How Impending Job Loss Is A Blessing

In December 2013, we sat down to strategize how the next year would go. We knew it would be our biggest year yet, specifically with the arrival of our first child, and finally becoming homeowners. Because of those two events, we anticipated our living costs would rise, so we talked about increasing our income 15% in 2014. Calculations showed we would manage better with such a margin if it came down to my wife becoming a stay-at-home mom. We could still get by on my current salary, but it'd be harder going forward. We had a few options at our disposal: (1) trim our budget so we live on less, (2) I get a second job that brings in the extra 15%, or (3) we somehow get raises or promotions that make up the 15%. We decided we would pursue all three options in the new year and see where we end up.

Enter 2014. We curb our appetites and the budget loses weight. Success! I start looking for contracts under my small business STRIVE. Promising! At our annual employee performance reviews, we inquire about raises and promotions, or lateral movement within our respective companies. Bleak! The first two options are viable, but the third is a no-go. We buy a house with 20% downpayment, leaving us with the lowest reserves we've seen in our entire marriage. Super! Then in April, we learn that my current job would be ending, the consequence of our company's acquisition and absorption into another. Bummer! Initially, it looks like the rest of the year will suck, but we chose to trust God still for our well-being and livelihood.

During that week, we literally "cast our burdens" unto God and reflected on how faithful He had been in our life thus far. We were reminded that when we yearned for a mate, we found each other although it wasn't how we had thought we'd meet our spouse. We wanted an easy marriage, and we have it. We wanted a child, and he'll be here in 3 weeks. We wanted a house, and we found it in 5 weeks. It even closed in much less time than short-sales usually do. We pray for good health and have generally lived it. Whatever we have needed, He has been faithful to provide, in His own time, in His own way.

Even in the impending job loss, we still see God's hand at work:
(1) The job does not end immediately -- I have until March 31, 2015. Most other layoffs have been immediate.
(2) It means we would still have our health coverage, which we think is important to have for at least the baby's first few months. We'll have 7 months.
(3) At the end of the job, I'll receive a severance package equivalent to 16 weeks of my current pay. That's 4 months income while I look for another job. I sense that we'll need me home these four months with the baby, depending on how childcare works out.
(4) It would have been impossible to get a 15% raise soon enough in this job, even through promotion. I would have had to work a lot more hours chasing the unattainable goal at the expense of time spent with family.
(5) Until the job ends, I have ample time to find a good job that can meet our original goal, without pressure to find something quickly or settle for the first thing that comes down the pipe.
(6) I can use the time until then to spruce up my resume, update my skills and even attain new ones that would make me more marketable. I've perused the job postings and feel confident that I will find work relatively easily when I start applying. It's also given me a chance to learn what skills are in demand today so I can prepare accordingly.
(7) The company has changed so much since the acquisition that some perks we were counting on after the baby arrives will no longer be there. The flexibility to work from home is gone (they prefer everyone to be in the office), among other things. Eventually, I would have hated working here.

For many people, losing a job is the worst blow to their lives. But we are blessed that we are in the best possible financial and emotional position to handle this impending job loss, so our pity party lasted only a week. Our emergency plans allow for a worst-case scenario of 6 months basic living if we both lost our jobs. Besides that, the severance package and unemployment benefits would cover us for up to 2 years. That in itself is a blessing, to have such safety nets in place.

We nonetheless do not anticipate that I will be unemployed for long, if at all. I'll officially start looking for another job in February 2015, although if a great opportunity presents before then, I'll seriously consider it. We trust that God will still be providing our daily needs no matter what happens, and are eagerly anticipating how the rest of the year will unfold.

House and Loan Match-Ups

In the course of searching for a home, you will begin to compare and match the different house and loan options at your disposal. We considered about 11 houses and 5 loan offers, and needed to find the best financial match (numbers only). It can be mind-boggling to keep mental note of everything, but that's what computers are for. So I added a feature in our financial app to do the match ups and analysis.

Below is an example of one such analysis. You can review how much money you must have on hand to close on a particular house with a certain lender. Don't forget to account for earnest money, inspection fees, and appraisal fees, which are paid before closing. The lender's GFE might not include these fees. After closing, consider any penalties for breaking your current contracts, moving costs, and stuff you must buy for the new home during first few months, in addition to your usual monthly expenses.

For the houses we considered high possibilities and loans we found reasonable, we entered that data in the application. We could then pair up any house and loan to see what the numbers came to, given a certain down payment. Most importantly, we wanted to know how much money we'll have spent by the end of the first month in the house, and ensure that it would be available when we make an offer.

I did not have enough time to complete the feature, but I had intended to further implement active analysis, where the application would also consider our house requirements and our weighted observations from house tours to help us determine the best value. It would consider our funding sources and monthly budget (since we track them in the application) to give us a rough estimate of our financial picture over the first year. It would obviously exclude current rent and make informed adjustments to utilities and gasoline costs to produce an good estimate. I think it would have been a cool feature. Apparently a weekend is not enough for this kind of work.

What We Want In A Loan

I do not understand why a mortgage is considered a hallmark of the American dream. It is essentially debt, with your very house as collateral to the banks until it is paid off many years down the road. To measure economic progress by how many people have mortgages is foolish; rather, we should be counting those that fully own their homes, having paid off these mortgages!

As much as we hate debt, we decided this was "good debt" that would help us get into our own home, rather than continue to bleed thousands in an apartment situation. So after finding a realtor and starting the search for a home, we also began looking for a mortgage lender. Some rules we followed that made it an easy process:

(1) Ensure you have an excellent credit score. Ours range from 760 to 790 from all 3 credit agencies, mostly built through a credit card we pay off every month. This was good advice from a friend when we first got married, that we should start building credit at least 2 years before planning to purchase a home.

(2) Ensure a low debt ratio by minimizing other debts you have (or earning more income). We practically have no debt except the revolving credit card mentioned above.

(3) Educate yourself about how mortgages work, and choose the right one for your situation. We chose a 30-year fixed conventional loan. We'll be retiring empty-nesters when this loan is finally paid off, but we plan to try and pay it off in less than 20 years.

(4) Aggressively save for the down payment, if your loan requires it. We started saving about 2 years ago, intending to pay 15% or even 20% down. Some lenders offer different interest rates depending on what bracket of down payment you fall in (5/10/15/20%). Most lenders have a flat rate regardless of the down payment, but will instead have steeper PMI rates.

(5) Know how much your monthly expenses are, and what proportion is currently spent for housing/rent. We have the data of all our spending over the last 2 years, so it was easy to see what our reality is. We spend about $1200/month for rent in this apartment, which is our psychological upper limit for a mortgage payment.

(6) For the houses you are considering, have an idea what the property taxes were last year. The MLS listing usually provides this data, but you can also query the county assessors. The houses we've been interested in have ranged from $800 - $1300/year.

(7) For the houses you are considering, also know about how much annual home insurance you might expect to pay. A quick way to determine this is to multiple the house list price by 0.0051 (statistical estimation of data from 3 insurers on 5 properties).

(8) Find a reputable lender. Whoever you contact, make sure you ask for an estimate and pre-qualification, giving them your credit scores to use so that you don't divulge too much personal information upfront. You also don't want too many hits against your credit at this time. But know that whichever lender runs your credit must send you a statement showing the FICO scores they pulled and used to determine your terms. So let one run it and furnish it to other lenders.
Online and out-of-state lenders are just as good as banks and local brokerages since everyone eventually sells your mortgage to the government. Until a week ago, I was considering a lender from North Carolina that I found online but eventually decided to go with Ent Federal Credit Union, who actually finance their own loans.

(9) In terms of who offers better deals, the order is such: credit unions, direct lenders, mortgage brokerages, and finally banks. Ask around and read the reviews about any institution you feel interested in. It is true that there are scams and bait-and-switch situations out there, so be very discerning. It look me 2 weeks to decide on 5 good lenders.

(10) With the house list price, property taxes, homeowner insurance, and desired total monthly mortgage payment, you can crunch the numbers on how much loan you can afford. We started our search thinking we could afford a $250,000 home but through this exercise settled in the $230,000 or less range, with a 15% down payment.

(11) When you speak with a lender, you want to know their 0-point interest rate for each of the down payment brackets, and their mortgage insurance rates for each down payment bracket. With this, I initially judged a good loan as one that has the lowest payment (P+I).

(12) If you additionally consider closing fees (excluding all title fees, processing fees, and appraisal fees) and the lender's escrow requirements, the best loan may be one with the lowest out-of-pocket at closing cost. ENT has high closing/origination fees (around 1% of loan value) but offers some of the lowest 0-point interest rates. Direct lenders have no or little closing fees beyond the usual processing charges.

(13) Take advantage of rate buydown, where you pay a certain percentage of the loan value (called "discount points") to have the interest rate reduced. A low interest rate translates to low monthly payments, so if you can afford the upfront cost, you get a better deal in the long run. Besides, this pre-paid interest is tax-deductible. The law allows up to 5% of loan value in discount points, or the loan is considered "high-cost", which is governed by slightly different rules.

(14) Keep an eye on national interest rate trends. The rates change on Mondays and are the same the rest of the week. Some lenders can offer you a rate lock-down, but it might cost you: they will run your credit and do some underwriting. Even so, the lock lasts anywhere from 30 to 45 days, and depending on the rates when the lock expires, it may be extended.

I noticed a strange correlation between how high the Dow Jones opens on Monday and whether mortgage interest rates will change. If the markets open considerably higher, it is very likely that mortgage interest rates will go up that week. So I requested my rate lock last week after 2 consecutive big opens on Wall Street. No science to this practice, but I might have scored.

We locked in at the bought-down rate of 3.875% (1 discount point), which put our monthly total mortgage payment anywhere between $1000-$1100 (including principle, interest, mortgage insurance, property taxes, and homeowner insurance) for the few houses we are interested in. This is obviously less than our current apartment rent, so our overarching goal is achieved. As a matter of good faith, I requested a counter-offer from the other lenders I was considering, and none could beat it. So we rest this case.

The Insurance of Lives

Whether we like it or not, our lives have a 100% mortality rate. Many of us avoid talking about end of life matters as if it'll never happen, but I think it is wiser to settle that issue while life is still on the upswing. The topics of discussion are many, including estate wills and medical directives, but the simplest one is about life insurance.

A few years ago when we considered term life insurance, we decided it was not necessary at that time. If either of us were to kick the bucket, the other would be okay financially at salaries we earned at the time. We had saved up enough to cover reasonable medical (beyond health insurance) and funeral costs, and did not have any other long-term commitments that needed the assurance an insurance payout would bring.

Then everything changed, with expectations of a mortgage and a baby later this year. We felt it was time we carried life insurance as a safety net because those two long-term commitments would be difficult to handle alone should either of us not be around. We didn't want a huge policy; we figured a good policy should be just enough to pay off the mortgage and provide replacement income for up to 5 years. The raw number comes to about $375k (that is, $192k mortgage + 5x12x$3000 budget) per person. But that also means $50/month ($100/month total) for a 30-year policy, which we felt was too much.

Eventually we settled on a slightly smaller policy through Primerica that allowed us to pay $680/year for two 30-year policies (one on each other). It'd be sufficient to cover the remaining mortgage balance and at least 1-2 years of replacement income. Of course, as we build equity in our home through monthly mortgage payments, more money would be alloted to replacement income. We think it is a good plan for basic coverage.

The biblical imperative: "A prudent man foreseeth the evil, and hideth himself; but the simple pass on, and are punished." (Prov.27:12). It is the imperative to prepare for the future and leave an inheritance for your family (loosely Prov.6:6-8, 2Cor.12:14c, 1Tim.5:8), and life insurance is one small way you can do this. The loss of a loved one is hard enough, but it's worse with an additional financial burden.

The Insuring of Things

In this country, insurance is as much a part of life as taxation. Almost every major aspect of life is insurable, including life itself, whether required by law or voluntary. So we comply if we want to drive (auto insurance) or want to live in this apartment (renters insurance). And every year, we review our insurance plans to make sure we are adequately covered at the best possible price.

For a family our size (2 people living in an apartment and owning 2 vehicles), these standard features and coverages are considered "good" coverage. You can get by with less or more, obviously, but the crux is getting what would be realistically "adequate" should catastrophe come.

AUTO INSURANCE
Bodily injury liability	$100,000 ind./$300,000 acc.
Property damage liability	$100,000
Uninsured/underinsured motorist	$100,000 ind./$300,000 acc.
Medical coverage	$10,000
Comprehensive deduction	$500
Collision deductible	$500
Glass coverage	Yes
Roadside emergency/towing	Yes
Loss of vehicle	Market value less deductible

RENTERS INSURANCE
Property damage liability	$45,000
Personal liability	$300,000
Guest medical cover	$10,000
Deductible	$500
Content replacement	Cost value with evidence
Loss of use	Up to 2 years, or until recovered
Other	Sewage backup. Flooding.

Conventional practice says bundling policies under the same insurer should deliver some savings. But this year, that did not pan out true. GEICO offered the best overall rate for auto insurance ($540 every 6 months for both vehicles and 2 drivers), while State Farm offered the best package for renters insurance ($125/year) at said coverages. It would have been $30 to $60 more expensive if bundled under either insurer. I checked out the top 10 big insurers, who offer web-based estimators and various discounts. I'm sure some insiders can beat these rates, but think they are competitive rates.

With that, we bid farewell to Farmers Insurance, which would have renewed with lesser coverages (half the limits, double the deductibles) at $870 every 6 months (auto) and $167/year (renters)! I'd asked why the rates were comparatively high and was told the 2 big fires that beseiged our city had forced risk and prices up. But I found it curious that no other major insurer was increasing their rates as much as Farmers was. I'm for shopping around and options, and will gladly do it every year.

Next up: life insurance and business insurance. We already have life assurance!

Healthcare After Obamacare

With most health insurance companies having published their rates for 2014, we now know what will change in our plan and how Obamacare really affects us. Overall, health insurance rates will rise 4-6% across the board in our plan (so said HR) because of changes in compliance with the Affordable Care Act (ACA).

For our family however, my employer will be paying $483 every pay period to cover my spouse and I under an Anthem HRA PPO plan. That is roughly $996/month, a $146 (18%) increased cost to the employer. What we personally pay increases from $115/paycheck to $125 (about 9% increase). Since the plan retains most of its features, we can say healthcare will cost us only 9% more in 2014.

The other changes I see include an increase in our out-of-pocket deductible, from $4000 to $6000/year. So the only action we'll take is to increase our emergency fund by $2000. The employer still contributes $4000 into our Health Reimbursement Account (HRA) at the beginning of the year, and how we use the plan remains unchanged. I also notice an emphasis towards expanded preventive care at 100% coverage. There are more women's services, and oddly questionable items like coverage for sex reassignment. Why that in lieu of more important services like fertility treatments? Starting in 2015, we'll be able to unbundle services from our plans; there's plenty I'd strike off right away. I also notice that our dental plan is now capped at $2500, with coverages at 90/60/80 for basic treatment/major treatment/orthodontics. Preventive dental care is always 100% covered. The prescription plan and other benefits do not change.

So I'd say come next year, we are paying a little bit more for healthcare but getting a little less service. Not bad, considering the stories we've heard about people seeing insurance costs double or tripple on the private market (about 12% of the insured). While most have blamed Obamacare for these increases, the truth is that healthcare is expensive to begin with (around $900/month for a family), and its costs rise every year.

Rather than focus on access, I think healthcare reform should have first addressed why the costs are so high (see this PBS Newshour analysis, for example). Second, decoupling insurance from employment would squarely make it a market problem, much like automobile or renters insurance work. Then would it have been appropriate to consider how people access healthcare and how it is delivered. I wouldn't even mind reviewing so-called entitlements to care that ultimately someone else pays for. So whether it is Obamacare causing the price hikes or not, there is a chronic problem in US healthcare that will continue to haunt us regardless of regulation and taxation.

Healthcare Before Obamacare

As the healthcare exchanges open and people all over the US sign up for health insurance, we begin to review our own options so that we are in a position to evaluate what these exchanges will deliver. We start with a review of what we currently have, at least until the end of the year.

We get healthcare through my employer, covering both of us for all medical, dental, vision, mental (counseling), and prescriptions. For 2013, it costs us $115/paycheck (roughly $230/month), although my employer ultimately pays about $820/month for this benefit. Our $9840 annual cost to the employer for healthcare insurance is a little higher than the national average. Health insurance is quite expensive in this country, this before the effects of the Affordable Care Act (ACA) kick in.

Additionally, my employer pays $4000 into our Health Reimbursement Account (HRA) at the beginning of the year, leaving our out-of-pocket deductible as $4000 annually. Whatever is not used up in the HRA the previous year is rolled over into the new year, in addition to new contributions from the employer. As we use up healthcare services, we don't start paying out-of-pocket until the HRA is depleted. When this happens, we pay up to $4000 out of pocket, and thereafter insurance covers the rest 100%. So as a matter of good planning, we decided to stow away the $4000 expected deductible as part of our emergency fund.

Medical coverage is provided by Anthem BlueCross, and includes preventive care, doctor visits, emergency room, hospital and board (3 days), and prescriptions (the complete list of benefits includes over 100 items that I do not care to list here, but that have 100% coverage in-network and 60-80% out of network). Of note, the lifetime maximum amount is unlimited. Dental coverage is provided by DeltaDental up to $3000, with 100% preventive care and basic treatments, and 80% major treatments and orthodontics. The vision plan is 100% covered beyond a $20 office visit fee.

To date, we have not had to pay anything out-of-pocket towards healthcare, even after the annual physicals and dental checkups we have done, except for various prescription co-pays at about $45/month. We like our healthcare plan thus far, but will shop around if the healthcare exchanges provide something better than what our plan will offer for 2014.

Financial Web Application

With the slew of personal financial applications (and more) available today, one may wonder why I would find need to create yet another one. The answer is simple: they all do good number-crunching and are well-designed, but none meets the standard for what I consider a good family- and faith-oriented financial management application. In fact, most have a lot of features, most of which are not used by average people. Most of all, most are paid services: simple financial management should be free. I reviewed most of the ones on the market and set out to write my own, which I call Geldzin (German for "good wealth habits", approximately). I hope the result to be a best practices study of currently available financial management principles.

The application will do the usual financial tracking of accounts, categories, and transactions, etc. It will emphasize budget-based financial management (an example of a budget in the image below) as a lifestyle. People that follow financial advisors like Dave Ramsey might find this application extremely useful when it is complete. Newly married couples will definitely find it useful (as we have).

However, I'd like to take it further and have the application do much more as regards family finances. I want an organic place to track everything that requires money, and to always know what's available for whatever, or to just make future plans and let the application integrate them easily in budgets, savings goals, and forecasting. The vision for this application is to be a financial tool that acts more as an advisor based on the information it knows about your family. For example, having setup a budget and added your debt accounts, the application can tell you how to distribute your next paycheck to cover the financial obligations it knows about.

Further, I want to emphasize charitable giving -- everything from suggestions of good Christian charities and non-profits, to distributing whatever you may have saved for this purpose amongst your choices, to tracking which ones are tax-deductable come tax filing day.  It encourages charitable giving by allowing you to specify a percentage of income to allocate for charity/giving, and a monthly goal. The application can also advise you about planning for emergencies and facilitate saving for them.  The days of keeping a credit card around are over: you need real money set aside for emergencies.

The application also tries to minimize month-to-month fluctuations of living paycheck-to-paycheck by ensuring that you allocate enough funds for the current and the next month. Future versions will also help you save money by crawling the web to find relevant deals, based on your savings goals and transaction information. For example, if the application notices that you shop at King Soopers a lot, it would try to find coupons from that store and suggest them to you, or notify you of sales. Or if you are saving for a guitar, it would be able to tell you about current prices and availability on the web depending on how much you have saved so far.

The application will also feature anonymous comparative studies, indepth reporting, some financial calculators, popular financial blogs/articles, investment tracking and advice, retirement and life insurance planning. But rather than have static information in your account, the goal is to animate it and make it more useful for day-to-day decision making. Managing money should be a personal experience, not an abstract number scheme you must contend with.

The application is specifically designed to be very simple. As such, it will not connect to financial institutions and bill paying services or do a lot of tax accounting. It is meant to be a quick reference about you financial standing based on the activity you do in the application.

From Refund To Owing Taxes

A strange thing happened this year: we had to pay taxes to the IRS and state when we would normally be expecting a tax refund. It is strange because nothing has changed in our employment or personal lives from last year, unless the tax code itself has changed. I even run the numbers several times (using different tax preparation software) and different ways (filing jointly versus separately) to make sure there wasn't a mistake, but no matter how I filed, we still owed. I expected my business to owe some taxes (and it did), but why did we owe on personal income?

We've had to review the exemptions we take on our W-4, and how we pay for our benefits, and I think it might be because we were both taking exemptions. I do not know why this wasn't a problem last year (our first time filing jointly) where we received a sizable refund. The best we could do is have my wife claim only one or two exemptions and allow higher tax withholding as if she were single. That will help next year.

But the best solution, however, will be for her to claim no exemptions and remain at the higher married/single withholding rate. I would claim only the head of household exemption and also do the higher married/single withholding rate. I've learned that this arrangement would ensure a nice tax refund every year.

Mathematical Analysis of a Phone Plan

For a while, we had noticed that we weren't using the full allocation of shared 1400 voice minutes on our mobile plan, in fact using only about half. So we made the decision to switch to a 700-minute plan instead. As I revisit that decision from a mathematical angle, it is clear that we perhaps need to reconsider that switch. Enter the nerdiness.

Data from the last 15 months shows that we average around 717 minutes/month. Close enough to the 700-minute limit, with a little restraint on our part. This was why we switched plans in the first place. But a closer look at the data also shows that we were over the 700-minute mark 60% of the time, and in those specific months, the overage was 83 minutes on average (mostly during the holidays). At $0.35/min for extra minutes, it would cost $29 more. Given that the switch saves us $25/month, the 700-minute plan is workable.

The usage trend, however, would suggest we should be on the larger plan: month-to-month, usage has grown 0.9% (around 7 minutes) over the 15-month period. This means that the likelihood of overage on the 700-minute plan will be higher (and increases) in the next several months, making it more expensive to stay on that plan. If life gets more interesting or I garner more business later this year, this plan will obviously not be enough. So why are we sticking with it?

The good news is that we can switch anytime we need to (online even) at no extra cost. Verizon also allows you to set usage alerts; tripping those 2-3 times will necessitate a return to the old plan. The math indicates that the 700-minute plan is good enough for the time being, but we should consider the 1400-minute plan in the near future, depending on how "active" our life becomes.

Do Newly-Weds Need Life Insurance?

Soon after the wedding day, somebody will approach you with an offer for life insurance (your bank or companies that hawk change-of-name records from the state). You'll hear how important it is to "protect" your loved ones, and scary scenarios will be presented, with an emphasis to buy coverage right away. Nobody really sits down to discuss with you whether you really need life insurance at all, or which kind will work for you best. If they did, they might find out that you don't really need it, kind of like where we find ourselves at this juncture.

Newly-weds (less than 24 months married) don't need life insurance if they (1) both have jobs/incomes, (2) have no children, (3) have no debt, including a mortgage, (4) have a fully-funded emergency fund, (5) are young and healthy enough, (6) have low-risk livelihoods, and (7) have no other shared long-term financial obligations. Note the emphasis on "need", because some agents sell insurance as a necessity, which it isn't. The key: if one spouse could comfortably live on their own income, it is not needed. It is important to understand term life insurance as "income replacement" and be realistic about what additional help you would need were your spouse to pass away. As newly-weds in said situation, we figure the only costs we should care about in that sense are funeral costs and perhaps any related hospital bills. As it is, our emergency fund would help with that. This highlights another reason why you should have a generous emergency fund even before you consider the luxury of life insurance.

Every marriage is different though, so assess yours carefully. The 7 criteria above will be a good start. The sooner you buy insurance, the lower the premium you are likely to secure because of your age, health, and prevailing market conditions (insurability). Your insurance agent will make sure you know this fact, but don't panic: everyone will die someday (Heb.9:27), and what matters more than anything is where your soul is headed at that point. Actually I find it a little ridiculous that the life insurance calculation is basically a bet that you will both outlive your policy (or they wouldn't offer to insure you if it were more likely that you'd die within term). It makes business sense that way for the insurer. But just be objective about it, understand it, ask a ton of questions, then choose a policy that is right for you.

That said, it makes good financial sense to considered it and buy a policy no later than your second anniversary. Use the time to stabilize and understand your particular financial dynamic, build a healthy emergency fund, and prepare yourself to tackle the hard topic of death and beneficiaries. It need not be seriously emotional or morbid, but sensible.

Bring On The Emergencies

Not literally praying for emergencies, but celebrating the achievement of our first financial goal: saving enough for all emergencies we can reasonably perceive. It took us a little over 6 months to set up a fully-funded emergency fund (as Dave Ramsey would advise). The few things we consider emergencies include: health insurance maximum out-of-pocket copay beyond what our plan covers, 4 months minimum income if we were both  simultaneously jobless, renters insurance deductible, auto insurance deductible and miscellaneous car repairs, and travel anywhere in the US on short notice.

The chances of all these events happening at once are minimal, but it is peace of mind to know that if it so happened, we would be alright. Because those chances are small, we are confident we can handle any other unperceived emergency too, without going into debt. In fact, we no longer have credit cards solely held for emergency purposes. It is a good feeling to have some control over your finances. It took a lot of discipline and sacrifice, but we can already taste its worth.