Even when the economy is steady, having a 6 months rainy day savings can go a long way in securing a stable future for your family. Nowadays, the government recommends a family has enough to live on for 8 months, provided all income sources are removed. Hence, managing your money for a personal or family emergency is a must in today’s financial climate. If you want to start saving money, here are some great ideas and tips you can use to build your own security backdrop.
I. Analyze your Spending Pattern, Calculate your Needs
1.Calculate your monthly expenses that are mostly static- insurance premiums, mortgage payments, tax payments, household purchases etc.
2. Allow some extra money for uncertain expenses.
3. Allocate at least 10% more than the amount that was calculated from point 1, to arrive at the total expenses amount. This is in case another recurring cost presents itself.
Analyze your ‘Probable’ Emergency Needs
1.With two people earning – Save up to 3 months salary as emergency fund
2.When only one person is earning – Save up to 6 months salary as emergency fund.
3.When one or both are earning – If you have a large family – up to 3 children – Save up to a year’s salary as emergency fund. Since the probability of emergencies is high in a family with kids, you need to allocate more funds.
Lock Up the Amount
1.Comparing your monthly expenses and emergency-needs, allocate a suitable amount that would go in as emergency funds.
2.Push your funds into a savings account that is made accessible by either of the partners in case of emergency.
3.Alternately, you can choose between a bank money market account or money-market mutual fund.
4.If you’re starting from scratch, remember to push in a bulk amount for the first time and subsequently allocate smaller portions from the next month.
5. And finally, never ever touch your emergency funds for any other expenditure.
Remember, that you’re saving for your loved ones. Regularly use expense tracking software to track your spending patterns and to keep a tab on your money. Let us know how this works or give us some feedback if you already try it!
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