Having two years of expenses in cash is a good cushion when you are older and if you lose your job and your severance and unemployment benefits get you through one year, guess what? You still likely have two years of expenses covered provided that inflation is not rampant. There is also a strong likelihood that you get laid off during a recession so having a strong cash cushion is nice for not having to sell investments during a downcycle. If you are in your late fifties or early sixties a few years of cash could mean the difference between when you can draw on retirement accounts and actually being retired.But what if you are in the middle of your career, like your mid forties? One to two years of expenses could help tide you over to look for your next gig because unlike other professions there just aren’t really a lot of job opportunities out there for chemists and by out there I mean in the world.
I think of myself as reasonably "with it" in terms of personal finances, but I've never actually thought about what "expenses" look like. I liked this Vanguard post in terms of "what counts" in terms of "emergency expenses":
- Health care (including insurance)
- Personal expenses