My dad explained what to do after I reach these two goals (from my last post); I would work towards having a total of 3 savings accounts.
The first savings account (that I’m already working towards) with $1,000 will be used as a cushion. This is a cushion that will save you in those unexpected situations where you need to dip into an emergency stash. For example, if an extra expense came in or you made less than you anticipated, now you have that emergency stash to fall back on.
*Remember that you want to continually have $1,000 in this account. This means when you take out from this account, you need to make sure that with your next paycheck you put money back to replenish the account.*
The next two savings accounts are in no way expected to happen any time soon. Like I said, take your time and plan it out with reasonable goals. The point is to work towards these goals, not achieve them right away.
The second savings account is for long term savings for big purchases. These big purchases can include anything from buying a car to making a down payment on your first house! For this savings account it was suggested that 6 – 12 months of your annual salary should remain in here.
*Again, remember that once you get to 6 months in your savings you can decided if you can afford to put more in there or not. Also, you want to plan to do your best at keeping at least 6 months’ worth in that account.*
The third saving account will be towards your retirement fund. My dad suggested $5,000 per year be put into this savings account. This too will take some time so I would not suggest starting saving for this until you decide you are in a position to do so.
*Something to consider for these larger saving accounts is to decide when you want to put money aside and how much. Do you want to be a little amount per paycheck aside or dedicated a larger amount per month or maybe even per year?*
Overall, these goals are more like lifetime goals. Breaking down the exact amount you want to dedicate to each savings account is ultimately up to you. Do not feel pressured to achieve these goals anytime soon.
For me, I just like to understand the overall picture and know how I eventually want to be set up. Once I reach my first goal and feel financially stable. I will then see what I can do to set money aside into these other savings accounts. Maybe when I have my $1,000 (hopefully by this summer) in my first saving account, I can use that 10% to go towards big purchases or retirement.
Now we have our overall goal, next we will start to get practical. We will look into the math of estimating spending.