I’m continue to another chapter for Personal Finance for Dummies book. This entry I’ll continue with the topic of building emergency reserves.
Emergency reserves is important as we don’t know what the future holds. Some wisdom says that the best emergency reserves is approximately six months of living expenses. This particular amount may or may not be right for you because it depends on how expensive the emergency is.
Building Emergency Reserves
This is recommend saving the following emergency amounts under differing circumstances :-
Three months’ living expenses
– Choose the option if you have other accounts whom you can tap for a short-term loan. This minimalist approach makes sense when you’re trying to maximize investments elsewhere or you have stable sources of income.
Six months’ living expenses
– This amount is appropriate if you don’t have other places to turn for a loan or you have some instability in your employment situation or source of income.
Up to one years’ living expenses
– Set aside this much if your income fluctuates wildly from year to year or if your profession involves a high risk of job loss, finding another job could take you a long time and you don’t have other places to turn for a loan.
That’s the recommend saving from Eric Tyson. How about you? In what type of saving you will be? For more about personal finance tips, buy ‘ Personal Finance for Dummies ‘ book