Thursday, February 2, 2012

Changing my Savings Goals

In January I set the goal of having a six month emergency fund set up, as well as $5,000 saved toward a house down payment fund. I've been making progress on these goals, as well as investing some of my savings. 

However, I got to thinking about how much I need in my emergency fund. I just chose a six month emergency fund because it's on the high end of what's recommended. And I'm a high achiever. But, it makes more sense to consider what my E-fund would be used for:

*Possible layoff: I'd get unemployment, which would pretty much cover my bare bones expenses. I'd only dip into savings for things like car registration/repairs or other emergencies.
*Illness/Disability: I have sick time for smaller things, as well as a $200 cushion in my budget each month. For something bigger, I pay for disability insurance.
*Car issues: Can't see this being more than my three month fund could cover.
*Moving: Could probably absorb this into my regular budget and just need the deposit covered until I get my deposit back from this place.

So, all this points to a three month emergency fund being enough for me right now.

I know there could be a shit storm where all of these things would happen at once. But that's pretty unlikely. And if it did go down that way, I could raid my house fund to cover it. So, I've decided to switch up my goals. I've decided that I want to have three months worth of expenses in my E-fund by the end of the year, and $10,000 invested in savings for a house down payment fund.

This goal makes me feel that owning a home is actually in reach in the next few years, and it still makes me feel secure because I'll have a sizable savings in case something big comes up. My investment money is liquid, so I could pull it without penalty, but it's nice to have my down payment fund earning higher interest and in a less reachable place.

So, one month in and I've totally changed my goals. Anyone else change your mind yet?


  1. I'm with you! I really don't see the need to have an emergency fund larger than 3 months (for me, that's $5,000), especially since the Roth IRA is sort of like a back-up emergency fund.

    And my savings goals shifted a little bit (shocker). I decided that I'm prioritizing maxing out my Roth over maxing out my e-fund. I made this decision for a number of reasons, but it all goes back to the idea that I can get the money if I REALLY need it.

    That said, I'm still trying to build up my cash savings. So far, it's been an uphill battle, with my asthmatic cat ($600 and counting this month) and an aging car ($400 this month). But one of my tutoring programs is starting soon, so hopefully that will help :/

  2. I did. Not the items. Just the order.

  3. Sounds reasonable to me. Like TeacHer said, you can always use your Roth IRA as a backup fund - although if that's the case I'd probably invest more conservatively than I would otherwise. I have a pretty big emergency fund right now, but all that cash will be 80% wiped out once I have to pay for grad school tuition.

  4. TeacHer, I totally thought of you when I was changing my goals! I used to think it was weird how often you changed your mind (no offense!) when I was in debt payoff mode, but now I'm totally in the same boat as you!

  5. It is common to receive advice to put money into savings, but many people do not know where to go from there. It is important the money you are saving have a specific purpose, because then you can find the best way to make that money grow and to begin building wealth. Before you become focused on saving money, you should get out of debt, since the interest rates on credit cards, and most other loans and higher than on typical savings. Setting up a support system that focuses on your financial goals will help you become better at saving money.