Good Financial Reads: How To Effectively Build & Use Your Savings for Emergencies and More

Do you tend use your savings account to hold onto cash when you are uncertain about what is going to happen?

Sometimes parents hold onto things from a first child because they don’t know if they’ll have a second child.  After all, you don’t want to rebuy those same things.  We also tend to hold onto cash when we aren’t quite sure what is going to happen ahead.  

Every dollar you have should have a job. If you aren’t giving a job to every dollar then your dollars are working against you.

Here’s What I Mean

We all know you ought to have an Emergency Fund. It should be a defined amount that you keep available. You should also have available any cash that will be going out the door in the next five years. This would be expenses that you have planned that extend beyond your income.

You've got your emergency savings built up. Your short-term goals are on track to be fully funded. Your cash flow easily fits into the 50/20/10 rule. You've paid off your credit cards and other high-interest debt. If you're in that place: congratulations! Also, you're probably wondering: what now?

Your savings balances may fluctuate a lot during the year depending on stock vesting, property or income tax payments, and many other things. But your Savings Target should not fluctuate.

Your Savings Target is made up of two things:

1. Your Emergency Savings
2. Your Net Cash Needs over the next 5 years