Why our Emergency Fund is based on Monthly Expenses, not Monthly Income

If you have searched the internet about Financial Freedom you have come across the concept of Emergency Funds. Ideally, this is around 3 to 6 months of your monthly income or expenses.

An Emergency Fund is an amount of money that you set aside in case you lost your income. It also acts as a buffer to avoid touching savings or investments during emergency expenses.

Most of the books and internet articles we read says that it should be based on monthly income, there are a few that says it should be based on Monthly Expenses.

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