9 Reasons You Should Have a Dave Ramsey Emergency Fund

dave ramsey emergency fund Middle Class Dad Lifebuoy made out of dollar bills

A Dave Ramsey Emergency Fund is an essential tool in protecting your family’s financial future!

Imagine not having car insurance and causing a terrible accident.

Or imagine not having health insurance and getting cancer.  Those would be terrible things!

But without a Dave Ramsey emergency fund that’s exactly the situation, you could find yourself in!

In this post, we’re diving deep into the world of emergency funds, sometimes called a rainy day fund. We’ll look at why every household should have one and how to save for one, even if you’re broke.

While Dave Ramsey didn’t invent the idea, he has certainly done an amazing job promoting them over his 20+ years as the #1 financial expert in the US. So we’ll explore who he is and how he thinks too.

Specifically though, we’ll look at exactly how to set up a Dave Ramsey emergency fund so you and your family can have peace of mind in the face of unexpected expenses.

Who is Dave Ramsey and why do I think his system is the best?

He is the #1 personal finance expert on the planet.

He has New York Times best-selling books, is a frequent guest on all the major news channels and the host of his own award-winning podcast.

In short, he knows more about getting out of debt and building personal wealth than just about anyone this side of Warren Buffet.

Chances are you already know him, but if you don’t check him out!

The concept of a Dave Ramsey emergency fund is simple: Set aside 3 to 6 months of your household expenses. Keep it in a savings or money market account and not something like an IRA. Use it for actual emergencies and when you use it to replenish it quickly.

There’s a whole lot more to it than that, but that’s the basic concept. So let’s dive in deeper!

Let’s review the ways I have used our family’s emergency fund:

  1. My oldest daughter Astrid has somehow managed to break an arm 3 times (playground, gymnastics class, and roller skating).  Guess what? Our out of pocket expense on each of these was about $8,000!
  2. Unexpected car repairs that total $500 or more
  3. Unexpected AC repair – a new unit can cost $4,000 or more!

And those are just a few things that could happen.

Some big expenses can be predicted and thus don’t really count.  Things like a new roof or replacing your AC system or replacing your cars can be estimated.

The life expectancy on those things is predictable, but in other areas, LIFE HAPPENS! And when it does, you don’t want Murphy to take over an extra bedroom in your house!

dave ramsey emergency fund Middle Class Dad young boy with a broken arm in a cast

Would your family be OK if it took 3 months to find a new job without a Dave Ramsey Emergency Fund?

Guess what else could happen?  You or your spouse could lose a job unexpectedly and perhaps where you live the competition for new jobs in your same pay range is fierce!

My point is not to scare you!  Fear has a way of paralyzing us. My point is to motivate you to start one if you haven’t.

So now we know why we might need a Dave Ramsey emergency fund, so let’s review . . .

How do you start an emergency fund?

dave ramsey emergency fund Middle Class Dad glass jar filled with cash labeled emergency fund

First off to do it right we need to have debt under control. We also need to be living on a written household budget each month so we are making the best possible use of our dollars. If your family isn’t doing those things, then we need to get them going.

As I mentioned, I follow the principals of Dave Ramsey and I highly recommend you do too. But I get he’s not for everyone. He gets a little religious & a little right wing. I’m not knocking those things, but they can sometimes divide people.

My goal is always to bring people together. Sometimes too, Dave gets a little grumpy when folks don’t follow his program exactly. So if he’s not your cup of tea, keep reading! We’re leaving the dogma at the front door and focusing on how I can help your family succeed!

First things first. Let’s begin this process by trying to get $1,000 in a savings account with your bank or credit union. This will be your starter Dave Ramsey emergency fund. If you have some money in savings already; great! You’re already heading in the right direction.

If not, we need to get some in there. $1,000 won’t help for major disasters, but it gives you a little cushion while you get everything else lined up.

dave ramsey emergency fund Middle Class Dad Dave Ramsey quote meme

Does saving $1,000 emergency fund seem like an impossible task? Then we need to start with your household budget.

If you aren’t on a written budget each month that both spouses agree to then we have to start there.

If you don’t tell your money where to go each month then guess what? It will go wherever it wants to. Then you’ll simply end up wondering where it went.

I also have a copy of my Budgeting Spreadsheet available at no charge
– a key step in ensuring you have enough money each month to build your Dave Ramsey emergency fund!

It’s a simple, highly customizable, Excel spreadsheet and you can download it quickly and easily FOR FREE!  It’s the same one my family has used for about 7 years.

dave ramsey emergency fund Middle Class Dad free budget spreadsheet banner


So let’s do a monthly budget before the month begins. We will note your projected income from your paychecks. Then we will subtract all the known expenses. Things like rent/mortgage, utilities, gas, spending money for you and your spouse, food, etc. Whatever is left over, for now, should go to your emergency fund savings account.

Take a moment and review my post on How to Make a Budget.  I cover the basics and walk you through everything you need to know.

If you don’t have anything left over for an emergency fund then we have 2 possibilities:

  1. You have an income problem
  2. You have a spending problem

The average household income in the US is currently just over $50,000 according to the US Census Bureau.

If you are significantly below that, or make that but live in a really expensive place like California or New York, then we have an income problem.

You and/or your spouse probably need to set some long-term career goals on getting that income up. It won’t happen instantly. However, you don’t want to still be in this boat in 5 years. As with any plan you need to know where you want to end up.

To get things under control while you work on your income, check out my post on Budgeting When Broke. I’ve been in almost every situation I post about, so learn from my mistakes!

If your income is good then we need to look at spending.

dave ramsey emergency fund Middle Class Dad box trap lifted up with twenty dollar bills as the bait

For starters, if your rent or house payment (including taxes and insurance) is significantly greater than 25% of your monthly take-home pay, then you have made yourself house poor.

To fix this, you should consider moving down in home (or up in income). When our housing expense is way over 25% of our income it makes it very hard to win financially. While you can put a lot of these ideas in place, the traction you get will be very slow.

When our momentum is slow, we often lose motivation and fall back into our old habits. Thus you’ll never get where you and your family need to be!


If your housing expense is in line then we need to look at everything else you spend money on. If you do have debt, in my opinion (and Dave Ramsey’s), you should cease contributing to retirement accounts until the debt is gone (not counting your home if you own it).

Debt slows your progress in almost every financial way and while there are certainly wealthy people with credit cards . . .

True financial freedom and independence come from not owing anyone anything!

One easy way to curb personal spending is to use cash for gas, food and personal money. Dave Ramsey calls this his “envelope system“.  Basically you have a separate envelope for each category and you divide up the cash each payday into them.

When we just pull out a debit card for everything, we don’t have a full sense of what it’s costing and unless we’re very on top of things you also don’t always have a clear understanding of how much is in the bank. And without guidelines and a budget, both spouses don’t always know what the other is charging.

I like the simplicity of cash as you:

  • Can see how much you have left
  • More carefully evaluate how badly you need something when you see how much cash you have left after buying it
  • Stop spending when you’re out!

If your spending habits on gas, food and personal stuff are in line then I would look at cutting or cutting back on the following:

  1. Do you still have cable or a satellite TV company? Get the top-rated digital antenna from Amazon for under 30 bucks, or get a Roku stick and stream Amazon Prime, Netflix, Hulu, and other similar channels. Don’t have Amazon Prime? It’s got tons of channels, movies, and TV shows.Try Amazon Prime free for 30 days! You’ll also get their famous free 2-day shipping on all qualified purchases.
  2. How often do you eat out? Eating out is not only a LOT more expensive but it’s often less healthy too. It also seems more special when it’s not several times a week
  3. How often do you pay 3 bucks for a 12 oz cup of coffee? I love a great cup of coffee, and in the Austin area, there’s no shortage of great coffee shops. But you know what I would be if I got a cup or 2 every time I wanted one? BROKE.  ’nuff said.
  4. Do you pay others for stuff like mowing your lawn or cleaning your house? I’m not knocking those things, but if you’re in debt or trying to get your financial household in order, those should be among the first to go
  5. Do you coupon for groceries? Coupons abound and while it can be annoying to sift through dozens of things that are not of interest, it can save you a lot of money! Many larger grocery chains have coupon apps. This can make the savings even easier!
  6. Do you make your kid’s breakfast & lunch? The lunch line at school (and breakfast line too) adds up. At my daughter’s school, if both did breakfast and lunch every day, that would cost us over $2,000 per year! Trust me; while it’s no fun getting up at 5:45 am, you can make your kids breakfast and lunch for a lot less! That also gives you the control over what they eat.

So now we’ve looked at both income and expenses, and if you are implementing some of my suggestions, you should be able to get your $1,000 starter emergency fund up within 2-3 months.

Then once you have that in place if you still have debt outside your primary mortgage, you’ll want to focus on paying off that for good and moving forward not taking on new debt.

Once you’re debt-free except your home, then you want to build your rainy day emergency fund up large enough to cover between 3 and 6 months of your household expenses. Dave Ramsey calls this process his baby steps.

What are Dave Ramsey’s baby steps?

Dave has what he calls his “Baby Steps“. As with any seemingly insurmountable task, when you break them down into small digestible chunks, your chance of success goes up exponentially. Thus his baby steps are simply the steps he recommends taking to both get out of debt, but also to build things like a Dave Ramsey emergency fund and eventually to build wealth and donate to charity.

Specifically, those Baby Steps are:

  1. Baby Step 1 – $1,000 starter Emergency Fund
  2. Baby Step 2 – Pay off all debt using his Debt Snowball
  3. Baby Step 3 – 3 to 6 months of expenses in the emergency fund
  4. Baby Step 4 – Invest 15% of household income into retirement
  5. Baby Step 5 – College funds for the kids
  6. Baby Step 6 – Pay off home early
  7. Baby Step 7 – Build wealth and give!

How much should you have in an emergency fund?

For a family making anywhere from $50k to $80k per year, somewhere between $10,000 and $20,000 is about right for your full-sized emergency fund.

Why the spread? If your income is variable or volatile or dependent on just 1 of you, go to the high side of that range. If, however, you have 2 steady incomes and have both been employed by the same employer for a long time, you can probably be safe going on the low side.

Depending on your income and how high you want your fully funded rainy day emergency fund, it may take you 12-18 months to fill it up completely. Somewhere close to $1,000/month should be your goal to put into your Dave Ramsey emergency fund.

If you have an emergency during that process just do the best you can in dealing with it, delay payments when possible and try and avoid new debt if at all possible. Remember too that the only thing we truly have control of in this world is our reaction to what happens to us. Control over anything else is an illusion.

Want to speed up the process of filling it up? After all, the sooner it’s full the sooner you can get back to eating out more, going on vacation and being generous!

These tips will speed up your journey to a fully funded Dave Ramsey emergency fund:

  • Eat basic staple foods like rice, beans, pasta, etc.
  • Save and eat leftovers
  • Avoid going on vacation until you are both done with your full Dave Ramsey emergency fund and you’ve saved enough for the vacation; inexpensive stay-cations can still be a great way to have fun with your family!
  • Pause putting money into retirement funds during this stage

Let’s wrap up and review my . . .

9 Reasons You Should Have a Dave Ramsey Emergency Fund

  1. DEBT – You will avoid going into debt when the unexpected happens
  2. BANKRUPTCY – You can avoid needing to file for bankruptcy
  3. SUCCESS – Avoiding debt and bankruptcy are 2 key components of long-term financial success
  4. PEACE OF MIND – You and your spouse will have the peace of mind of not constantly worrying when something doesn’t go as planned
  5. DIVORCE – You and your spouse can avoid the top reason for divorce in the US; money fights! (based on the study “Examining the Relationship Between Financial Issues and Divorce“)
  6. NEEDS GET MET – Noted Psychologist Abraham Maslow famously created his “Hierarchy of Needs” which shows the 5 stages of human needs. A rainy day emergency fund is a key component in moving out of the first and second levels (having our basic physical needs met and feeling safe and secure)
  7. WEALTH – When your financial house falls into place that’s when you really begin to build wealth!
  8. GENEROSITY – As you build wealth because you’ve moved on from living paycheck to paycheck, your generosity will soar!
  9. IMPROVE HEALTH – When your finances are in such great shape that you’re both building wealth and donating significantly, you will see immeasurable improvements in your family’s health and mental well being (source: The Do Good. Live Well Survey)

An emergency fund is a crucial step in your long-term plan for financial success.

It literally means the difference between panic and being forced to incur debt when the unthinkable happens and confidently moving forward knowing you’re set. Want to dive in deeper? Check out the Ultimate Guide to Emergency Funds over at CreditZeal.


Are You Struggling to start a Dave Ramsey Emergency Fund?

In this post, we took an indepth look at the world of emergency savings that every household needs.

We examined different methods and strategies and how to start one, even if you’re broke. Specifically, though, we talked about how to get started on your Dave Ramsey emergency fund so you and your family will be protected in the event of a large, unexpected expense.

Are you struggling to fill one up? Are you struggling just living paycheck to paycheck?

Feel free to comment here or email me with any questions as I am here to help!

dave ramsey emergency fund Jeff Campbell Middle Class Dad bio

Photo credits (that aren’t mine):
Cash Ring Buoy – https://www.flickr.com/photos/86530412@N02/
Kid in cast – https://www.flickr.com/photos/thomaspetermueller/
Jar of Cash – https://www.flickr.com/photos/76657755@N04/
Car Drove Thru House – https://www.flickr.com/photos/ret0dd/
Money Trap – https://www.flickr.com/photos/kaioarmada/
Of course I have to add in that this post, like all my personal finance posts, is not intended as “financial advice”. I offer my opinions based on my experience, research and my own mistakes. Thus if you need financial advice you should seek out a professional in that area who is legally authorized to give financial advice.


Struggling with your family’s finances?

Get Instant Access to my
FREE Budget Spreadsheet

FREE DOWNLOAD

What you need to get your finances back on track or to take it to the next level!

This free (and highly customizable) budget worksheet will give you the tools you need to get your family’s finances back on track (AND help eliminate the turmoil that comes with financial chaos).

Join the 13,512 people who follow me and my posts each week. 

    By entering your email above you are agreeing to receive emails from me. But I promise to never spam you, sell your email address or otherwise send you anything I don’t genuinely think can help people. Unsubscribe anytime.

    By clicking the button, you agree to the above as well as my terms of service and privacy policy.

    Powered By ConvertKit

    Leave a comment

    Your email address will not be published. Required fields are marked *

    This site uses Akismet to reduce spam. Learn how your comment data is processed.