Getting canned brings the honeymoon phase to a screeching halt. When you do not have the financial reserves to pay for your fixed expenses, you cannot pay for the fun in your life. Navigating a layoff or termination is easier with sufficient emergency reserves. Experts at Bankrate.com recommend socking away nine to 12 months' worth of monthly expenses in an easily accessible bank account.
Financial stability requires reserves of money to fall back on when your paycheck comes up short, or missing. Your emergency fund is not to be tapped to pay for a big-screen TV, car repairs or a last-minute vacation. A true emergency fund is for unemployment, disability or major illness. You need at least six months' worth to weather the storm, but more is recommended.
Young couples may not be able to deposit a large amount of money in an account overnight. You need to create a spending plan to save money every month to prepare for the unexpected. The Daily Finance website recommends following a 50-30-20 spending plan. You set aside 50 percent of your take-home pay for fixed expenses such as rent, water and food. Next, allocate 30 percent of your income for discretionary expenses such as haircuts, pedicures and basketball tickets. The other 20 percent of your income needs to be set aside into a savings account. Also, set aside "found" money such as tax refunds and bonuses into savings for a rainy day.
Bankrate.com recommends opening several small savings accounts for squirreling away money for multiple goals. In addition to emergency savings, it is recommended you have a small fund to pay for small crises such as car and house repairs. Saving for small things leaves your big emergency fund available in a true emergency. You also want to list out your other life goals such as a house, vacation and children and save for these events.
Where to Save
You don't want to stash your money under your mattress. Instead, consider a FDIC-insured personal savings account or money market account tied to your checking account. You can easily transfer between the two accounts to set money aside each month. As your account grows to significant amounts, you may want to consult a money manager for advice on earning interest on your savings.
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