How to Know if You Need an Emergency Fund

By February 27, 2017 Blog No Comments

This article is a guest post written by Erik Klumpp, Founder and President of Chessie AdvisorsErik and I became friends after meeting at the NAPFA conference and I asked him to write some thoughts on the benefits of an emergency fund as a guest topic for this site.

Having money in the bank is a reassuring financial reality. When you can cover an emergency without going into debt or it disrupting your financial life – that’s winning. No one wants to be confronted with a huge bill that they cannot pay. The strain of financial stress is real, but it can absolutely be mitigated by giving yourself the necessary cushion to weather whatever financial storm comes your way.

Ask yourself these following questions and see what you’re answers are. Maybe you’ll be pleased to discover how well you are doing. On the other hand, maybe you’ll realize you’re in dire need of an emergency fund stat!

Do You Fit Any of These Criteria?

  • Do you have a really good job? In other words, does it pay well and is it secure?
  • Do you work in a growing field? In other words, one which is projected to experience growth in the future, as determined by the Bureau of Labor Statistics (BLS)?
  • Do you have a marketable skillset that would allow you to get another job quickly and easily if you were to lose your present job?
  • Do you have the credentials (degrees and/or certifications) that would allow you get another similar job easily if you got laid off from your present job?
  • Do you have extra money every month after paying all your expenses?
  • Do you have assets that could serve as a financial safety net if you lost your job?
  • Do you have good credit? (750 or higher)

If you answered yes to all or most of these questions, you should have your emergency fund mostly funded by now! If you don’t, it won’t take you very long to do so. I would get on that sooner rather than later. There is no reason why you shouldn’t.

If you answered “no” to any of these questions, then you should definitely start saving what you can toward an emergency fund. Even if it’s only small amounts right now. Every little bit counts and having an emergency fund can help alleviate some of the stress around certain financial uncertainties you’re facing.

Bottom line: everyone should have an emergency fund.

The reason for an emergency fund is to have some money ready in case you lose your job or you suddenly have some other large expense.

Emergency funds aren’t for replacing your income in the long term. The money is put aside to bridge the gap between your sudden loss of income (or rise in expenses) and the point when you get it all in balance again.

Basically, you should have enough saved up in your emergency fund to cover expenses for as long as it would take you to find a job. Aim for six months but until you reach that point, whatever you can manage is better than nothing.


Erik Klumpp - 253About the Author: Erik O. Klumpp, CFP® is Founder and President of Chessie Advisors, LLC, a fee only financial planning and investment management firm. Based in the Metro Detroit city of Rochester Hills, Michigan, Chessie Advisors specializes in providing financial planning and investment management guidance to teachers, engineers, and young professionals both within Michigan and virtually throughout the United States. He is also Founder and President of Chessie Tax, LLC, a firm that specializes in providing income tax preparation, planning, and bookkeeping services to individuals and small businesses. Chessie Tax, LLC is also based in Rochester Hills, Michigan.

About Woven Capital

Aaron Hatch is a Certified Financial Planner and co-founder of Woven Capital, a fee-only financial planning and investment management firm that specializes in helping people balance life, work, and community. Aaron has been quoted in various publications, including The Chicago Tribune, US News and World Report, and the Huffington Post among others. Aaron can be reached at