How Much Should You Have in Savings?
Updated: Nov 10, 2020
You probably already know it’s important to save money, but are you saving enough in this new COVID world?
In the past, many people regularly saved for retirement, vacations and holidays - and many people even have emergency funds. But, given recent events with the COVID situation and volatile financial world, it’s more important than ever to save enough money.
Experts disagree about the exact amount you need to have in the bank but a closer look at each item or situation you need to save for can help you get an idea about what is best for you.
Here are some situations that you should save for along with some general guidelines for the amount of savings you might need in each category.
What should you save for and how much should you save?
Tires/Auto Repairs – You should always have enough money on hand to pay for one set of tires for each car and for one major car repair, which can range from roughly $300 to $2,000 depending on the type of car you have and where you have it fixed.
Christmas/Hanukkah – This really depends on your income and budget. But in general, Americans spend an average of around $1,000 per holiday season. Remember to save for the extra special food for family gatherings and parties as well.
Vacation – This depends on where you want to go and your budget. Plan ahead and start researching costs to know who much you will need. Remember to include money for meals, transportation, tours and souvenirs.
Home and car deductibles – Check your deductibles and make sure you have enough to cover them if something should happen.
Healthcare deductible – There are two amounts you might need – one is the individual deductible and the other is your family max out of pocket. If your family has separate insurance plans, you may need enough to cover both deductibles and max out of pocket expenses.
Home Repairs – In an ideal world, products we buy for our home would last forever, but the reality is that air conditioners, refrigerators and washing machines don’t last as long as they used to. It would be wise to have the money for at least one of these items at all times. Remember to save for maintenance items like painting as well.
Loss of Income – To make sure you have enough to get by financially in case you lose your job, consider how long it might take to find another job and then plan to build an emergency fund to cover your monthly expenses for that amount of time. This can depend on the level of job you currently have. If you are working for minimum wage, you can probably find another job in about a month or two. If you are a manager making a middle-income wage, you might need 3 to 6 months. If you are a senior executive, you might need a full year of income to make it.
New Automobile – If possible, it’s helpful to have enough savings to buy a new automobile if yours should break down. However, because saving up such a large amount is not always possible before you need it, a low-interest loan can help you get by.
What should I do if I can’t save any money at all?
At this point, if you are like many people, you are looking at this list and thinking that you can’t afford to save for all of these things. So what should you do if you can’t do that?
Thankfully, everything will usually not break or happen at the same time.
Just be sure to always have enough on hand to handle the items that you know for sure will be expenses, like Christmas and tire repairs. Then, we recommend having enough money to cover your loss of income. This can cover other emergencies if needed.
If saving for these items is pretty much impossible on your income, it’s time to find a better paying job, find a side job or start a business. In today’s world, there are many technical certificate programs that could help you earn more money upon completion. In this situation, a small personal loan could be used to get to this next step of income.
If you have a more entrepreneurial spirit, there are many options to make money online as a side gig or full business. Just search for “how to make money online” on Google and you will find many ideas, but always be on alert for online scams.
We hope this guide is helpful. If want to learn more about where and how to save your money, give us a call to learn about the pros and cons of different options.