Budgeting family finance

How Much Should I Have in an Emergency Fund?

We’re all on the path to better ourselves financially, and a big part to that is having a safety net. When it comes to our finances, that safety net takes a few different forms; but usually this boils down to a form of insurance.

And an emergency fund is insurance against going into debt.

A question we get a lot is: “How much money should I have in my emergency fund?”

The good news and the bad news is the same in this case: There is no right answer. Everyone is going to be different. At its core, the answer to this question is “however much money you need to have saved up not to go into debt in the case of an emergency.”

But What Do the Experts Recommend?

Financial planners generally recommend that you save up three to six months worth of expenses in an emergency fund. It is important to remember that we’re talking about three to six months worth of expenses, not income.

Look at your budget and determine how much money you have going out in expenses that are required to live every month. This does not include money going toward savings, investments, charities, etc. That income is strictly surplus money in the budget.

What Do You Recommend?

Generally, we recommend the same as the experts. Three to six months should suffice most financial catastrophes. But we like to call the number that works for you and your spouse the Sleep at Night Number.

What number in your savings account helps you sleep at night? What number in your account helps you not worry about what your investments are doing? What number helps you and your spouse not feel stress about money?

That number is your sweet spot.

What number helps you sleep at night? Do you agree with the experts with three to six months or do you have a different idea of what should be in your savings account?


This article is not intended to be financial, tax, or legal advice. Please consult a local professional for help with your specific situation.

Budgeting family finance

Should I Pay Off Debt and Invest at the Same Time?

We all want to pay off debt. And we all want to put more money into our retirement plans (401k’s, IRA’s, etc.). But do these two things conflict?

They shouldn’t. They’re both working towards the same goal: a better financial future for yourself.

So Do I Invest While I Pay Off Debt?

We hear the argument made all the time: “Why would I pay off debt at 3-4% interest when my investments make an average of 6-7% every year? I can make the minimum payments on my debt and invest and come out ahead.”

Look, we get that you can crunch the numbers. But this is personal finance. And it is important to remember that nothing in personal finance makes mathematical sense. Personal finance is almost entirely psychological, not numerical. And that statement alone is enough to make a person with a finance degree cringe.

If we made personal financial decisions based on what made numerical sense, we wouldn’t have debt in the first place.

So I Shouldn’t Invest While Paying Off Debt?

Yes. Saving and paying off debt are conflicting goals. This has nothing to do with the numbers making sense or that both of these actions help work toward your future.

They conflict because you can only do one thing aggressively at a time. If you try to pay off your pile of student loans at the same time you are trying to grow your investment portfolio, you will lose your mind. You will get burnt out and give up.

It is so important to feel small victories when working on yourself financially, just like it’s important to have small victories when dieting or exercising. This is where the psychological side of personal finance comes into play.

The balance in your 401k won’t matter when you have hundreds of thousands in student loan and credit card debt. The stress will pile up from the debt and your IRA won’t be there to comfort you until you turn 59 ½.

But what do you think? Have you gotten out of debt at the same time you invested? Do you think it’s more beneficial to focus on paying off debt before investing in mutual funds?


This article is not intended to be financial, tax, or legal advice. For help regarding your specific situation, please consult your local professional.

Budgeting finance

What Category Do I Start With For My Budget?

Jason writes in: “My family and I are trying to figure out where to even begin with budgeting. What category do I start with?”

Thanks for writing, Jason. Where you start is going to depend on you and your family. Specifically, it is going to depend on where you are on your journey to becoming debt-free, as well as your family’s values.

A good place for anyone to start with the budget is the essentials: you have to eat, you have to keep the heat/air conditioning on, you have to keep the lights on, and you have to pay rent/mortgage. If you are really struggling to get by, that is where your budget will start every month until you have breathing room.

If you and your family are having trouble staying above water, then you will be living as frugally as possible: no going out to eat, working extra hours, or even taking a second job.

But if you are not struggling, then you may want to consider broadening your budgeting categories. You might start with charitable giving. If your family values helping others, then this would be a good place to start as it puts your values on the forefront and helps to change your mindset toward money.

If you struggle with saving, you may want to make the first and second categories Long-Term Savings (Retirement) and Short Term Savings (Emergency Fund, New Car Fund). This makes it easier to save so it isn’t something that is on the back-burner but instead is something that you do at the beginning of every month with little thought.

The most important thing to remember is that budgeting is a personal process and everyone will have different categories, values, and percentages set aside for every category. The important aspect of this is remembering to even start the budget. Knowing where your money is going is the first step to changing any potentially bad behaviors. It is also potentially revealing as to what your family values.

Thanks for reading. What category does your family start the budgeting process with?

This article does not constitute legal, financial, or tax advice. For specific information on budgeting and helping your family get out of debt, please consult a local professional.

Budgeting finance

To Rent or to Buy?

To buy or not to buy?

That is the question.

To clarify, we’ll solely be discussing the benefits and drawbacks of renting and buying of houses, however some information may pertain to other purchases, such as cars.

So to start, we’ll tackle the obvious benefits of buying a house, the one everyone loves to say when in the discussion of renting or buying: You build equity!

And you do. But the drawback that no one likes to mention is that in order to build equity, you have to take on a massive, massive liability. In accountant speak, you are now financed more by liabilities, and not equity. Your balance sheet doesn’t look very attractive immediately after taking out the mortgage, and it won’t look very good for quite a few years thereafter.

It takes years to pay off much of the principal (the portion of the mortgage that builds equity for you once it’s paid). For the first few years, all you’re doing is paying off a huge amount of interest expense. Essentially, the only actual equity in your house is the down payment and the small principal that you pay on the principal every month.

But You Don’t Build Any Equity At All When You Rent!

True, and that’s why we won’t be talking about that. Just because renting property doesn’t build you equity, doesn’t mean it doesn’t have any benefits.

And just to be clear, we feel that owning a home should be the end goal for anyone and everyone. But sometimes in the short term, some benefits of renting may outweigh the fact that you won’t build equity.

When renting, much of the repairs and maintenance of your apartment or rented property are handled by your landlord. The tradeoff for not being able to build equity is the ability to save on expenses. In essence, you are shifting the liability of ownership as well as the expense of maintenance and repairs onto the actual owner.

What we’re trying to say is, depending on where you are in life, renting or buying may be the best choice for you.

So Who is Renting For and Who is Buying For?

Just because a college kid’s parents are pressuring him or her to buy their first house and not “waste” the money on renting, that doesn’t mean it’s the best choice for them.

If you’re fresh out of college or trade school and starting a new career, you’ll likely have to put in a lot of hours working. Those hours may restrict you from having to put in the time and energy for regular maintenance of your home and you may lack the ability to pay for the expense of having someone else take care of the maintenance, such as a lawn care service.

If you’re young, lack the time for the maintenance, or lack the money for a down payment of a house, renting may be the best option in order to build up your bank account. The hidden costs of home ownership may outweigh the mostly upfront fees of renting a space.

But what do you think? What are your personal experiences with renting and how do you feel about a young couple trying to buy a house? More importantly, what tips would you like to give to them?


This article does not constitute financial advice. For information regarding your specific situation, please consult your local financial advisor.

Budgeting finance

How to Budget for Your Family

When it comes to our financial lives, nothing is easier or more difficult than planning. And our plans generally (or should I say, hopefully) take the form of a written, thought-out budget.

We must meticulously plan out every aspect of the budget; we have to think of every expense and every source of income that we will potentially incur.

But more important than the planning for the budget, of course, is the changing and required variability of the budget. The budget– and you, by extension– has to adapt accordingly to any change that is going to happen.

The budget might not change this month if a large, unexpected expense is to happen. But for the next month, that expense needs to be taken into consideration. And for every month thereafter until you’ve recovered. You have to reduce your other expenses (or possibly increase your sources of income) until everything is back to normal for your finances.

I get all the planning stuff. But how do I do the budget?!

Alright, so you’re going to have to be your own personal accountant. And myself, personally, I recommend Wave to track your expenses and income for free. It does the bookkeeping for you so after you’ve hooked up your bank accounts and credit or debit cards so you don’t have to do anything other than check the reports at the end of the month.

It categorizes your expenses so that you can easily see where your money is going and where you can afford to stop your money from going.

More importantly, after you see realistically where your money is going for a month and what it is being spent on– and also where your money is coming from and realistically how much you make in a month– you can create a budget in an Excel spreadsheet based on those numbers.

This is how businesses track their income and expenses. This is how businesses know when to increase their income and how to decrease their expenses. If it works for them, it will work for you.

But what do you think? How do you and your family track your income and expenses?

This page is not meant to constitute financial advice. For specific information concerning your financial situation, please contact your local financial advisor.


Budgeting: Getting Your Spouse Involved



When it comes to laying out a budget for yourself and your family, the most important aspect of making sure that the budget is followed is to make sure that every person involved is on board and agrees about every aspect of the budget. The first step in ensuring this is having everyone that will be affected by the budget involved in its making so that everyone understands every aspect of the budget.

It’s equally important to have open discussions regarding the budget and making sure that everyone knows that the budget is only a tool (albeit a very powerful one when used correctly), not something that will control the lives of those involved. It’s therefore good for no single person to solely control the budget. Spouses must have equal input in the budget, regardless of how many of them are actually bringing in an income.

Because both spouses are likely spending and using the money, who is bringing it in is not nearly as important as making sure that both partners are managing it carefully and responsibly.

There’s two sides of the budget equation: the outgoing and the incoming. Because those two sides are equally important and both sides can always be improved by each partner involved in the budgeting process, both partners must be involved in the making and planning of the budget. Each person involved must feel as though they have equal say in the budget, or else they will likely stray from the path you have outlined in the budget.

Remember, the budget is only the starting point to getting to a point that your family feels financially secure. It’s something that will need constant revisions, improvements, and open, honest discussions about. Both partners must always feel in control of their finances and work together in unison to find financial peace.


Disclaimer: This information does not constitute financial advice. For specific information concerning your financial situation, please consult your local financial advisor.