How Much Should Healthcare Professionals Save in an Emergency Fund?
- Mike
- Dec 10, 2024
- 3 min read
Updated: Mar 7
Healthcare careers are generally stable, but no job is immune to disruptions. An emergency fun is typically three to six months of living expenses. This helps you stay prepared for challenges like a job loss or unexpected bills without relying on debt.
Step 1: Understand Your Monthly Expenses
Simple – Look at how much money gets deposited into your checking account each month from your job. For example, if you’re getting paid every two weeks and $3,000 hits your account each time, that adds up to $6,000 a month. Now, to figure out how much you should have saved as an emergency fund, you’d take that monthly amount—$6,000—and multiply it by 3 to 6 months. So, you’d aim for something like $18,000 to $36,000 set aside.
Detailed - Check your credit card and bank statements—your banking app makes this easy. Combine your spending to get the full picture monthly. Then group it into categories. Cut anything you wouldn’t need if money got tight, like dining out, vacations, or gym memberships. Once you’ve got that leaner number, multiply it by 3 to 6 months to find your emergency fund target.
Step 2: Determine How Many Months You Need
Most people fall into the three to six months range, but your specific situation can nudge you higher or lower. Let’s break it down:
When Three Months May Be Enough
Stable Career: If you're in a high-demand healthcare role (e.g., registered nurse or physical therapist), finding a new job is usually quick.
Dual-Income Household: If your spouse or partner has a stable job in a different field, you’re less likely to need a larger fund.
When Six Months (or More) Might Be Better
Volatile Income: Do you work PRN, on contract, or rely on bonuses? Income unpredictability may warrant a bigger safety net.
Dependents: Kids or aging parents relying on you financially? Factor in their needs.
Life Events: Baby on the way? Or just bought a house? Save a bit more.
Conservative Planners: If you're more cautious or feel nervous about uncertainty, having a larger emergency fund can offer peace of mind and extra security.
For healthcare professionals, the sweet spot often lands around three to six months unless you have unique circumstances like major upcoming expenses or a volatile income.
Where to Keep Your Emergency Fund
Your emergency fund needs to be:
Liquid: Easy to access without penalties.
Safe: Avoid investments that can lose value like stocks, bonds, and investment funds.
Earning Interest: High-yield savings accounts or money market funds are ideal.
Backup Plan
Life happens, and sometimes your emergency fund won’t be enough. If that happens you can:
Consider a 401(k) loan if necessary.
Tap into Roth IRA contributions (penalty-free for contributions, not earnings).
Use home equity or, as a last resort, credit cards (not ideal due to high interest rates).
Recap
The amount you need to save depends on:
Job Stability: High-demand roles need less cushion.
Household Income: Dual-income households need less.
Risk Tolerance: Save what makes you feel secure.
Upcoming Goals: Prepare for big expenses like a wedding, baby, or new home.
For most healthcare professionals, a fund of three to six months of living expenses will strike the right balance. Start by calculating your baseline expenses, choose a multiplier, and work toward your goal over time. And remember—an emergency fund isn’t just about numbers; it’s your financial safety net, helping you sleep better at night.
Link for the Emergency Fund Checklist:
If you have any questions contact me at marlinfinancialadvisors@gmail.com
Take care
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