🚨 Emergency Fund & EMI
Emergency fund size and loan EMI math.
This dual-purpose tool sizes your emergency fund (based on essential monthly expenses and a target number of months of coverage) and separately calculates loan EMI (equated monthly installment) for any loan amount, rate, and tenure.
Emergency fund sizing:
Emergency Fund = Essential Monthly Expenses × Months of Cover
EMI uses the standard amortization formula:
EMI = P × r × (1 + r)n / [(1 + r)n − 1]
where P is principal, r is the monthly interest rate, and n is the number of monthly installments. The EMI side feeds directly into the Rent vs Buy math when the loan is a home loan.
If essential expenses are 40,000/month and you target 8 months of coverage, your emergency fund target is 3,20,000. Separately, a 20,00,000 home loan at 8.5% annual interest over 20 years works out to an EMI of roughly 17,350/month.
Sizing an emergency fund off total expenses rather than essential expenses inflates the target unnecessarily — discretionary spending (travel, entertainment) is usually the first thing cut during an actual emergency, so it shouldn't be included in the base calculation.
What it does
Computes the emergency fund you need for a job loss or surprise expense, and separately calculates the monthly EMI for a fixed-rate loan.
When to use it
Build the emergency fund before any investing; use the EMI side when comparing loan offers or checking affordability.
Assumptions
- The emergency fund must cover a fixed number of months of expenses.
- The EMI formula assumes a fixed rate with equal monthly installments.
Keep the emergency fund in something liquid and safe — a savings account or short-term deposit — not in stocks. A 6-month target is the standard; aim for more if your income is irregular. For loans, a shorter tenure cuts total interest sharply.