Savings

Savings accounts are a good way to dedicate funds for specific purposes.

In the Ramsey baby steps, step 1 is to put $1,000 in an emergency fund. While you may think you need a “new” (fill in the blank), emergencies are just that – emergencies such as: car repair, medical treatment, furnace repair amongst other similar things.

Step 3 in the Ramsey baby steps is to build at least 3 to 6 months of expenses in savings. This increase in emergency funds ensures a safety net for normal and extraordinary emergencies such as home repair or change in employment.

After or concurrently saving for an immediate emergency fund and 3 to 6 months in savings, start a specific savings account for your yearly and platinum dreams.

Each year, you likely take a vacation or a short getaway; eat out for meals; buy holiday and birthday gifts; attend a concert, play or sporting event; do a project around your home, etc.

Once a year, make a list of all the activities and purchases you make outside of your normal budget expenses (mortgage/rent, utilities, etc.), assign a financial impact to each activity or purchase, and then determine an overall total. Once you have an overall total, divide it by 12 to determine a monthly savings amount. If you determine the list is beyond your income, take time to reduce or eliminate some of these extra expenses so you remain true to budget.

Practical Resources on Savings: