First we should define living expenses. Generally it is the minimum payments and amount of cash needed for food and fuel that you must have to support you and your family.

In the current economy, many people have been foregoing saving in order to pay down debt. Financial advisors suggest that you should continue to save until you have enough to sustain your family for one year in the event that a wage earner in your home loses their job.

The new conventional-wisdom is that you should not overpay your mortgage or pay down credit card debt, until you have enough cash in your emergency fund.