For a while I had a goal set at $6000, then I upped it to $10,000 because that sounded like it could realistically cover a *lot* of "career transition," especially when coupled with unemployment ensurance. But I've been thinking about what I want to accomplish financially in 2015, in preparation for setting those goals, and just now I did this:
(Yeah, I included the bottom part of that screencap just so I could bask in having the loans paid off again. Sue me.)
If I save $500 every month from now until I leave this job in July 2016, I will have $10000 in cash by that time. I intend to do this -- it seems like a weirdly miniscule amount for that much work, but I have to keep reminding myself it's in addition to the retirement savings and the cash I'm setting aside monthly for yearly costs of car maintenance, health, travel, etc. We're just talking about medium-term savings here.
I re-set the goal explicitly entitled "Emergency Fund" to $5000, though, not because I plan to blow the other $5000 but because I feel really, really protective and defensive about that EF money. In my head, it's in a glass case marked "Break In Case of Job Loss." That's a good thing, because it means I won't randomly spend it on travel to Europe, but a bad thing, because it means I'm going to resist drawing on it for other long-term goals I need cash for.
So, once I reach that $5000 mark -- I'm estimating August, at $500 a month -- I'm going to stop contributing to that particular targeted savings account and open two others. One will be for "house/car" -- because I'm going to have to get one or both of those at some point, and I don't have anything saved for a down payment, and I figure I really should start -- and the other will be for something I'm going to have to invent a category name for. I'm thinking things like a new laptop, when I need one, or moving expenses. Things that aren't wants, but real needs, but are too big and lump-sum-like to be absorbed into monthly cash flow. The way I used to deal with this stuff is putting it on a credit card and then paying it down, but, well, yeah. Trying to avoid that in the future. So the way I look at it, if I put $250 in each of these accounts monthly after the EF is done, I should have $2500 in the car/house fund and $2500 in the "life expenses"[name TBD when I actually open it] account, assuming, of course, that my laptop doesn't die in that time frame :)
I'm very protective of my emergency fund as well. It cannot be less than $5,000, otherwise I'd be a stress-case. Off topic, but what program is that goal from? Is it your bank, or is that YNAB? My bank allows me to make goals for specific accounts.
ReplyDeleteI'm just afraid I'll get so protective of it that I won't want to use it for, like. Emergencies. I can see my future self putting emergencies on a credit card instead and then paying them down over time like I used to do! Hence the idea of the $5000 last-defense EF coupled with two smaller savings accounts that I might actually be willing to spend from :)
DeleteIt's actually from mint.com. Capitalone360 (our version of tangerine) also allows you to set goals for accounts, but I have my major goals set up in mint and tied to specific accounts. I just think it looks prettier. :-)
We waffle around with out emergency fund too. My husband has a steady job now, but might be making some changes in the next few years, which could mean taking a big pay drop.
ReplyDeleteYeah, I'm definitely in "big changes could be coming" mode -- I'm going to be a cash hoarder over the next year and a half to try to ease potential shocks.
DeleteI do something very similar. Right now, I'm working towards a $3,000 Emergency Fund. That's money to be used only for unexpected emergencies only, so I hope not to touch it. Then I set up separate "goals" (my bank lets me divide out my savings into goals) for anything coming up that I know I'm likely to spend money on, like the money I have set aside for home improvement. I feel less guilty spending the money when I've set it aside specifically for that thing. It also means I have more cash reserves; Should a drastic emergency strike that my EF doesn't cover, I can always pull from one of my other savings goals. It's worked well throughout 2014: Even though I'm still working towards my $3,000 goal, I typically had anywhere from $6,000-10,000 in the bank. That definitely helps with peace of mind!
ReplyDeleteYeah, I think that was my idea: that I'd be more likely to use the money from one of the other accounts for an emergency, than I would be to use the emergency fund money for one of the other goals :)
Delete$6000-$10000 in the bank! That sounds amazing.
" it seems like a weirdly miniscule amount for that much work, but I have to keep reminding myself it's in addition to the retirement savings and the cash I'm setting aside monthly for yearly costs of car maintenance, health, travel, etc."
ReplyDeleteI really liked this part. After maxing out my retirement accounts and making sure I have a decently sized emergency fund, I don't seem to save that much or at least I don't have a goal for that money. I need to start saving for a down payment on a house or a newer car as well.
Yeah, I'm finding it's helpful for me to have specific goals for the money I'm saving. But good for you for maxing out your retirement accounts! I can't even get close to that right now -- $12K a year is the best I can do on my salary while also building some cash savings.
DeleteI like that you have a detailed plan to get toward that $10,000 goal for your EF. Good luck on your saving! I’m trying to build a solid $3000 EF then hopefully double that but it’s a working progress since I’m still trying to pay down my debt. I also need to set up a few targeted savings accounts to cover expenses like car repairs and other savings goals so I’ve definitely got my work cut out for me.
ReplyDeleteThanks for the good wishes! And good luck to you. My advice -- and take it for what it's worth, since I'm no expert -- is to forget about the big EF until you get rid of your debt. By all means, keep $1000 or $2000 around, but other than that, just kill the debt off. (The only exception is if you feel your job situation is unstable and you really might need a lot of cash just to make minimum payments until you find a new job.)
DeleteThanks for your advice. I do feel that I really need to attack this debt asap because it’s only holding me back, but I feel a little uncomfortable without an EF of at least $3000. But once I get there I will definitely have to put even more toward getting rid of the debt.
ReplyDelete