Savings at a Glance

Keeping your budget on a spreadsheet, seeing at a glance what you have and what you spend, is the best way to stay disciplined.

The same holds true for your savings.  You should have separate savings accounts, so you can see at a glance, not only how much is there, but how much you need to add to each for their specific use.

Cash Reserve Account:  This is the one that you would use only if you, for one reason or another, lost your job… that your income has stopped. It is for no other reason. In this account, there should be a total of 9-12 months of your total income.  Should you get laid off, or need medical leave, the 9-12 months amount will pay for your monthly expenses until you return to work and have wages coming in.

While you’re out of work, do not buy incidentals, do not eat out, this account is only to be used for necessary living expenses.  And, on your return to work, you need to replenish what you withdrew to keep it current with the 9-12 month figure.

Liquid Emergency Account:  This is the one that you have for an emergency purchase.  Liquid means it’s there, it’s available to use.  This account should have a few thousand dollars in it. Should an emergency arise you’ll have the money to take care of it.  This is not for buying a new outfit or shoes, or dining out.  Emergencies here mean, car repairs, tires, root canal, eyeglasses, plumbing etc.  Emergencies mean a stressful situation.  Having the cash to pay to have it fixed takes some of that stress away.  And remember, you need to replenish whatever you take out.

Retirement Account:  This is the account that you set monies aside for your future.  For your retirement years.  You will need it. There are many types of accounts for this.  Seek out a Fiduciary…a Financial Adviser to help you, explaining each ‘vehicle’ available – be sure you ask questions and understand what the rules are, and understand completely what you’re signing on for.  Retirement accounts are meant for just retirement.  So, that said, know that any money put into a Retirement Account stays there until no earlier than when you turn 59 1/2, and some not until you’re 72.  There are both tax penalties and early surrender charges if you don’t follow the rules.  Ask questions.  Understand answers. And, do not count on Social Security.

Rental/Moving Account: This is one where it is a good idea to have money set aside for moving costs and also first, last, security, and sometimes, broker fees.  Should you choose to or need to move, the money is available when you find the new place. If you don’t have this set aside being able to put a hold on it, you could lose the apartment to someone who had saved up.

Down Payment for a Home Account:  Those choosing to buy a home, should have a down payment of at least 20% of the cost of the house they are purchasing.  In this account there should also be extra money for Closing Costs (lawyer, title, Registry of Deeds), which can run a few thousand dollars.  And remember, you’ll need a lawn mower, shovel, etc., so save for that.

Bottom line…….    It’s imperative that you save……. Save every penny you can. Every cent counts.