The Common vs the right advice on emergency funds

Follow any personal finance blog/website for any length of time and you'll come across this piece of advice: save 3-6 months of expenses for your emergency fund.

That's the common advice from gurus and bloggers alike; but is it the right advice? Isn't it a little too simplistic in the assumption that you'll find new employment within 3-6 months? This assumption works is some cases but not all. One common situation where the assumption may not hold true is for technical specialists in niche industries.

Case in point is my situation. I'm a technical specialist in the energy industry. With the current crash in oil prices (from $100 to below $30), the industry is seeing massive layoffs. No one is hiring. 

Why not get a job in a different industry? That's where the term "technical specialists" becomes a clutch. The skills that are highly priced in one sector are worth $0 elsewhere. A Brain Surgeon is a highly skilled, highly paid person; but outside of a hospital those skills become less valuable. If Walmart was to hire a brain surgeon, he'd probably be stocking shelves for a lot less than a doctor's salary. 

It therefore makes sense that career technical specialists take stock of their specific situation in determining how many months expenses will constitute a good emergency fund. Considerations should include:

Alternate sources of income already available: this will include spouse's income, regular passive income, second job, unemployment/disability benefits etc. The less sure an alternate source of income, the more emergency funds needed.

Housing options: Housing is usually the the biggest line item in a family's budget and the make-or-break when times are hard. The emergency plan should cover the question "How do I ensure I have a roof over my head in a time of emergency". The answer could be move back with relations, prepay mortgage, relocate or have enough savings to cover X months of housing costs

Industry Cycles: What is the employment cycle in the industry? How soon after mass layoffs will companies return to hiring?

In the current cycle in the oil industry, there's no end in sight to the price crash that started over 15 months ago. Speaking to colleagues who have lost their employment, it's taken a minimum of  8 months for some to get comparable employment. Some are still looking. One year is a long time to be without income.

Anyone who did the "smart" thing and saved 6 months of living expenses will find themselves in a bind now; because even though that was the common advice, it wasn't the right one.

Homework: Take stock of your personal situation and determine what your realistic emergency plan for loss of working income is.


  1. Great point. Like you I fall more into the technical specialist label and as such I am working towards building a more sensible emergency fund. It might take me a while but I hope to get to my goal!

    1. Yeah, it was a real shocker for me when I realized that with emergency funds, one size doesn't fit all.


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