Chapter 03 — Money & Finance
How big should my emergency fund be?
Three to six months of essential expenses (rent, food, utilities, insurance, minimum debt payments — not your full lifestyle). Lean toward six if you have dependents, variable income, or work in a volatile industry. Keep it in a separate account so you don't 'see' it daily.
Follow-up questions
Where should I keep it?
A high-yield savings or money-market account, ideally at a different bank than your checking. Friction is a feature.
Should I invest it instead?
No. The point is access on a bad day, not return. A 20% market drop the week you lose your job defeats the purpose.
What counts as an emergency?
Job loss, urgent medical, essential car or home repair. A wedding, vacation, or sale is not an emergency — those need a sinking fund.
Should I pay debt or save first?
Save a $1,000 starter buffer first, then aggressively pay high-interest debt (over 7%), then build the full emergency fund.
When can I use it?
Job loss, medical emergency, urgent car or home repair. Not a vacation, not a new TV. If you use it, rebuild it before anything else.
Fund it or pay debt first?
Build a $1,000 mini-fund, attack high-interest debt (>7%), then finish the full emergency fund.
Do I still need one with credit cards?
Yes — credit is not liquidity in an emergency (rate hikes, limit cuts, job loss). Cash is.
How do I actually save it?
Automate a transfer the day you're paid. What you never see, you don't spend.
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