It is time to get serious about saving. The silver lining of the recession is that people are starting to finally realize that they cannot constantly get by on borrowed money. The problem is that the more consumers save, the longer it may take to get out of these dark economic times.
This is some bad news when it comes to being frugal, but should not be used as an excuse to splurge. You just have to figure out how much is enough when it comes to saving, and how much you should be spending. You can get a good insight into how much you need for your emergency savings fund by asking yourself these intrusive questions.
How much savings should you aim for?
There is a general rule of thumb that says that people should keep enough in their savings to cover three months of living expenses. While this is a good generally idea, there is a lot more to it. To come up with a better figure you need to personalize this advice.
How many dependents do you have?
How many people are reliant upon your salary and steady income? The more people that depend on you, the more money you should be saving and keeping aside. However if it is just you, living the bachelor lifestyle, you can get away with saving quite a bit less. When you are the only one that has to eat ketchup sandwiches, you can afford to spend a little more if things are going well.
Is your job safe?
What industry do you work in? Is your company safeguarded and in high demand? Are you working in a field that can guarantee a regular paycheck, or are you just riding out the wave while it is still here? Do you specialize in a skill that can be used by a number of industries, or do your skills leave you with very few options if it came to finding a new job? These are all important questions. Your marketability will have a big impact on how much savings you will need. If you consider all options and feel that you may have a tough time getting a new job, try taking new classes and beefing up your skills.
Can you be self dependent?
If something happens and your company begins laying people off, could you provide for yourself? Would there be opportunities to work on contract with your former company, or are there opportunities for you to freelance? Essentially it is important to figure out how flexible you are. Are you willing to ask, “Would you like fries with that?” in order to pay rent should it come to that? If not, then you need to make sure your nest egg is a little bigger.
What is your Credit Situation?
If you have access to credit then make sure you keep it, use it, and keep your credit score in good shape. It will be much easier to make it through an emergency if you can at least rely a little bit on credit. This is not the ideal situation, but having good credit can give you a lot of peace of mind should you feel a savings crunch coming on.
If you ask yourself these questions, and really answer them honestly, you will have a much more personalized idea of how much you need to be saving. Remember that savings are not just for you, but also for the important people around you that rely on you. Another thing that it is important to remember is that emergency savings funds are truly meant for emergencies.
This doesn’t mean you should blow your savings on an “emergency” relaxing vacation. Keep the extra money there for when you really need it, it could make a huge difference when you need it most.
Things do happen and unexpected circumstances do come along, if you cannot stay really tight to your planned savings do not lose sleep over it, but try to get back on track as soon as you can.