An alternate strategy is to try to reduce your monthly expenses. We try to avoid making payments when we can just buy it outright, and most of our optional monthly bills have no contracts.
Is 3-6 months savings for emergencies realistic?
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Originally Posted By: ZZman
In our case we just never seemed to be able to save before something like a car repair or medical bill or something hit us.
I would say we lived an average lifestyle. Around 75-80,000 combined income, 100,000 house, used cars, no expensive vacations, no expensive nights out or restaurants, no expensive toys or clothes etc. The money just never seemed to be there....
You could make a million dollars and still not know where the money goes or went . Make up a bujet and go from there. Run your life like a successful business owner not like an employee.
In our case we just never seemed to be able to save before something like a car repair or medical bill or something hit us.
I would say we lived an average lifestyle. Around 75-80,000 combined income, 100,000 house, used cars, no expensive vacations, no expensive nights out or restaurants, no expensive toys or clothes etc. The money just never seemed to be there....
You could make a million dollars and still not know where the money goes or went . Make up a bujet and go from there. Run your life like a successful business owner not like an employee.
If you have to cash in your 401k when the economy tanks and you coincidentally lose your job (b/c they're trying to make the numbers better) it's a double whammy since you're selling at a loss.
Of course hiding under a rock and keeping lots of money in cash during an upswing causes one to lose out.
Co-worker took out a loan against his retirement to put a $2000+ flatbed on his truck "because his original rotted out". He's never going to have a cushion.
Of course hiding under a rock and keeping lots of money in cash during an upswing causes one to lose out.
Co-worker took out a loan against his retirement to put a $2000+ flatbed on his truck "because his original rotted out". He's never going to have a cushion.
Originally Posted By: ZZman
Experts will tell you to have 3-6 months savings to help cover unforseen emergencies. Many if not most people live paycheck to paycheck. Is it realistic?
It's realistic but they have to step back and see what is necessary and what things they can reduce spending on non necessary things.
Although I don't have much in 'cash' savings..... I could come up with cash without touching any retirement funds.
Experts will tell you to have 3-6 months savings to help cover unforseen emergencies. Many if not most people live paycheck to paycheck. Is it realistic?
It's realistic but they have to step back and see what is necessary and what things they can reduce spending on non necessary things.
Although I don't have much in 'cash' savings..... I could come up with cash without touching any retirement funds.
No I'd say a year and that's aside from your retirement accounts.
But don't forget the Ammo it could get bad.
But don't forget the Ammo it could get bad.
I always figured at least a year, before tapping into any long term savings.
6 months would seem right. You do not want to go into a crisis if you loose your job or you are hit with a major repair.
By "experts" r u referring to the cook Dave Ramsey?
Yes. I guess the caveat to that is that if I had an "emergency", like a total loss of income, my expenses would also decrease significantly. So if I'm spending $4000 a month on everything now, I probably could reduce that to $2000 if I had an "emergency".
"Paycheck to paycheck" just means you're spending what you make. Ninety percent of people could reduce the spending if they "had" (or wanted) to.
"Paycheck to paycheck" just means you're spending what you make. Ninety percent of people could reduce the spending if they "had" (or wanted) to.
Originally Posted By: jj51702
By "experts" r u referring to the cook Dave Ramsey?
Hmm... Most people don't refer to his skills as a cook, but he does do some advocating for cooking so you can save money. I just didn't realize he was also well known as a cook.
But the 3-6 months advice is pretty standard, long before Dave Ramsey.
By "experts" r u referring to the cook Dave Ramsey?
Hmm... Most people don't refer to his skills as a cook, but he does do some advocating for cooking so you can save money. I just didn't realize he was also well known as a cook.
But the 3-6 months advice is pretty standard, long before Dave Ramsey.
I hate when Dave tells his callers on his radio show to eat , Rice and Beans - Beans and Rice diet for 3 years to get out of debt.
Originally Posted By: ZZman
Originally Posted By: Astro14
It's realistic if you're on track for retirement savings.
If you don't have it, and you're living paycheck to paycheck, dial back your spending so that you can put away 3 - 6 months of savings. You need that cushion for unexpected events. It's part of a complete financial plan.
What's with your sudden obsession over income, savings, and retirement?
You're starting a lot of threads asking basic questions. You should seriously consider getting a financial advisor. This is precisely the kind of thing for them to guide you through.
If you're just discovering that you should have 3-6 months of savings, and that you should be putting away 15% of your salary for retirement, and all the other basic elements of financial planning, then instead of polling a site focused on oil, get real, professional advice.
It is to get people talking and to see what people think and what they do.
And this was posted in the General/Off Topic area....
Fair enough.
We have about 3 months in savings, having just paid for a wedding, and about to write a big check to an institution of higher learning in Cambridge, MA. We are building it back up.
But, I reckon that it's 3-6 months of expenses, not income, that you should have set aside. At our income level, and at our savings and tax rate, there's a very large difference between the two.
We both work. Both have good jobs. There are three pensions between us (my USN, her USN, and her GS). With those, and social security, and a considerable retirement portfolio, we still are investing 23% of my salary in tax-deferred accounts, while putting nearly half of hers into savings for the next wedding, new car, tuition, or whatever.
Last year, we needed a new roof, and two months later, the furnace croaked. We wrote a check for each of those, along with a tuition check because we had the cash. I can't emphasize how important that cushion is. I couldn't fund the retirement savings at the level we do if we had to pay off a credit card after each of those.
You can't just take cash out of your401(k), it's both stupid, and you pay a 10% tax penalty on top of income tax on the money withdrawn. You can cash out of mutual funds, or stock, I've had to do both, but you pay capital gains. Having cash allows you to avoid those taxes levied on your money. Those taxes are considerable, and do tremendous long term damage to wealth accumulation. So, get the cash part right.
And it doesn't happen overnight. For example: Pay off a car, then drive it for another several years while putting the car payment in your savings account. This takes years. Figure out what you don't need. In a consumer-driven culture, the line between need and want is tremendously distorted. In the average set of monthly expenses for a US household, there are a bunch of thoughtless extra expenses, and therefore, there is a ton of room for cutting back.
You make good money.
Where is every penny going?
Answer that question and then you can begin to find the money to save.
Originally Posted By: Astro14
It's realistic if you're on track for retirement savings.
If you don't have it, and you're living paycheck to paycheck, dial back your spending so that you can put away 3 - 6 months of savings. You need that cushion for unexpected events. It's part of a complete financial plan.
What's with your sudden obsession over income, savings, and retirement?
You're starting a lot of threads asking basic questions. You should seriously consider getting a financial advisor. This is precisely the kind of thing for them to guide you through.
If you're just discovering that you should have 3-6 months of savings, and that you should be putting away 15% of your salary for retirement, and all the other basic elements of financial planning, then instead of polling a site focused on oil, get real, professional advice.
It is to get people talking and to see what people think and what they do.
And this was posted in the General/Off Topic area....
Fair enough.
We have about 3 months in savings, having just paid for a wedding, and about to write a big check to an institution of higher learning in Cambridge, MA. We are building it back up.
But, I reckon that it's 3-6 months of expenses, not income, that you should have set aside. At our income level, and at our savings and tax rate, there's a very large difference between the two.
We both work. Both have good jobs. There are three pensions between us (my USN, her USN, and her GS). With those, and social security, and a considerable retirement portfolio, we still are investing 23% of my salary in tax-deferred accounts, while putting nearly half of hers into savings for the next wedding, new car, tuition, or whatever.
Last year, we needed a new roof, and two months later, the furnace croaked. We wrote a check for each of those, along with a tuition check because we had the cash. I can't emphasize how important that cushion is. I couldn't fund the retirement savings at the level we do if we had to pay off a credit card after each of those.
You can't just take cash out of your401(k), it's both stupid, and you pay a 10% tax penalty on top of income tax on the money withdrawn. You can cash out of mutual funds, or stock, I've had to do both, but you pay capital gains. Having cash allows you to avoid those taxes levied on your money. Those taxes are considerable, and do tremendous long term damage to wealth accumulation. So, get the cash part right.
And it doesn't happen overnight. For example: Pay off a car, then drive it for another several years while putting the car payment in your savings account. This takes years. Figure out what you don't need. In a consumer-driven culture, the line between need and want is tremendously distorted. In the average set of monthly expenses for a US household, there are a bunch of thoughtless extra expenses, and therefore, there is a ton of room for cutting back.
You make good money.
Where is every penny going?
Answer that question and then you can begin to find the money to save.
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Originally Posted By: Mr Nice
I hate when Dave tells his callers on his radio show to eat , Rice and Beans - Beans and Rice diet for 3 years to get out of debt.
Understand that this is just his metaphor for cutting back on extraneous spending (like eating out a lot) and to use that money instead for getting your plan going well. It is sound advice.
I hate when Dave tells his callers on his radio show to eat , Rice and Beans - Beans and Rice diet for 3 years to get out of debt.
Understand that this is just his metaphor for cutting back on extraneous spending (like eating out a lot) and to use that money instead for getting your plan going well. It is sound advice.
I would like to say a bit about food expense. My wife cooks everything from scratch. Everything we eat (other than cereal) is cooked with fresh ingredients. She cooks enough for supper that we'll have the leftovers for lunch the next day. We eat out 2 or 3 times a week. We don't buy snack foods like chips, soda, little debbie cakes, etc... We spend a max of $60-$70 a week on groceries. It helps that she is a dietitian and loves to grocery shop. She finds cooking therapeutic. (she's weird, lol)
Another couple we know only buys junk food; boxed meals such as hamburger helper and the like, soda, candy, cookies, chips, and hardly ever eat at home. They spend $150-200 a week on groceries and eat out 5+ nights a week. They complain that they never have money. Not only are they eating garbage, their health is suffering because of it. That only adds more medical bills and prescription drugs to their tight budget.
Another couple we know only buys junk food; boxed meals such as hamburger helper and the like, soda, candy, cookies, chips, and hardly ever eat at home. They spend $150-200 a week on groceries and eat out 5+ nights a week. They complain that they never have money. Not only are they eating garbage, their health is suffering because of it. That only adds more medical bills and prescription drugs to their tight budget.
Weird??
Your wife sounds like a keeper!!
Your wife sounds like a keeper!!
Triple_Se7en
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Originally Posted By: ZZman
Experts will tell you to have 3-6 months savings to help cover unforseen emergencies. Many if not most people live paycheck to paycheck. Is it realistic?
Make it 2-3 years in emergency savings. I keep 75K in my checking / simple savings account. Access to it is immediate.
I don't need more than-that. I haven't any mortgage, car payment.....etc.
Experts will tell you to have 3-6 months savings to help cover unforseen emergencies. Many if not most people live paycheck to paycheck. Is it realistic?
Make it 2-3 years in emergency savings. I keep 75K in my checking / simple savings account. Access to it is immediate.
I don't need more than-that. I haven't any mortgage, car payment.....etc.
Originally Posted By: Wolf359
Originally Posted By: jj51702
By "experts" r u referring to the cook Dave Ramsey?
Hmm... Most people don't refer to his skills as a cook, but he does do some advocating for cooking so you can save money. I just didn't realize he was also well known as a cook.
But the 3-6 months advice is pretty standard, long before Dave Ramsey.
*kook
Thanks for catching my spelling error baby
Originally Posted By: jj51702
By "experts" r u referring to the cook Dave Ramsey?
Hmm... Most people don't refer to his skills as a cook, but he does do some advocating for cooking so you can save money. I just didn't realize he was also well known as a cook.
But the 3-6 months advice is pretty standard, long before Dave Ramsey.
*kook
Thanks for catching my spelling error baby
Just curious why people don't consider a secured line of credit instead of stashing cash away in a bank account doing nothing? I would rather invest that 3-6 months of income and make money on it, then if an emergency happens, I have my LOC to fall back on, which is several years worth of income if needed.
I don't agree with everything Dave Ramsey says, but a lot of it is great advice for people who consume like locusts - they spend everything they make plus whatever credit they can get. They get in trouble, and it takes an advisor like Dave to tell it like it is.
If you want to get ahead, it's simple. Consume less than you make. The rest is icing on the cake.
It helps to have your spouse on board with getting ahead. If one partner isn't, you are rowing upstream against both the current and the wind.
If you want to get ahead, it's simple. Consume less than you make. The rest is icing on the cake.
It helps to have your spouse on board with getting ahead. If one partner isn't, you are rowing upstream against both the current and the wind.
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