4 ms·

This article highlights what not to do, but how much is a sensible amount to have in savings, not including a tax-sheltered retirement account? $10K, $30K, $50K

This article highlights what not to do, but how much is a sensible amount to have in savings, not including a tax-sheltered retirement account? $10K, $30K, $50K, $100K? I've heard in the past that you should have 6 months to a year worth of living expenses stored up that you can access quickly, but you also have to factor in your age, current economic conditions, and your tolerance for risk. Any thoughts on this?

IAmGraydon 9y ago
At least a year, IMO. 2 years is a better goal, but then again, I'm a pretty risk-averse person when it comes to being able to pay my bills in an emergency situation.
- username223 9y ago
  A year if you're debt-free, two or more if you're paying off debts, seems reasonable to me. Ideally, you should be aiming for f-you money.
toomuchtodo 9y ago
6 months minimum, more depending on how risk adverse you are. I keep a year of expenses in high yield savings after living through the 2008 global financial crisis (money market fund with my emergency fund broke $1 NAV, withdrawals temporarily halted at the same time I was laid off when my employer folded). Use a savings account. The funds must be liquid.
- white-flame 9y ago
  Just curious, what sort of APY does "high yield savings" get you nowadays?
  - deleted 9y ago
    [deleted]
  - waterphone 9y ago
    1.3% to 1.7% in most cases, but it's been climbing over the past 6 months. Not a lot, but better than the laughable 0.05% some megabanks offer.
jogjayr 9y ago
The ultimate goal is 25x your annual spending, including a tax-sheltered retirement account - that's f-you money. Until you get there, 6 months to a year. Or for maximum safety, however much you'd need to pay for expenses and max out your annual medical + home insurance deductibles until you could find a new job. This covers the worst-case scenario of job loss + medical emergency + house burning down.
- edraferi 9y ago
  Why 25?
  - hueving 9y ago
    Maybe the assumption is that you can earn 4% pretty easily on it and live on that.
  - jogjayr 9y ago
    For a longer version: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim... tl;dr You can generally withdraw 4% of your investments on average every year taking into account gains and inflation Assuming you're invested in a broad-based portfolio of stocks, bonds and real-estate. So if you have 25x your annual spending invested, there is a high likelihood of being able to live off just investment returns in perpetuity.
waterphone 9y ago
6 months expenses is a reasonable baseline for a lot of people strictly as an emergency fund in the event of job loss, sudden automotive or medical emergencies, or any other unplanned scenario that might otherwise put you into debt without the emergency fund. If you're in a very secure career that is highly likely to weather a recession, less might be appropriate. If you're in an unstable career or freelance, more might be appropriate. Money for short and mid-term savings goals should also be in something safe like a savings account, CD, or possibly bonds. Money you plan to use in under 3 to 5 years should generally not be invested in the stock market.
bernardino 9y ago
I still live with my parents and work part-time, and I have come to be obsessed about saving. While I don't have much in savings, I tend to save nearly everything, unless it's for a necessity. I do hope the latter is not the case when I have a professional job. I am thinking about how everyone talks about investing towards your retirement, savings, etc, and it sounds a bit depressing. 10k signing bonus? Go buy that mint 1986 BMW 528e. I suppose I am just trying to get some perspective. What do people tend to do with most of their income? If they are saving more, are they worse off in regards to the so-called good life? I suppose there must be a balance. There's that word again: "balance".
- AstralStorm 9y ago
  The real problem here is that the accrual things bringing happiness take time (art, side projects, friends, family) and this is incompatible with income maximization (therefore savings maximization) on fundamental level. If it is just discretionary "comfort" spending perhaps you could rethink why are you doing it. Savings essentially work like a buffer and can be used to supplement a pension. How much buffer you can hold and afford depends on many expenses. Many people are unable to even trade time for these things as their jobs which are full time pay too little - barely subsistence. Telling them to save more or switch jobs is not the solution. (I bet they would of they could)

IAmGraydon 9y ago

At least a year, IMO. 2 years is a better goal, but then again, I'm a pretty risk-averse person when it comes to being able to pay my bills in an emergency situation.

username223 9y ago
A year if you're debt-free, two or more if you're paying off debts, seems reasonable to me. Ideally, you should be aiming for f-you money.

toomuchtodo 9y ago

6 months minimum, more depending on how risk adverse you are. I keep a year of expenses in high yield savings after living through the 2008 global financial crisis (money market fund with my emergency fund broke $1 NAV, withdrawals temporarily halted at the same time I was laid off when my employer folded). Use a savings account. The funds must be liquid.

white-flame 9y ago
Just curious, what sort of APY does "high yield savings" get you nowadays?
- deleted 9y ago
  [deleted]
- waterphone 9y ago
  1.3% to 1.7% in most cases, but it's been climbing over the past 6 months. Not a lot, but better than the laughable 0.05% some megabanks offer.

jogjayr 9y ago

The ultimate goal is 25x your annual spending, including a tax-sheltered retirement account - that's f-you money. Until you get there, 6 months to a year. Or for maximum safety, however much you'd need to pay for expenses and max out your annual medical + home insurance deductibles until you could find a new job. This covers the worst-case scenario of job loss + medical emergency + house burning down.

edraferi 9y ago
Why 25?
- hueving 9y ago
  Maybe the assumption is that you can earn 4% pretty easily on it and live on that.
- jogjayr 9y ago
  For a longer version: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim... tl;dr You can generally withdraw 4% of your investments on average every year taking into account gains and inflation Assuming you're invested in a broad-based portfolio of stocks, bonds and real-estate. So if you have 25x your annual spending invested, there is a high likelihood of being able to live off just investment returns in perpetuity.

waterphone 9y ago

6 months expenses is a reasonable baseline for a lot of people strictly as an emergency fund in the event of job loss, sudden automotive or medical emergencies, or any other unplanned scenario that might otherwise put you into debt without the emergency fund. If you're in a very secure career that is highly likely to weather a recession, less might be appropriate. If you're in an unstable career or freelance, more might be appropriate. Money for short and mid-term savings goals should also be in something safe like a savings account, CD, or possibly bonds. Money you plan to use in under 3 to 5 years should generally not be invested in the stock market.

bernardino 9y ago

I still live with my parents and work part-time, and I have come to be obsessed about saving. While I don't have much in savings, I tend to save nearly everything, unless it's for a necessity. I do hope the latter is not the case when I have a professional job. I am thinking about how everyone talks about investing towards your retirement, savings, etc, and it sounds a bit depressing. 10k signing bonus? Go buy that mint 1986 BMW 528e. I suppose I am just trying to get some perspective. What do people tend to do with most of their income? If they are saving more, are they worse off in regards to the so-called good life? I suppose there must be a balance. There's that word again: "balance".

AstralStorm 9y ago
The real problem here is that the accrual things bringing happiness take time (art, side projects, friends, family) and this is incompatible with income maximization (therefore savings maximization) on fundamental level. If it is just discretionary "comfort" spending perhaps you could rethink why are you doing it. Savings essentially work like a buffer and can be used to supplement a pension. How much buffer you can hold and afford depends on many expenses. Many people are unable to even trade time for these things as their jobs which are full time pay too little - barely subsistence. Telling them to save more or switch jobs is not the solution. (I bet they would of they could)