Your Cash Flow and Net Worth statements are like mirrors reflecting your financial strengths and weaknesses. Can you identify yours? If you are unsure, take some time with your partner, accountant, or financial advisor to go through them in detail. The effort you put in now will pay dividends later! Being good with money also means being smart about managing risks, and that’s where a solid emergency fund comes in. 

Life has a funny way of throwing curveballs when we least expect them. Maybe it’s losing a job right after buying a new home or before your wedding (yes, this happens!). Or perhaps it’s discovering all four tires need replacing after a blowout on your evening commute. Or your air conditioner breaks down during a heatwave. We could fill pages with unexpected expenses that arise at the worst possible times! 

An emergency fund is simply cash you’ve set aside in an easily accessible savings or money market account. Ideally, you’ll keep it as cash rather than investing it to avoid: 

• Having to sell investments when markets are down 

• Selling when markets are up and facing tax consequences 

• Waiting for transactions to clear in your brokerage account when you need funds quickly 

While it might be tempting to invest this money, especially when no emergencies are on the horizon, remember that’s exactly the point of an emergency fund—it should be immediately available when the unexpected happens. 

How Much Should You Save? 

The size of your ideal emergency fund depends on your specific situation. A good rule of thumb is to save 3-6 months of living expenses (this is where your cash flow statement comes in handy!). The right amount for you also depends on how stable your income is, how many people rely on you financially, and any large irregular expenses you might face. 

Building Your Emergency Fund 

Creating an emergency fund might be easier than you think! The simplest approach is to pay yourself first by setting up automatic transfers from your paycheck to a high-yield savings account or money market fund. (Remember that money in retirement accounts like 401(k)s or IRAs doesn’t count as emergency funds.) 

Calculate your target amount.  If your monthly living expenses are $5,000 and you decide you should have a six-month cushion, your emergency fund target should be $30,000.   Divide this amount by the number of paychecks you receive each year. For example, if you need $30,000 and get paid twice a month, you’d need to save $1,250 per paycheck ($30,000 ÷ 24 = $1,250). Another helpful strategy is to deposit portions of bonuses or commissions into your emergency fund to reduce how much you will need to pull from your regular paychecks.  Once the emergency fund is at the target level you need, you are all set.   

However you choose to build your emergency fund, you will definitely thank yourself when the inevitable unexpected expense comes knocking! 

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Mosaic FI, LLC is a registered investment adviser. The opinions expressed herein are those of the firm and are subject to change without notice. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Any opinions, projections, or forward-looking statements expressed herein are solely those of Leslie Meisner and Jenifer Aronson, may differ from the views or opinions expressed by other areas of the firm, and are only for general informational purposes as of March 6, 2025.

Mosaic FI, LLC has provided links to various other websites. While Mosaic FI, LLC believes this information to be current and valuable to its clients, Mosaic FI, LLC provides these links on a strictly informational basis only and cannot be held liable for the accuracy, time sensitive nature, or viability of any information shown on these sites.