Posted by Mackenzie Arsenault on January 29, 2018
Everyone wants to know if they are on the right track and if they are saving enough.
Your first savings goal is to establish an Emergency Fund.
What is it?
An emergency fund is money that you have set aside to cover a large unexpected expense that can not be covered by your monthly income. Some examples include car repairs or medical bills.
How much should be in it?
It is wise to save 3 to 6 months of your monthly net income (after taxes and savings) in a seperate savings that can be easily accessed (when needed, but not as a temptation). These funds should be kept in cash, not invested or tied up in a CD. If you own a home it is also recommended that you have a seperate ‘home repair fund’ that is at least 1% of your homes value.
Does 3 months of net income sound impossible? Start small -- aim for $1,000 by saving $25 each week. This will take less than 1 year! It is important to have an emergency fund established before aggressively paying down debt or saving or other goals.
Once you have fully funded your emergency fund your next steps are working to eliminating debt, saving towards retirement, and other financial goals.