Planning for the Unexpected: Establishing an Emergency Fund

Financial stability can contribute to your overall well-being. Having an emergency fund of cash can help protect your financial health when you experience unexpected financial emergencies like emergency medical bills, or a loss of income. It can also help you avoid having to resort to high-interest credit cards or loans which can quickly build into long term expensive debt and potentially jeopardize your long-term goals.

Determining how much emergency fund you need

The size of emergency cash you need depends on your unique circumstances and comfort level. A general rule of thumb is three to six months of must-have expenses.  This would include things like housing, at-home food, utilities, car payments, etc. You may wish to have more than the general guideline depending upon your stage of life. Things to consider:

  • Are you the sole provider for your household?
  • How stable is your job or industry?
  • Is your income inconsistent?

As an example, a married couple, both 35 years old, are each earning a salary of $100,000 per year with basic monthly expenses of $5,000. One spouse is a teacher in the local school district, and the other is a manager at an established Fortune 500 company. These could be considered low risk of job loss occupations and an emergency fund of 3 months of basic expenses, or $15,000 could be appropriate.

Another couple, also 35 years old, with similar incomes. One spouse just started their own business while the other works as a sales rep making primarily commissions. Their basic monthly expenses are $5,000. Their jobs could be considered less stable with variable income. It could be appropriate to have 9 months of basic expenses in an emergency cash fund.

Retirement planning and emergency cash

Retirement planning requires careful consideration of potential financial setbacks. To help ensure a comfortable retirement, consider having a year’s worth of expenses in liquid assets to provide a buffer against unforeseen expenses and market downturns. However, the exact amount needed may vary based on your individual circumstances, risk tolerance, and expenditure needs.

Emergency cash: a safety net during market volatility

Market volatility is an inherent part of investing. During times of economic uncertainty, having emergency cash can allow you to stay invested without having to liquidate your investments at inopportune moments. By maintaining a cushion of cash, you can withstand short-term market fluctuations without compromising your long-term investment strategy.

Ongoing maintenance and monitoring

If you do need to dip into your emergency fund, plan to build it back up again as quickly as you can. It is also helpful to reevaluate your emergency cash needs as you age or transition into new life stages. As responsibilities change, financial obligations evolve, and retirement approaches, your emergency cash reserve may require adjustment to align with your current circumstances.

Reassessing your emergency cash needs regularly and working with a financial advisor can be beneficial to your overall financial plan.


Marshall Financial Group, Inc (“Marshall Financial”) is an SEC-registered investment adviser with its principal place of business in Doylestown, Pennsylvania.   This newsletter is limited to the dissemination of general information pertaining to Marshall Financial Group’s investment advisory services.  Investing involves risk, including risk of loss.  References to market indices are included for informational purposes only as it is not possible to directly invest in an index. The historical performance results of an index do not reflect the deduction of transaction, custodial, and management fees, which would decrease performance results. It should not be assumed that your account performance or the volatility of any securities held in your account will correspond directly to any comparative benchmark index.

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