Now that my credit card debt is basically gone, it's time I set some concrete savings goals. It's not sexy, but I really need to establish a safety net. The first step is to figure out how much I need in my emergency fund. Well, this is easier said than done because advice varies. Suze says eight months living expenses, then she says six elsewhere, and fools say three to six (it depends!) .
Well... I need a meetable goal, our expenses are $3k and I have a high risk tolerance (and no kids - just me, my gal pal and two cats...insert clichés here) so I decided to start with setting a goal of $10k by the end of the year.
This is my "emergency fund" only, I will be using my short term savings for a new washer (the current one gobbles water and eats our clothes), three trips to see family, some desperately needed small home improvements and building an emergency repair slush fund.
This is going to be a little tight because including the 2004 Roth contribution I need $13k...and I have $50.03 now with less than 10 months left. But it's no fun if it's easy.
$10k in 2005! Ready...Set...GO.
Good luck, Caitlin! I agree that three months is a good place to start.
ReplyDeleteHaving an emergency fund is nice. I didn't know realize how much I'd enjoy it, and although we've never had to reach very far into it, it's already proved to be useful.
ReplyDeleteOnce we got the emergency fund rolling, we also set up a Freedom Account, as suggested by Mary Hunt in her Complete Cheapskate and Debt-Proof Living books. Once you get the Freedom Account working, your budget actually makes sense year-round, and not just on a month-to-month basis. It sounds like you've already thought a lot about how to make short-term saving work. When our washer quit, we shrugged and said, "Okay, appliance replacement slush fund!" Ditto using the Christmas fund.
Congrats on pushing money into last year's Roth, too.