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Question: Investors, can you answer this simple question?

(Posted by: on 2010-08-30 07:08:39)

Why do some investors suggest saving u$D 1.000 for emergencies, while others suggest an amount equivalent to 6 mounths of salary? 1.000 is too little. Dave Ransey is one of the defenders of the just 1.000 dollars for emergencies.

Posted by: Joe on 2010-08-30, 07:28:36

Dave Ramsey's first step is saving $1,000 dollars for emergencies. His second step is paying off all debt but your house mortgage. His third step is increasing your emergency savings to 3-6 months of expenses. He is more keen on paying off debt than some advisors, but he still believes in the eventually 3-6 month goal. I think you need more than $1,000 dollars in an emergency fund before paying off debt, but different people have different opinions on the optimal amount.

Posted by: John on 2010-08-30, 07:27:20

Because their thinking is off. 1,000 is clearly not enough for anything. Mayne the people who suggest to just have $1,000 in savings are addressing the people of China or India?

Posted by: The Son of Rage and Love on 2010-08-30, 08:26:13

My guess is that the proponents of the $1,000 are talking to people who would otherwise not be able to save anything. $1,000 is not much but it would help a bit. In these days of potential unemployment, I think six months savings is a wise policy.

Posted by: msc on 2010-08-30, 09:03:04

$1,000 will buy a lot of groceries while you wait for your next paycheck, or a minor car repair, etc. You should save as much as possible. But you have to start with a reasonable goal.

Posted by: MarcThyme on 2010-08-30, 11:45:46

You either misheard what Dave Ramsey SAID, or you are deliberately misrepresenting it.....the "$1,000 Emergency Fund " is separate from (and in addition to) a "3-6 months of living expenses Fund "... If you are usually that bad at understanding instructions, Ramsey's methods won't work well for you at all, and you might do better to rely on winning the Lottery, or having a rich Uncle you did not know you had die and leave you a boatload.... Silly goose!