How Much Savings Is Enough?

Maybe you don’t worry about paying the electric bill, but many thousands of Americans (and others around the globe) are worried about their jobs, their mortgage, their credit card bills and more. This brings us to discuss “How much savings is enough?”

If this were 1974 or 1987 (two pretty big confidence and financial meltdown periods), the old recommendations called for 3 to 6 months of liquid cash or savings to pay bills if you lost your job. That was a good deal of time in the rearview mirror.

How much savings is enough in 2009? To answer that question, you need to honestly look at your current job, your current bills and think about how long it might take you to replace your INCOME. How long – in this environment with jobs meltdowns – will it take you to replace 100% of your income?

Statistics don’t lie. These days (pre-financial crisis) the rule was one (1) month for each $10,000 in income. That means if you make $20,000.00, you should expect that it could take two (2) months to find employment at that level. Even then, it may not be the same kind of job or income.

That means you could lose your job and have to replace it with a job that earns you 10% or 20% less in income. That is tough medicine for the average worker today. It is also the potential reality.

These are all problems to consider BEFORE YOU HAVE THE PROBLEM of losing your job.

What about now? The latest statistics on jobs say that approximately 610,000 people lost their jobs last month. Are the economists saying the turn around is close? No.

It could take 15 to 18 months for the economy to recover (or much longer). What if your savings slip away and you are left with nothing?

This is exactly why we are NOW recommending that you work to build 15 to 18 months of expenses in emergency savings. It’s okay to have 3 to 6 months of that in MONEY MARKET covered by the FDIC, but you should have the rest in money market and certificates of deposit (and keep the terms on the CDs to under a year because inflation is very likely to explode with all the government money being printed to attempt to restrain the financial system back into complete working order).

If you read this blog a lot, you know that we recommend that the #1 thing you can do is START.

If you don’t have savings, START.

If you have savings but don’t have 15 to 18 months, START. Work toward it. Don’t get overwhelmed. Remember: Rome was not built in a day.

If you have to start slow, START. Begin with 1% of your next paycheck. Add 1% additional percentage of savings from your check the time after that and so on until you are saving 15% of your after tax income. YOU CAN DO THIS.

Don’t wait until YOU are unemployed to begin saving. Do it now.

Sign up for our free e-saver by going to our main blog. You can also find us on Twitter: boostmoneyblog.

Thank you for reading our blog.

Loyd Ford
http://www.stickyasset.com/blog

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