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Watch now: Full interview: Suze Orman and Devin Miller delve into why so many Americans aren't prepared for their next financial emergency

Use monthly expenses as an emergency fund barometer

If you’re following Ramsey’s “baby steps” to pay off debt, he also suggests you pause to set aside money for the unexpected. To calculate your emergency fund needs, first look at your monthly expenses over the last three to six months and come up with your average spending.

Gathering this statistic could help you avoid becoming a statistic. As of 2022, the Federal Reserve reported that 37% of Americans couldn’t even cover a $400 emergency expense without borrowing money, or selling something. That's up from 32% in 2021. So calculating your average monthly expenses can ground you in financial clarity in case of an emergency.

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Consider job stability and income volatility

Those in volatile fields or positions — independent contractors or commission employees, for example — know income can shift without warning. In such cases, emergency funds should cover a longer time horizon to factor for job or income loss, or a lack of financial stability.

A JPMorgan Chase Institute study found that on average, families experience large income swings almost five months out of the year.

If your income is inconsitent or your job uncertain, a good rule of thumb is to plan for three months of emergency savings for every 10% of income volatility.

Assess the range of risk factors

Beyond job uncertainties come personal ones that involve health, dependents, car repairs and home maintenance, for starters. The danger comes when you’re forced to pay these off with high-interest loans and credit cards, which can easily double or triple the initial charge.

Households with low liquid savings and high debt-to-income ratios will of course get hit harder when homefront pitfalls turn into financial ones. So the more possessions you own and responsibilities you have, the more you’ll need to save.

In the end, it comes down to being prepared. Take a cue from Dave Ramsey, who would no doubt approve of trading in a $1,000 benchmark for acting on million-dollar advice.

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Get your finances in shape

Having an emergency fund in place is crucial to feeling financially stable. But, as Ramsey himself would point out, that emergency fund doesn't do you much good sitting in your bank if you're still digging yourself deeper and deeper into debt.

While Ramsey recommends the snowball method — starting with your smallest debts and clearing them first to build momentum — if you've got lots of high-interest debt on say multiple credit cards, that can get expensive real fast. Due to compound interest, you can end up paying interest on your interest before you've cleared that account.

And with the average credit rate over 24% according to LendingTree, that interest can catch up fast. Depending on how much you owe and how many accounts you have, consolidating your various debts into a single loan could end up saving you thousands in interest.

These days, there are helpful online platforms make finding a personalized loan easy and efficient. By replacing your old loans with a single, cheaper one, you can keep yourself organized as you work to pay it off.

And if you want to get out of debt sooner and save even more on interest, you can choose a shorter repayment plan.

Kiss Your Credit Card Debt Goodbye

Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.

About the Author

Amy Legate-Wolfe

Amy Legate-Wolfe

Freelance contributor

Amy Legate-Wolfe is an experienced personal finance writer and journalist. She has a Bachelor of Arts in History from the University of Toronto, a Freelance Writing Certificate in Journalism from the University of Toronto Schools, and a Master of Arts in Journalism from Western University. Amy has worked for Huffington Post,, CBC, Motley Fool Canada, and Financial Post. She is skilled at analyzing trends and creating content for digital and print platforms. In her free time, Amy enjoys reading and watching British dramas on BritBox. She is a mother and dog-mom to a Wheaten Terrier.

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