What constitutes having 3-6months cash on hand.
Should you consider all living expenses when you set aside 3 to 6 months cash on hand? Is it 3, 4, 5, or 6 months that you should for?
Terry Says
First, take into account ALL your living expenses — even annual things like auto insurance or homeowners. Make a list of your monthly expenses — mortgage or rent, utilities, car payment, cell phone or Internet costs, and food! Don’t forget incidentals.
Then look around at what could possibly happen to you. If you die, you should have life insurance. If you become disabled, you could count on disability insurance (or SSDI from Social Security if completely disabled. If you become unemployed in a recession, would you likely be able to find another job in 6 months, a year?
Are you comfortable that these things would resolve in 6 months? If not, set more aside in savings!
