Our last entry discussed the need for an emergency fund and how large it should be. A minimum of three to six months of living expenses should be set aside in a safe, liquid asset (cash or cash equivalent). Some special situations deserve more discussion.

With married couples, even though both spouses have good paying jobs, their financial situation may dictate a much larger emergency fund. Consider the example where a dual income couple is able to meet monthly payments but has taken on two large car loans, a large home-equity loan, and has numerous credit card balances. If one of the spouses suddenly loses his or her job, their need for an emergency fund is even greater than what the general guidelines call for.

While it might sound extreme, it is not out of line to suggest that married couples should live on just one spouse’s income unless they have substantial savings to fall back on. With today’s turbulent economy, even the seemingly safest job can disappear over night. Young, newly married couples can easily fall into the two income trap. They get used to two incomes; buy a larger house, two brand new cars and end up forced to use credit cards to pay ordinary bills. Their budget gets even tighter when they have a baby and one of them decides to work part time. Medical expenses, diapers, baby furniture and clothes add to an even tighter budget. Without an adequate emergency fund in place, they can get into big trouble if they do not make the necessary budget adjustments in time.

Finally, college graduates should be especially aware. Often, they go overboard with the sudden availability of cash from their new job. They buy a new car, flat screen TV, new clothes, etc. If they are not careful to hold off on some of these items and establish an emergency fund, they may be setting themselves up for a serious debt problem.

Our economy is undergoing some major changes that are impacting us all. Credit is not as readily available to us and the need to pay for unexpected expenses will have to come from cold hard cash. What’s the bottom line? Don’t ignore your emergency fund and make sure it’s big enough to handle the problems you least expect.