Apparently I am caught up in finances today!
DH and I are finally at a place where we are starting to settle in financially and need to start establishing some goals/markers.
In my mind...savings fall in to a few categories (not necessarily separate accounts).
-House
-General/Emergency
-Upcoming Stuff (mostly travel/life events)
-Retirement
Do you have specific goals in mind for your savings? how do you determine them? how do you divide your savings "accounts"?
pomegranate / 3375 posts
Currently, we are saving for a house in an insane market, so our savings is basically 100% devoted to that. Obviously, I have the comfort of knowing that if any surprises popped up, we have that money, but I'd be sad to take away from it.
Our retirement savings will always be separate from other "life" savings ... I don't have a goal on that side of things, but we are always contributing.
Once we purchase a home, having about 5k-10k in savings will be our goal for our "emergency fund". Otherwise, we like using cash, and try living majorly within our means. Having the cushion of that money is nice peace of mind.
We're the type that decide to save when we know we have something to save for. Want a vacation? Save for that, specifically. House, currently saving for it.
I'm really interested to see how other people feel about this.
grapefruit / 4545 posts
For me...this is what I am thinking...
-House: For me, I feel like $25K is a comfortable place to be for a house fund. We are in what may well become our forever home and virtually everything was renovated in the last 12 months. That said - we know the HVAC and Hot Water Heater will eventually die (HVAC is 22 years old) so we know that is looming. $25K is probably a lot for us now - but in 5-10 years as more things age its probably more appropriate.
-General/Emergency: I have always read 6 mos savings is best. Not sure if this is still current but that seems like a decent starting point. We are WAY short of this now...but definitely what we are working towards - we are also in a very expensive time with daycare costs!
-Upcoming Stuff (mostly travel/life events): Determined yearly. For now its really just travel - plus if we decided we wanted to do something to the house. Right now, we probably only have a couple smaller trips and some yard work to save for in 2016.
-Retirement - I max out my 401K - with ER match its about 16% a year, DH will once his student loans are paid off. We also will both inherit money. So I feel comfortable with this currently and dont feel the need to do more.
Still daunting when you add it all up...it will take years before I feel completely financially secure from a house/general fund...but forward progress!
grapefruit / 4545 posts
I should add - I also have a separate savings account. I would like for this to reach $10K soon (about half way there). We have separate finances (for now - will change when DD#2 arrives in March) but would like to have an amount of "play" money to do as I wish with.
grapefruit / 4545 posts
@littlejoy: DH and I were cautious when we bought our new house to put away $7K just "in case". Its the first time we have really had money in a regular savings account (of any substantial sum) for no reason. It feels very nice having it there. I worry as we add kids/expenses we may want to have more - which is sparking me to want to up it to 6 mos expenses!
papaya / 10343 posts
Taking retirement and saving for education out of it, we just have two categories: Emergency fund and slush fund.
Emergency fund is just that-- money that we keep in an online savings account (takes 2-3 days to transfer) and is a bigger number to be used only in true emergency situations. Our goal for this was what we thought we'd need for about 6-8 months if one of us lost our jobs. Although as it turned out, I did lose my job and 1.5 years later we haven't had to touch it due to some other financial decisions we made... so we are pretty much done contributing to it even once I get a job.
Slush fund is just fun savings. This is where we pull from for car repairs, new furniture, trips, medical bills like LO's birth, etc.
wonderful pear / 26210 posts
I think about in terms of short term (living expenses in cash, 6 months of living expenses aka emergency fund via a CD ladder, for example) and long term (retirement via an IRA, higher education for my son via a 529, trust, custodial accts).
The fun stuff is harder, because I feel like that is a budgeted expense. We don't necesarily save for a trip in a formal way, we use our living expenses. Maybe we should change that thinking.
grapefruit / 4545 posts
@Mae: I was just re-evaluating my "emergency" fund and was thinking that 6 mos of total household expenses is really a LOT to have stashed. In reality - there is so much that you can adjust in a time of need. Plus - if you are a two income family...what are the odds of both losing your jobs? Not to say it cant happen - but I think 3 months of total, or 6 months of half is sufficient. To give some time before you are into other savings!
pomelo / 5660 posts
We have a few savings accounts:
Investment Property Emergency Funds Account- this is where we put money to cover any emergencies related to investment properties
Investment Reinvestment Account- This is where we put excess income until we reinvest (try not to keep in savings account since rates are low)
Emergency Account- as the name implies, for emergencies
Money Market Account- fun money that DH likes to have to play in the markets
Each child has their own savings account.
This excludes 401k, IRAs and 529 accounts.
pomelo / 5129 posts
For us, retirement are separate investments, not part of our bank accounts. They're contributed to prior to our checks being deposited, so I don't consider them "savings" accounts...
We have three savings accounts. One joint, and one for each of us. The joint account is our main account, and has our approximately 6 months living saving in it (probably more, but we're not really specific about that goal). It's the money we had leftover when we sold my old house and bought our new one.
The account is there as a cushion for the life/emergency events. We don't overly categorize it though.
My savings account was being added to while I was pregnant in order to help us with child expenses. Once we realized how expensive child care would be, we started (around 14 weeks pregnant) to contribute what we'd pay weekly to daycare to that savings account. That way we'd get used to the budget faster, and have money saved up in case we hit a hard time and needed a chunk of money. We also figured we'd use it to do things like furnish the nursery.
pomelo / 5093 posts
Retirement is separate, we just contribute the max each month that my husband's company will match. I couldn't even tell you how much is in it except that I know we've saved a good amount for our age. We contribute to a 529 college savings account each month, but not very much. When I go back to work in a few years, I'll use my salary to pay off my student loans quickly, and then that money will go towards college savings.
My biggest savings goal was 6 months living expenses. Since we don't have daycare, and our rent is currently cheap, this figure isn't huge, as I figure in an emergency we'd cut down to basics. On top of that we have our 'everything else' savings, which was recently emptied to put down a big chunk on a new car, and also to buy a pair of new bikes. That money is also for a down payment on a house, so we're rebuilding towards that goal.
As long as the emergency fund and the retirement and college savings are funded, I don't really stress it. We save a big chunk monthly (because our rent is so cheap), and we have also historically gotten a nice tax refund and a yearly bonus.
blogger / grapefruit / 4836 posts
We save for all of those categories too...a little every month. We have an emergency fund that is equal to about 6 months of expenses.
Retirement our goal is to set aside 15% of our income, but right now it is a little less. When we are both employed full time and don't have to pay for childcare that will be our goal monthly. Since my income is variable extra retirement is one of the things we try to shoot for but it doesn't always happen.
pomegranate / 3809 posts
Like everyone else, retirement is separate - we max out both 401k and roth IRAs. We have a "emergency/dont touch savings" that we just feed $500/month to and let it grow. We haven't had to touch that yet so there's about 6 months living expenses in there. House/vacation/general, what we call "spendable savings" we just have as one account and I don't like that to drop below 10k. It usually bounces between 15 and 25k. With more medical expenses coming up though I'm preparing to say good bye to both accounts.
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