I have my first good paying "career" position (I'm 27), but I've heard stories about around 10 years ago when they laid of 60% of the company. I'm worried that this could happen again because I believe another recession may happen sometime in the next few years.

My spending philosophy is to enjoy your money, but don't waste it every time you get a raise. Currently, here is my income/expenses:


  • $4,150/month from salary (after tax)
  • $6,000 in stocks
  • $4,000 in savings

Expenses (monthly):

  • Car payment: $380 (but I've started to pay $500)
  • Car insurance: $70
  • Utilities & rent: $730
  • Cell phone: $65
  • Food: $600
  • Credit card debt: $800 total, but I pay anywhere from $70 to $200 a month on it.
  • Other (spending, subscriptions, etc): $500-$700
  • Saving/Investing: The rest of the money. I break savings down into emergency vs vacation fund, but investments I view as a permanent savings account that I never touch.

I know my title question is really personal, but I'm really just trying to find an amount so that I don't panic if I was laid off and how I would get to that amount as quickly as possible. I'd like to upgrade my apartment because i have been living in the same place ever since I was only making $10/hour (5 years ago) and the walls are starting to close in on me. It's a small one bedroom.

  • 110
    $1300/month of "excess cash" while still carrying CC debt and paying it off SLOWLY is... puzzling. Really puzzling. Do you think that it builds your credit score?
    – RonJohn
    Commented Nov 6, 2019 at 15:56
  • 5
    What country are you in? Commented Nov 6, 2019 at 19:20
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    Why aren't you debt free with such an income?
    – gerrit
    Commented Nov 7, 2019 at 8:44
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    I don't understand why you both have a credit card debt and savings. you pay interest on that debt. It's not like you would have less money if you paid it off with your savings. In case of emergency you could use that same credit card again
    – Ivo
    Commented Nov 7, 2019 at 12:34
  • 4
    the very simple answer is "pay-off or sell the car, and pay-off the card". debt is what makes people feel insecure. if you happen to lose your job, so what? you're young and smart, you'll get a new job. but debt is fear. the literal answer to your question is eliminate debt. income is nothing.
    – Fattie
    Commented Nov 7, 2019 at 22:37

7 Answers 7


By my calculations you have about $2,800 in expenses and $10,000 in "savings" (including your stock). That's a decent (3.5 month) emergency fund that could be used in event of a layoff, and you could pare down some expenses to make it last longer. Plus, you could always find temporary work, even if it meant making half of what you do now.

So I wouldn't panic just yet. Certainly you could save a little more while you're working, but you're in a good position to weather most storms.

I would also consider paying off the car quickly. That would eliminate about $400 of your monthly expenses, making your emergency fund last even longer, or make a new apartment more affordable.

Bottom line - don't panic. A crash with the scope and magnitude of 2008 (meaning that you actually lost your job, not just some value in your investments) was hopefully a once-in-a-lifetime event, and even if something similar does happen again, there's nothing you can do about it but be prepared, which you are. You'll be better off than most people that have no savings and struggle to manage after getting laid off.

  • 29
    I wouldn't consider stocks as part of the emergency fund. Depending on their value and the market, they can only be sold with losses.
    – glglgl
    Commented Nov 6, 2019 at 16:54
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    2008 was hopefully a once-in-a-lifetime event? At 27, OP should have lived through the dotcom bust as well..
    – Mars
    Commented Nov 7, 2019 at 0:45
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    and by the time OP is 55, they could live through a S&L crisis, a commodities crisis, a computer-triggered black swan like October 1985 or whatever year that was, three war recessions, an Elder Boom (baby boom in reverse, what if his parents exhaust all their assets due to elder health issues), etc etc
    – Beanluc
    Commented Nov 7, 2019 at 1:14
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    It's not a matter of if 2008 will happen again, but when, considering that there is no evidence anyone has learned anything.
    – gerrit
    Commented Nov 7, 2019 at 8:45
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    @Mars Some people reckon that recessions happen every 10-11 years. Which means there should be another one right about now. Commented Nov 7, 2019 at 14:25

I don't know how expensive it is to live where you live, but IMO your expenses are too high by far.

Your expenses should reduce to:

  • Car insurance: $70 → probably ok
  • Utilities & rent: $730 → probably ok
  • Cell phone: $65 → probably ok, but maybe you find a cheaper plan
  • Food: $600 → seems very much to me. You should be able to halve this value.
  • Other (spending, subscriptions, etc): $500-$700 → This as well should be able to be reduced, let's say $400.

(You'll see that I deliberately omitted the following points: Car payment, Credit card debt and Saving/Investing. That's because these are no permanent points, but rather ones which should be eliminated ASAP. We'll see later how.)

So far, we are at $1565 (instead of $1965-$2165 before). That's still quite a lot.

From your $4165, you now have left $2600 (instead of $2000-$2200 before).

From this money, you can eliminate your CC debt immediately, and probably a significant part of your car loan. In some months (depending on how much of the principal is left), you are rid of it.

Once you are at this point, the whole $2000 to $2600 is free to be saved.

If you are really afraid of being unemployed, you should have an emergency fund of about 3 to 12 times your monthly expenses (depending on what makes you feel the safest), so let's say about $5000 to $18000. Don't consider the stocks you have as emergency cash, however, because you might to be able to sell them under value, what would be a loss after all.

But anyway, you should have reached your goal in about 3 to 9 months. The money you earn then can all be invested long-term, or you increase your cushion even more.

Additional thoughts about your wish to upgrade your apartment:

If I was in your shoes, I'd postpone this step until after your CC debt and your car loan are paid off fully and you have enough money left to at least cover the costs of moving.

Otherwise, you might end up in even more debt.

  • 5
    Is the 12 months worth of emergency fund your personal opinion, or are you drawing from a source for it? I ask because I've always heard 3-6 months is satisfactory.
    – bvoyelr
    Commented Nov 7, 2019 at 0:10
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    @bvoyelr In the end, that's up to each individual. The more you have, the safer you can feel. I had the feeling that the OP feels rather unsafe, so a bit more of a cushion might be favourable.
    – glglgl
    Commented Nov 7, 2019 at 5:51
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    @bvoyelr especially if somebody is worried about layoff in a crisis 6-12 month seem to be more realistic.
    – lalala
    Commented Nov 7, 2019 at 10:12
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    $730 for rent is definitely OK for someone making over $4000 a month. Don't scare the poor guy.. $730 is well beyond great, in fact: much less than a fourth of his paycheck after tax. Most people pay way more than that.
    – user91988
    Commented Nov 7, 2019 at 15:57
  • 2
    12 months of salary sitting in a low interest is wasting capital. He would be paying a handsome and invisible fee for all that liquidity he is not using. I do agree to have savings at 3-4x your monthly expenses but 12x seems excessive. Stocks and bonds can also be emergency funds but they are less liquid and shouldn't be counted as 1$ = 1$ (more like half). The savings are for having liquidity enough to release the rest of your assets in case sh...
    – Stian
    Commented Nov 8, 2019 at 15:01

How much money would I need to feel secure in my job?

As much money as is needed to tide you over until you find a new job.

It's no more complicated than that, really.

Of course, "until you find a new job" is the tricky part to figure out, which depends on:

  1. where you live,
  2. what your profession is,
  3. what industry it is, and
  4. how willing you are to move.
  • 4
    The rule of thumb I work to is that I need to have a reserve of sufficient capital to cover me for six months of unemployment. If I'm still unemployed after that, I'm probably in deeper trouble than I can save for. The furthest it's been tested has been four months. Commented Nov 7, 2019 at 13:38

You asked the question pretty well, but frankly there is nothing you can do to feel secure in your job. Keep increasing your skills and work hard and you will be employable. The company might go under, but knowing how to earn is a key skill that keeps one "employed". It is very likely, statistically speaking, that you will change jobs in the next 3 years. You might want to read the book Who Moved My Cheese. There is also a Zig Ziglar anecdote which talked about a grocery delivery boy that was always hustling. Not only was he always employable, but he also deserved a raise.

Now to feel more financially independent, you really need to eschew consumer debt. You make pretty good money and your expenses are not bad, but the car payment and CC is killing you. Despite the ability to earn points and what not, it is time for you to cut up your credit card. If you carry a balance, then you need to be done. Perhaps after a year or so of no CC balance, you can then go back to earning points and stuff.

To me this is your budget:

Car payment: $380 
Car insurance: $70
Utilities & rent: $730
Cell phone: $65
Food: $600  <- Can this be cut?
Other (spending, subscriptions, etc): Cut to $400
Total:  $2245

This gives you a positive cash flow of 1905 for the month. So pay off your CC in full. Then cut it up. Use the remaining 1100 towards your car payment. You don't talk about a balance on your car loan, but in subsequent months you should be able to pay around $2300 per month on the car loan. So in less than a year you could owe 23K less on your car, that will probably pay it off.

Having no car payment and no CC payment will give you a nice free cash flow. Also if you do get laid off those are obligations you do not need to pay. I would also avoid individual stocks in favor of mutual funds, but that is a bit of ways off.

  • 17
    Disagree with the advice to cut up your credit card. Better to keep your card but never carry a balance on it (i.e. pay it off in full every month). Many cards have rewards programs that will give you 1-4% cashback; or discounts on car rentals; or free travel insurance which is easily worth $200-$500 a year depending on your spending habits.
    – Dugan
    Commented Nov 7, 2019 at 3:00
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    "There is also a Zig Ziglar antidote" I think the intended word was anecdote.
    – zovits
    Commented Nov 7, 2019 at 9:30
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    Don't cut up your credit card.. terrible advice. Use your credit card as much as possible to reap the rewards points, and always pay it off in full each month. This will both build credit and give you free money.
    – user91988
    Commented Nov 7, 2019 at 15:55
  • 3
    In the UK (dunno about elsewhere) you can set up a Direct Debit with your bank that automatically pays off the CC in full each month. I always do that with all my cards and never pay interest on them.
    – Tim B
    Commented Nov 9, 2019 at 13:46

Feeling secure is very subjective and it really depends on multiple factors, as said by RonJohn. Here is my take: you should have this amount of cash in your savings for different cases:

Case 1:

  • 3 months salary in cash saved up ($12,450 using your after tax monthly salary of $4150)
  • No dependents
  • No debt
  • You are in an industry with lots of job openings
  • Takes you less than 1 month to find a job

Case 2:

  • 3-6 months salary ($12,450-$24,900)
  • You are in an industry which has some job openings
  • It takes you at least 1-2 month to find a new job
  • You have some debt

Case 3:

  • 6 month-1 year salary ($24,900-$49,800)
  • You are in an industry which doesn't have that many job openings
  • You have debt
  • You have at least 1 dependent
  • It takes you more than 3 months to find another job

I recommend also checking out Dave Ramsey's 7 baby steps which also includes establishing a $1000 emergency fund. https://www.daveramsey.com/dave-ramsey-7-baby-steps

  • 5
    I wonder if it is correct to calculate in multiples of after tax salary or if it would be better to calculate in multiples of monthly costs. Because, as long as you are living off your savings, you don't have to add to the savings. These considerations would about halve the needed savings value.
    – glglgl
    Commented Nov 7, 2019 at 16:23
  • 1
    Seconding @glglgl. All keeping that much cash on hand will do is make you miss out on the compound interest yielded by investments. Remember, having cash makes us feel nice, but it loses value every year due to inflation, so we should only keep as much as we can reasonably expect to need on short notice. The rest should be in a savings vehicle that at least keeps up with inflation Keeping more cash is just short changing yourself (which is your prerogative if you feel your situation demands it!)
    – bvoyelr
    Commented Nov 7, 2019 at 17:40

Besides the excellent ideas in other questions, a couple observations:

Nowadays, 6 months' cushion may not be enough. Fortunately, you are at the beginning of your career, so you have some flexibility. One thing to consider is whether your job may become obsolete by the "Next Big Thing" -- so as others have suggested, consider learning new skills. I thought a couple times that my job was secure, but when a company announces a 15% job force reduction, you get nervous. I know recent college graduates that were unable to find a job in their field for over a year.

First priority as others suggested is paying off car loan, reducing expenses, etc. but besides building up your savings, be sure to take advantage of deferred compensation plans such as 401(k) plans in the United States. If your employer matches contributions up to a certain percent (3 to 6% match are common), that is like getting a 3 to 6% percent raise. If you start early in your career, you could have several million dollars at retirement.


Several answers here are very good, but I don't feel that any are 100% adequate. I hope my answer adds value and isn't just noise. And full disclosure, I am a Dave Ramsey disciple so I'm just going to say what he would say.

You should have $6,500 - $13,000 for you to feel secure, which is 3-6 months of expenses if I've done my math correctly (excluding debt payments which I'll address presently). But before you do that, you need to pay off your debt. I want you to imagine that you have $8,000 in the bank, but you have a car payment and credit card debt, and then you get laid off. How does that feel? Now imagine you have $8,000, no car payment, no credit card debt, and you get laid off. How does that feel? It feels better doesn't it? It isn't difficult to figure out that the more debt you have, the quicker your emergency fund is going to be eaten away.

SpartaSixZero makes an excellent point that the exact amount of money to help you feel secure will vary depending on how stable and how in-demand your career is, and how many dependents you have, but your debt should not be a factor because you should pay that off asap. And the reason Dave Ramsey recommends 6 months and no more for an emergency fund is exactly the reasons glglgl and bvoyelr point out in their comments on SpartaSixZero's answer: you have too much money that isn't doing anything.

Dave Ramsey outlines 7 Baby Steps:

  1. Baby Emergency Fund: save a $1,000 emergency fund, and nothing more. If anyone quibbles about this it's usually that they believe their emergency fund should be larger, but at this stage you should feel uncomfortable because you're in debt, and saving up a large emergency fund is going to keep you in debt longer. There are very rarely exceptions to this, and I do not think your situation is one.
  2. Debt Snowball: list all of your debts smallest to largest, and throw every dime you can at the smallest debt until it's paid off, then move to the next largest, etc. Paying off debt this way builds up emotional momentum, which is much more valuable than paying off your debts from largest interest rate to smallest.
  3. Emergency Fund: fill out your emergency fund to cover 3-6 months of expenses.
  4. Retirement: save 15% of your salary for retirement. This 15% should not include any employer-match. If your employee matches 3% of your contributions, do not use that as an excuse to put only 12% of your paycheck away, you should instead put a full 15% away.
  5. Children: save for your kids' college (if you don't have any children yet, don't save yet).
  6. House: Pay off your house early (or begin saving for a down payment if you don't yet have a mortgage).
  7. Enjoy: Be outrageously generous.

You're already past Baby Step 1 which is good, but you have debt so you need to tackle that before going any further. If you have less than $3,000 in debt, take the money from your savings and pay off all your debt today, cut up your credit cards, and vow to never go into debt again (with the unfortunate exception of a mortgage). If you have more than $3,000 in debt, and your stocks are not in retirement accounts, sell off all the stock necessary to pay off the debt. If you have more than $9,000 in debt, go down to a $1,000 emergency fund, throw everything you have saved at the debt, then continue with Baby Step 2.

At this point, some people complain about taking money out of an investment to pay off debt. And let me reiterate, do not take out money from a retirement account for any reason except to prevent a bankruptcy; the fees and taxes are just too much. But you absolutely should sell all other investments to pay off debt, and here's why. Almost no one would agree to go into debt to invest in something. It's a good way to lose everything you have. And those who would agree to do it aren't wise. But from a financial standpoint, that's exactly what you've done, you've borrowed money on a car to invest in some stocks.

So once you're debt free, your next step is to build up your emergency fund to at least $6,500, but maybe more if it will take you more than a month or two to find another job. But do not have more than $13,000 in your emergency fund.

Once you have a real emergency fund you can either do what Dave calls Baby Step 3b, which is to save for at most 2 years for a down payment for a house. No more than 2 years because you're probably under-saving for retirement to save for the down payment, and missing out on more than 2 years of retirement savings in your late 20s is just too much. After 3b, or instead of 3b, start saving 15% of your paycheck towards retirement. It sounds like you don't have children so I'm assuming you can skip Baby Step 5. And so on.

I get the feeling you don't have a whole lot of debt, so you can probably have your emergency fund fully-funded within a year, maybe sooner. And if you want to really throw gasoline on this fire, get a second job delivering pizzas or something, where you can make another $1,000/month. That will absolutely catapult you through this process.

And lest you're still concerned that you're missing out on investment returns at this age, if you invest just $623/month (which is 15% of your current paycheck, which you're going to get raises throughout your career so these are really low numbers in reality) at 10% (historically the stock market has done over 12%) from the age of 30 to 60, you will have just a hair under 1.3 million dollars. And if you follow Dave Ramsey's plan, you're going to build so much financial discipline and good habits that you're going to wind up with quite a lot more than that in reality.

  • 4
    I am the down voter. Because most of your answer has nothing to do with the OP’s situation. It comes off more as proselytizing the celebrity David’s position on finance, and could be copy/pasted to multiple questions here. Commented Nov 8, 2019 at 20:28
  • Fair enough. No regrets :)
    – Jason
    Commented Nov 8, 2019 at 21:05

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