Often when people consider their
retirement savings, they think of how much they will need to live on while they aren’t working. Unfortunately, there is a lot more to consider when calculating how much money to save away. The Equifax Finance Blog points out many additional costs which need to be planned and saved for in a recent article, “
Preparing for the Worst: Evaluating Your Emergency Fund and Cash Savings.”
In addition to the normal retirement savings, like maintaining quality of life and preparing for trips and other fun, it is very important to plan for emergencies. A fund of anywhere from three to six months of expenses should be saved for emergencies and that is just the beginning. A fund of that size might get you through one or two relatively minor emergencies, but there need to be additional savings as part of your
financial goals, too.
These savings should be classified in two ways: short term emergencies and long term emergencies. Short term emergencies are where you go to when an appliance needs to be repaired or replaced, or you have a fender bender. Long term emergency funds cover things like hospitalization, serious loss and the like. This long term fund needs to be significant, as in tens of thousands of dollars. A good way to think about it is how much money would you need to deal with three real quality of life threatening emergencies at once?
For more great retirement finance information as well as information on taxes, credit, real estate and other
money management information, check the Equifax Finance Blog.
