Billionaire Mark Cuban believes in saving for emergencies. In 2017, Cuban Tell Vanity Fair: “If at some point you don’t like your job, get fired or have to move, or something goes wrong, you’ll need at least six months of income.” Then in 2020, in a In an interview with Men’s Health, he ramped up his guidance on emergency savings: “Once you can save, I’d say six months, now I want you to have a year’s expense because there’s a lot of uncertainty about COVID. Then, you can start to Invest and put it into something he can appreciate.” (Check out the best savings account rates you could get here.)
If you’re eager to save now, we have good news: It’s a better time to put that money into a savings account than it has been in years. As Greg McBride, chief financial analyst at Bankrate, noted recently: Rates on high-yield savings accounts are sometimes their highest since 2009. In fact, while early-early, higher-paying savings accounts were only paying about 0.50%. Of this in the year, many now pay more than 2%.
What other professionals have to save on how much money to save in an emergency fund
The pros vary in their advice about how much you need in your emergency fund, but nearly everyone says you need to have one.
While a six-month income is a good rule of thumb, in general, the amount you personally need in your emergency fund may vary, says certified financial planner Jesse Carlucci of Arrow Investment Management. “Six months is a good standard, but it really depends on your personal situation. The emergency funds should be allocated according to your own situation because the purpose of the fund is to pay all your monthly expenses in case of emergency.”
Those who might need more than six months, Carlucci says, include single-income families, insecure jobs, high job turnover time, and a poor medical history. “I would recommend a three-month dual-income emergency fund with secure jobs and a six-month emergency fund for single-income families or those with some uncertainty about their prospects in their current situation,” says Carlucci.
Meanwhile, Austin Hawn, a certified financial planner at Momentum Private Wealth Management, recommends that you have at least three months of living expenses, up to 18 months. “Six months seems to be the nice place. We typically define the amount of cash to keep by their current role as a business owner, single or dual income household, layoff risk and taxable investment account balance,” says Hon.
Certified Financial Planner Holly Donaldson of Holly Donaldson Financial Planning prefers to ask people how long it will take them to find a new job if they lose theirs today. The answer is usually somewhere between two and four weeks for healthcare workers and nine months for corporate executives. Whatever the answer, I would suggest that there be a lot of expenses, not necessarily income, in the emergency fund,” says Donaldson.
Many experts agree that the amount of your emergency fund should be based on required monthly living expenses, not necessary monthly income. “The way we calculate it is we take the total amount they spend in monthly bills, debt servicing and discretionary spending. We assume that savings will stop during a time of unemployment or income loss and that the amount someone needs in their emergency fund depends on how much they need to maintain on his lifestyle on a monthly basis,” says certified financial planner Angela Moore of Modern Money Education.
Certified financial planner Annie McQuicklin of Forever Financial Advisors says discretionary expenses such as vacations should not be included in the primary calculation. “I would love to see my clients be able to cover three months of all expenses or six months of essential expenses. Plus, I look at other sources of emergency cash and recommend that all homeowners have a HELOC in place, just in case they need it.” “The time to qualify for this is before the emergency happens, and you don’t want to do it after you lose your job,” says McQuicklin. And if you have a HELOC in place, the amount in your emergency fund may be smaller.
The trick, according to Hohn, is to find the balance of having enough cash to take the mental stress of losing a job, while putting every dollar to work. “Having a cash reserve gives you options if you need them,” Hon says.
Certified financial planner Eileen King of the Institute for Family and Money says that while six months may be acceptable right now, the pandemic has shown us that the questioner [savings] For 12 months is the best. Because fluctuations can lead to interruptions in your job, business, and opportunity, King says.
Some experts also recommend having extra reserves to cover anticipated emergencies such as auto repairs, home repairs, or medical expenses. “These items are not a requirement, but when, and should be kept separate from contingency cash reserves,” says certified financial planner James Kenny of Financial Pathways.
The tips, recommendations or ratings in this article are those of MarketWatch Picks, and have not been reviewed or approved by our trading partners.
#Mark #Cuban #Giving #Simple #Money #Advice #Profitable #Decade