Tuesday, September 11, 2007

Emergency savings....

In my post yesterday I was saying how now that I don't have debt to pay off and I have purchased my condo, I am somewhat bored with my finances. I really need to figure out what will get me excited about them again. SMB commented that I didn't mention whether or not I have an emergency savings account. I do, currently it has $5793.02. I know it should have more, but what is a good number?? I know this can be completely different for everyone, so I look forward to hearing what you have to say. When I met with the financial planner last week, he thought that I should work on getting the E-fund up to $10,000. As far as other savings goes, for retirement, I am taking full advantage of the company match in my Simple IRA, and I am working on fully funding the Roth IRA. Then what should be next?? Do you think it is wise to try to pay off a mortgage early? Or should I continue adding to my savings? Or should I start a savings for a car? The one I have now is in great shape, but I know it won't last forever. A vacation fund? Oh, what to do, what to do...... I look forward to any and all advice. Thanks!

5 comments:

Living Almost Large said...

You should be maxing out all retirement options before you pay of the mortgage period. There is no reason to pay off a mortgage unless it's a ARM early. Even then maybe not. Retirement savings can never be done later, you can only contribute for that year.

Second (IMHO) you should have at least 3 months of expenses in liquid cash, 1 month of cash in the checking account for emergencies that come up monthly. If you are single maybe even stash 6 months cash liquid.

Third, I will never pay off my mortgage sooner, I will save the money in a taxable account. Because paying off the mortgage is an illiquid investment. Then when I have enough to pay it off in full in a taxable account I will do so.

Fourth, if you do not have an adequate sink funds for things like replacement car, furniture, and maintenance of a home (1% of value annually), then you need to set those up. Those are known expenses not something you pull from an emergency fund.

SMB said...

Those are all excellent suggestions!

Kansas Simplicity said...

A different perspective....

1 - 6 Months of Salary for Emergency Fund. Career changes, emergency and other issues gives you power.

2 - Buy some land a small farm or an acre or two. Nice to have a place to call home with some dirt.

3 - Pay off all debt. Living Almost Large has good advice yet I like not having any debt to anyone yet the advantages of leverage are important.

4 - Investments are always an option and possible.

5 - Perhaps have a little fun in a simple and frugal manner or course..LOL

Escape Brooklyn said...

Those are all great suggestions! Maybe other goals could include starting a side business or investing in real estate? Just to be really ambitious! ;)

Z3trkrnr said...

One of the major things I've realized is making sure I have an emergency fund for those situations that you don't expect. If you have an emergency fund and something unexpted happens it won't derail your savings goals. ING Direct offers a way to split your account into "defined" segments. I have "emergency" "down payment" "savings 1" and "vacation" I can allocate how much each section get whenever I want. If you want a referral link to get a $25 kickstart (only if you begin with at least $250) that is automatically deposited to your account, shoot me an e-mail at z3trkrnr@ gmail.com