We all are told that saving some of our income is important. However, if you were hit with an unexpected expense right now, could your finances cover it? If you are like most people, you would need to turn to a credit card. It’s time to change that.
The Consumer Financial Protection Bureau recommends that all individuals have four different types of savings goals. Let’s take a closer look at what each one of these is below.
Quarterly, Biannual And Annual Expenses
Your budget needs to consist of more than just monthly bills. You should be saving for those additional expenses that happen throughout the year. These include things like birthdays, holidays, winter heating costs, vehicle inspections, and many others.
These expenses can add up, especially when you are not ready for them. By planning ahead you can avoid stressing out when these quarterly, biannual, or annual expenses pop up.
This fund is to be set aside for the rare occasion that you lose your job or are unable to work due to a medical problem. You should save up for at least three months worth of funding based off of your current budget. You should think of this as a buffer to help absorb your financial obligations so you can focus your energy on finding another job or getting healthier.
Irregular Bills Fund
This fund should be one that you continue to add to each month. Specify a percentage of your income to put towards this fund and stick with it. Irregular bills saving is for funding expenses such as a new washer, dryer, vet bill, car repair, or a fridge.
These are the things you know you will need to pay for at some point in the future, you just don’t know exactly when. It’s best to start saving now so your finances aren’t hit with a major expense when something breaks.
Your Goal Fund
We all have goals we want to work towards. Whether they are to go back to school or start a small business, you need to a way to fund them. This savings account is meant for helping you achieve those goals and not put them off until you have the money.