 \">\t\n                            <div class=\"flex gap-4 justify-between items-center\">\n                    <!-- Category  -->\n                                            <a href=\"https:\/\/www.biggerpockets.com\/blog\/category\/all\" class=\"transition-colors bg-themeBlue\/20 text-themeBlue-medium hover:bg-themeBlue hover:text-white px-2 py-1 mb-2 inline-block rounded-sm no-underline text-sm\" target=\"_blank\">All<\/a>\n                    \n                                            <span class=\"text-sm text-gray-500 hidden lg:inline-block\">4 min read<\/span>\n                                    <\/div>\n            \n           <div class=\"flex gap-3 items-center my-2 flex-nowrap text-base\">\n                <!-- Avatar and Author Name -->\n                <img decoding=\"async\" src=\"https:\/\/bp-wp-migration.s3.amazonaws.com\/author_avatars\/807.jpg\" class=\"w-8 h-8 object-cover my-0 inline-block rounded-full\" alt=\"\" title=\"\"><span class='leading-snug text-slate-500 flex items-center'><span class='hidden whitespace-nowrap sm:inline-block md:hidden lg:inline-block pr-1'><span class='posted-on'><time class=\"entry-date published\" datetime=\"2021-08-12T09:30:00-06:00\">Aug 12, 2021<\/time><time class=\"updated\" datetime=\"2023-03-27T02:36:09-06:00\">Mar 27, 2023<\/time><\/span><\/span>&nbsp;<a href=\"https:\/\/www.biggerpockets.com\/blog\/contributors\/davevanhorn\" class=\"no-underline line-clamp-1\" target=\"_blank\">Dave Van Horn<\/a><\/span>            <\/div>\n\n            <!-- Post title -->\n\t\t\t<h2 class=\"entry-title js-toc-ignore mt-4 mb-0 text-xl leading-snug text-left\">\n\t\t\t\t<a href=\"https:\/\/www.biggerpockets.com\/blog\/disaster-insurance\" rel=\"bookmark\" class=\"whitespace-normal no-underline font-bold  text-slate visited:text-slate hover:text-themeBlue\" target=\"_blank\">\n\t\t\t\t\tInvestors: Don&#8217;t Be Caught Unprepared! Here&#8217;s Why Disaster Insurance Is Essential\t\t\t\t<\/a>\n\t\t\t<\/h2>\n\t\t\t\n                        <p class=\"text-lg font-normal mt-3 text-slate-500 mb-1 line-clamp-3\">Fires and floods and earthquakes and landslides show how unpredictable Mother Nature can be. Recent natural disasters have caused real estate investors to stop and think about what protections they&hellip;<\/p>\n\t\t<\/div>\n\t<\/header>\n     <footer class=\"flex justify-between mt-auto\">\n        <!-- Comment Count -->\n        \t\t<span class='flex items-center space-x-2 text-sm' x-cloak x-data='commentCount()' :class=\"parseFloat(commentCount) < 1 || commentCount == '' ? 'hidden' : 'flex'\">\n\t\t\n            <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-5 w-5 text-slate text-opacity-50\" fill=\"none\" viewBox=\"0 0 24 24\" stroke=\"currentColor\">\n                <path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M17 8h2a2 2 0 012 2v6a2 2 0 01-2 2h-2v4l-4-4H9a1.994 1.994 0 01-1.414-.586m0 0L11 14h4a2 2 0 002-2V6a2 2 0 00-2-2H5a2 2 0 00-2 2v6a2 2 0 002 2h2v4l.586-.586z\" \/>\n            <\/svg>\n\n            <span x-ref=\"comment_count\" class=\"disqus-comment-count text-slate text-opacity-80\" data-disqus-identifier=\"93431\">\n\t\t\t\t\t\t\t<\/span>\n        <\/span>\n\t    <\/footer>\n<\/article><!-- #post-93431 -->\n<article \n\tid=\"post-131669\" \n\tclass=\"content-card mb-0 flex flex-col  post-131669 post type-post status-publish format-standard has-post-thumbnail hentry category-landlording category-biggerpockets-daily tag-emergency-maintenance tag-maintenance tag-property-management tag-sewage-backups tag-tenants tag-water-leaks\">\n\n\t<header class=\"entry-header\">\t\t\t\n\t\t<!-- Image -->\n        \t\t\t<a class=\"post-thumbnail\" href=\"https:\/\/www.biggerpockets.com\/blog\/quick-guide-to-emergency-maintenance\" target=\"_blank\" aria-hidden=\"true\" tabindex=\"-1\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"338\" height=\"225\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/11\/roof-leak-tenant.jpg\" class=\"size-card w-full  m-0 aspect-[68\/45] object-scale-down wp-post-image\" alt=\"You Can Avoid After-Hours Phone Calls From Tenants\u2014Here&#8217;s How\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/11\/roof-leak-tenant.jpg 830w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/11\/roof-leak-tenant-300x200.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/11\/roof-leak-tenant-768x512.jpg 768w\" sizes=\"auto, (max-width: 338px) 100vw, 338px\" title=\"\">\t\t\t<\/a>\n\t\t        \n\n\t\t<!-- Content Wrapper -->\n\t\t<div class=\"py-4 \">\t\n                            <div class=\"flex gap-4 justify-between items-center\">\n                    <!-- Category  -->\n                                            <a href=\"https:\/\/www.biggerpockets.com\/blog\/category\/managing-scaling\/landlording\" class=\"transition-colors bg-themeBlue\/20 text-themeBlue-medium hover:bg-themeBlue hover:text-white px-2 py-1 mb-2 inline-block rounded-sm no-underline text-sm\" target=\"_blank\">Landlording &amp; Property Management<\/a>\n                    \n                                            <span class=\"text-sm text-gray-500 hidden lg:inline-block\">6 min read<\/span>\n                                    <\/div>\n            \n           <div class=\"flex gap-3 items-center my-2 flex-nowrap text-base\">\n                <!-- Avatar and Author Name -->\n                <img decoding=\"async\" src=\"https:\/\/bp-wp-migration.s3.amazonaws.com\/author_avatars\/1689.jpg\" class=\"w-8 h-8 object-cover my-0 inline-block rounded-full\" alt=\"\" title=\"\"><span class='leading-snug text-slate-500 flex items-center'><span class='hidden whitespace-nowrap sm:inline-block md:hidden lg:inline-block pr-1'><span class='posted-on'><time class=\"entry-date published\" datetime=\"2020-11-26T10:00:37-07:00\">Nov 26, 2020<\/time><time class=\"updated\" datetime=\"2023-04-04T00:25:07-06:00\">Apr 04, 2023<\/time><\/span><\/span>&nbsp;<a href=\"https:\/\/www.biggerpockets.com\/blog\/contributors\/andrewsyrios\" class=\"no-underline line-clamp-1\" target=\"_blank\">Andrew Syrios<svg class=\"h-5 inline ml-2\" viewBox=\"0 0 21 21\" fill=\"none\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><g clip-path=\"url(#a)\"><path d=\"M19.253 5.25a1.75 1.75 0 0 0-1.663 2.29l-1.42.902a2.188 2.188 0 0 1-2.868-.46L11.91 6.28a1.73 1.73 0 0 0 .342-1.03 1.75 1.75 0 1 0-3.5 0c0 .37.12.732.34 1.03L7.701 7.982a2.188 2.188 0 0 1-2.868.46l-1.42-.903a1.75 1.75 0 1 0-1.816 1.203l1.035 6.205a.438.438 0 0 0 .43.366H17.94a.437.437 0 0 0 .431-.366l1.035-6.204a1.75 1.75 0 0 0-.153-3.494Z\" fill=\"#FFC107\"\/><path d=\"M10.502 17.064c4.108 0 7.438-.98 7.438-2.188 0-1.208-3.33-2.188-7.438-2.188-4.109 0-7.439.98-7.439 2.188 0 1.208 3.33 2.188 7.439 2.188Z\" fill=\"#FFA000\"\/><path d=\"M10.502 17.501c-3.915 0-7.877-.901-7.877-2.625s3.962-2.625 7.877-2.625c3.914 0 7.876.9 7.876 2.625 0 1.724-3.962 2.625-7.876 2.625Zm0-4.375c-4.597 0-7.001 1.137-7.001 1.75s2.404 1.75 7 1.75c4.597 0 7.002-1.138 7.002-1.75 0-.613-2.405-1.75-7.001-1.75Z\" fill=\"#FFD54F\"\/><\/g><defs><clipPath id=\"a\"><path fill=\"#fff\" d=\"M0 0h21v21H0z\"\/><\/clipPath><\/defs><\/svg><\/a><\/span>            <\/div>\n\n            <!-- Post title -->\n\t\t\t<h2 class=\"entry-title js-toc-ignore mt-4 mb-0 text-xl leading-snug text-left\">\n\t\t\t\t<a href=\"https:\/\/www.biggerpockets.com\/blog\/quick-guide-to-emergency-maintenance\" rel=\"bookmark\" class=\"whitespace-normal no-underline font-bold  text-slate visited:text-slate hover:text-themeBlue\" target=\"_blank\">\n\t\t\t\t\tYou Can Avoid After-Hours Phone Calls From Tenants\u2014Here&#8217;s How\t\t\t\t<\/a>\n\t\t\t<\/h2>\n\t\t\t\n                        <p class=\"text-lg font-normal mt-3 text-slate-500 mb-1 line-clamp-3\">Emergency maintenance doesn&#8217;t happen often\u2014on average, maybe once a year per unit. A property manager&#8217;s job is to have a plan in place ahead of issues arising.<\/p>\n\t\t<\/div>\n\t<\/header>\n     <footer class=\"flex justify-between mt-auto\">\n        <!-- Comment Count -->\n        \t\t<span class='flex items-center space-x-2 text-sm' x-cloak x-data='commentCount()' :class=\"parseFloat(commentCount) < 1 || commentCount == '' ? 'hidden' : 'flex'\">\n\t\t\n            <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-5 w-5 text-slate text-opacity-50\" fill=\"none\" viewBox=\"0 0 24 24\" stroke=\"currentColor\">\n                <path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M17 8h2a2 2 0 012 2v6a2 2 0 01-2 2h-2v4l-4-4H9a1.994 1.994 0 01-1.414-.586m0 0L11 14h4a2 2 0 002-2V6a2 2 0 00-2-2H5a2 2 0 00-2 2v6a2 2 0 002 2h2v4l.586-.586z\" \/>\n            <\/svg>\n\n            <span x-ref=\"comment_count\" class=\"disqus-comment-count text-slate text-opacity-80\" data-disqus-identifier=\"131669\">\n\t\t\t\t\t\t\t<\/span>\n        <\/span>\n\t    <\/footer>\n<\/article><!-- #post-131669 -->\n<article \n\tid=\"post-124457\" \n\tclass=\"content-card mb-0 flex flex-col  post-124457 post type-post status-publish format-standard has-post-thumbnail hentry category-landlording\">\n\n\t<header class=\"entry-header\">\t\t\t\n\t\t<!-- Image -->\n        \t\t\t<a class=\"post-thumbnail\" href=\"https:\/\/www.biggerpockets.com\/blog\/landlord-emergency-preparedness-101\" target=\"_blank\" aria-hidden=\"true\" tabindex=\"-1\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"338\" height=\"225\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/04\/landlording-guide-cover.jpg\" class=\"size-card w-full  m-0 aspect-[68\/45] object-scale-down wp-post-image\" alt=\"Landlord Emergency Preparedness 101: What Real Estate Investors Should Do Before Disaster Strikes\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/04\/landlording-guide-cover.jpg 830w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/04\/landlording-guide-cover-300x200.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/04\/landlording-guide-cover-768x512.jpg 768w\" sizes=\"auto, (max-width: 338px) 100vw, 338px\" title=\"\">\t\t\t<\/a>\n\t\t        \n\n\t\t<!-- Content Wrapper -->\n\t\t<div class=\"py-4 \">\t\n                            <div class=\"flex gap-4 justify-between items-center\">\n                    <!-- Category  -->\n                                            <a href=\"https:\/\/www.biggerpockets.com\/blog\/category\/managing-scaling\/landlording\" class=\"transition-colors bg-themeBlue\/20 text-themeBlue-medium hover:bg-themeBlue hover:text-white px-2 py-1 mb-2 inline-block rounded-sm no-underline text-sm\" target=\"_blank\">Landlording &amp; Property Management<\/a>\n                    \n                                            <span class=\"text-sm text-gray-500 hidden lg:inline-block\">7 min read<\/span>\n                                    <\/div>\n            \n           <div class=\"flex gap-3 items-center my-2 flex-nowrap text-base\">\n                <!-- Avatar and Author Name -->\n                <img decoding=\"async\" src=\"https:\/\/bp-wp-migration.s3.amazonaws.com\/author_avatars\/612019.jpg\" class=\"w-8 h-8 object-cover my-0 inline-block rounded-full\" alt=\"\" title=\"\"><span class='leading-snug text-slate-500 flex items-center'><span class='hidden whitespace-nowrap sm:inline-block md:hidden lg:inline-block pr-1'><span class='posted-on'><time class=\"entry-date published\" datetime=\"2020-04-14T15:10:39-06:00\">Apr 14, 2020<\/time><time class=\"updated\" datetime=\"2021-03-16T14:59:54-06:00\">Mar 16, 2021<\/time><\/span><\/span>&nbsp;<a href=\"https:\/\/www.biggerpockets.com\/blog\/contributors\/steverozenberg-2\" class=\"no-underline line-clamp-1\" target=\"_blank\">Steve Rozenberg<\/a><\/span>            <\/div>\n\n            <!-- Post title -->\n\t\t\t<h2 class=\"entry-title js-toc-ignore mt-4 mb-0 text-xl leading-snug text-left\">\n\t\t\t\t<a href=\"https:\/\/www.biggerpockets.com\/blog\/landlord-emergency-preparedness-101\" rel=\"bookmark\" class=\"whitespace-normal no-underline font-bold  text-slate visited:text-slate hover:text-themeBlue\" target=\"_blank\">\n\t\t\t\t\tLandlord Emergency Preparedness 101: What Real Estate Investors Should Do Before Disaster Strikes\t\t\t\t<\/a>\n\t\t\t<\/h2>\n\t\t\t\n                        <p class=\"text-lg font-normal mt-3 text-slate-500 mb-1 line-clamp-3\">Learn more about how you can be prepared as a landlord during emergencies, pandemics, and anything else that can impact your rental properties.\u00a0<\/p>\n\t\t<\/div>\n\t<\/header>\n     <footer class=\"flex justify-between mt-auto\">\n        <!-- Comment Count -->\n        \t\t<span class='flex items-center space-x-2 text-sm' x-cloak x-data='commentCount()' :class=\"parseFloat(commentCount) < 1 || commentCount == '' ? 'hidden' : 'flex'\">\n\t\t\n            <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-5 w-5 text-slate text-opacity-50\" fill=\"none\" viewBox=\"0 0 24 24\" stroke=\"currentColor\">\n                <path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M17 8h2a2 2 0 012 2v6a2 2 0 01-2 2h-2v4l-4-4H9a1.994 1.994 0 01-1.414-.586m0 0L11 14h4a2 2 0 002-2V6a2 2 0 00-2-2H5a2 2 0 00-2 2v6a2 2 0 002 2h2v4l.586-.586z\" \/>\n            <\/svg>\n\n            <span x-ref=\"comment_count\" class=\"disqus-comment-count text-slate text-opacity-80\" data-disqus-identifier=\"124457\">\n\t\t\t\t\t\t\t<\/span>\n        <\/span>\n\t    <\/footer>\n<\/article><!-- #post-124457 -->        <\/div>\n      <\/div>\n    <\/div>\n  <\/div>\n\n  \n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">What is an emergency fund?<\/h2>\n\n\n\n<p>An emergency fund doesn\u2019t have to burn a hole in your wallet if you know what it is and how it can work for you without earning a huge return.<\/p>\n\n\n\n<p>You need to be prepared for any emergency that might require quick money to handle. You can\u2019t predict every emergency before it happens, of course. Still, you can be prepared if you have a catch-all financial emergency plan that equips you to tackle almost any potential emergency that could strike. For all individuals and businesses, this requires cash reserves in an account you can easily access.<\/p>\n\n\n\n<p>For real estate investors, an emergency fund is necessary if your tenants can\u2019t pay or refuse to pay. At the end of the day, someone still has to pay the bank, and that will fall on you.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Why might you need an emergency fund?<\/h2>\n\n\n\n<p>Saving cash in a savings or checking account and setting it aside in an emergency fund gives you grace at a time you might otherwise make a desperate decision. If an emergency hits, you could be tempted to dip into your retirement account or other investment accounts to cover the costs. It also adds a safety net so you wouldn\u2019t have to turn to taking out more loans. The emergency fund can protect you now and in the future.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How much should you save for emergencies?<\/h2>\n\n\n\n<p>The size of your emergency fund will vary based on your personal risk tolerance, the types of emergencies you\u2019re most likely to encounter, and your personal circumstances (including your income). However, a good rule of thumb is to set aside at least three months\u2019 worth of expenses and preferably six months of expenses or more. You need to know how much you spend in a typical month and plan to cover at least three months to be safe. Your savings goal may be for a greater or smaller number of months, depending on your lifestyle and profession. <\/p>\n\n\n\n<p>What monthly expenses should you include when calculating your minimum emergency fund amount? Make sure to include any mandatory payments, like credit cards, mortgage, rent, or student loans. (Some loans can be deferred in an emergency, but it&#8217;s better to be prepared.) Also include things like utilities, groceries, phone bills, and other mandatory monthly expenses. But discretionary spending like going out to eat should be severely reduced in an emergency\u2014so you don&#8217;t necessarily need to save enough cash to cover your usual restaurant bill. Remember, your spending habits will change in an emergency, hopefully dramatically so!<\/p>\n\n\n\n<p>It\u2019s also important to estimate your home repairs. Most experts recommend that homeowners save about 1% of their home\u2019s overall worth for estimated home repair and upkeep costs in any given year. For example, if you live in a $250,000 structure, plan to spend about $2,500 in annual repairs. This may increase or decrease depending on your home\u2019s age and condition.<\/p>\n\n\n\n<p>If you can, try to prevent emergencies before they occur. Invest in solid insurance policies that protect you from the bulk of unplanned expenses you\u2019d otherwise face. Take care of your home with upgrades and as-needed repairs. Attend regular medical checkups and keep your vehicle in good running condition.<\/p>\n\n\n\n<p>For investors, the economies-of-scale concept is worth mentioning. With smaller properties with only one or two units, six months of cash reserves per unit is reasonable. But as the property size increases, it\u2019s probably not worth it to have six months saved for each unit. The chances of every unit being vacant or hit by a non-insurance-related emergency at the same time are slim.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n<div id=\"hero-block_62df1a82bfc88\" class=\"first:mt-0 hero-block py-4    has-background has-slate-200-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-slate-800-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">The Money Podcast<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Kickstart your personal finance journey with Scott and Mindy as they break down the good, bad, and ugly of people\u2019s personal money stories. From interviews with entrepreneurs and business owners to breakdowns of listener finances, you\u2019ll get actionable advice on how to get out of debt and grow your money.<\/p>\n\n\n\n<div id=button-custom-event-block_65400b52d0a76 class='button-custom-event'>\n      <a href=\"https:\/\/link.chtbl.com\/Money\" x-on:click=\"window.analytics.track(&#039;Money Podcast Blog CTA Click&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/emergency-fund&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-slate-dark-background-color has-text-color has-white-color\" target=\"_blank\" rel=\"noopener\">Listen Now<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  shadow-xl rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/12\/BP_Money_podcast_square-1024x1024-1-e1660861377128.jpeg\" alt=\"\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Where should you put your emergency fund?<\/h2>\n\n\n\n<p>You should keep your emergency fund in a safe location where you can access it easily. Most mainstream banks are federally insured for up to $250,000 (and sometimes more), making this one of the safest options. However, low risk means lower interest, so don\u2019t expect great returns. Having 2% interest on your emergency fund savings account is great to ensure your cash is instantly available if you should need it.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">When should you use the money?<\/h2>\n\n\n\n<p>It\u2019s important to only use this money for an emergency you can\u2019t otherwise pay for.<\/p>\n\n\n\n<p>You should be prepared for a variety of financial emergencies, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Vehicular collisions.<\/strong> In an ideal world, after a traffic crash, the party who\u2019s responsible will cover all damages with his or her insurance policy, and you\u2019ll be able to proceed with your life as if nothing happened. You could be the victim of a hit and run\u2014but you could encounter insurance issues or suffer a debilitating injury that prevents you from working. Legal action can help you cover your expenses, but that will take time to resolve\u2014you\u2019ll need to go through the discovery process, strive for a settlement, and possibly proceed to court\u2014and you\u2019ll still need an emergency fund to cover temporary cash shortfalls in the meantime.<\/li>\n\n\n\n<li><strong>Injuries and illnesses.<\/strong> You can never know when you or a loved one may fall ill and become unable to work. Again, you\u2019ll need an emergency fund to pay expenses not covered by insurance and make up for lost wages in the short term.<\/li>\n\n\n\n<li><strong>Major home repairs.<\/strong> If your roof starts to leak, you\u2019ll need to fix it as soon as possible. Some home issues could render your house unlivable, and others will only increase in severity the longer you allow them to go unaddressed.<\/li>\n\n\n\n<li><strong>Natural disasters.<\/strong> Insurance covers many natural disasters, but you may discover certain specific expenses are not included or that your insurance plan doesn\u2019t reference specific disasters.<\/li>\n\n\n\n<li><strong>Job loss.<\/strong> Even if you\u2019re amazing at your job, you may be laid off or otherwise unable to work. You\u2019ll need to be prepared for that kind of income shortfall as well.<\/li>\n<\/ul>\n\n\n\n<p>For real estate investors, it\u2019s important to think about these emergencies in each of your units. Repairs, natural disasters, and loss of rental income are all financial emergencies you should be prepared for.<\/p>\n\n\n\n<p>This isn\u2019t to say you should just magically have cash. Holding strong cash reserves should be an integral part of your business plan. It should be something to build toward.<\/p>\n\n\n\n<p>Aim to have approximately 5% to 10% of your assets be in cash or cash equivalents. As your real estate investments grow and your risk is diluted by being spread across more properties, that percentage could fall a bit. Nevertheless, as those financial experts recommend, you should aim to have between three and six months of basic expenses in reserve for yourself and your business.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>You never know when you\u2019ll lose your job or get sick, or when a global pandemic will crash the economy. A substantial emergency fund prevents disaster.<\/p>\n","protected":false},"author":1687,"featured_media":139725,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7119,5182],"tags":[],"class_list":["post-123792","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-biggerpockets-daily","category-personal-finance"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/123792","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/1687"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=123792"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/123792\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/139725"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=123792"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=123792"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=123792"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}