Questions about saving
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Questions about saving
| Wed, 07-22-2009 - 8:34am |
I have read in many places that you should aim to save about 10% of your paycheck. Is this retirement savings or savings in general?
The reason I ask is I have several "savings" accounts (and by several I mean 7, lol). They are all free (ING and PC Financial) and I use the system to organize myself. But they really aren't savings accounts. They are more like mini efunds for expenses that aren't monthly, but are regular. Do these count towards my savings or should the 10% be on top of this??? Where does my pension fit in?
Here is what I have:
Efund - Currently $1015 not adding to this until debt gets paid off
Tuition - $15 a paycheck

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I think it's great that you are saving like this for all the regular stuff...I've noticed that you don't have car insurance (or house insurance) listed amongst your accounts. I pay mine annually and it used to surprise me that "all of a sudden" they were due (even though I knew all year what date the insurance expired).
I don't know if the 10% is supposed to be on top of saving for regular expenses, but for now, I would suggest you set it as a target to maintain saving at that level until the debt is paid off, then you can raise the percentage from there.
What I would do is back calculate. Think about when you want to retire and how much you may need, how much your pension will be and how much you have now, then you will have some idea how much you need to save.
This calculator may be helpful:
http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner.jsp
Do remember these are all rough estimates.
I think that when they say 10%, it means retirement, but I could be wrong.
Honestly, the only things you have listed that I would really consider "savings" are the efund and mutual fund (is that your "retirement fund"?) accounts. The rest is simply budgeting for regular household expenses -- and your system looks like a great way to do it. (Definitely something I should be doing, because those quarterly, or twice-yearly, or annual etc. expenses do have a tendency to sneak up on me!)
So technically, the 10% for savings should be on top of what you're putting aside for the household expenses. However, some financial experts recommend paying off the debt first, then start putting money into retirement. Perhaps you can split the difference. I guess it really comes down to what is comfortable for you (and probably how close you are to retirement, of course!).
Thanks for your input!
I actually pay insurance monthly. It was never an option to pay yearly (I wish it was because it would have made it easier to set up an account and transfer so much each pay).
I like your idea of leaving it as is for now and then diverting once CC is gone. Once CC is gone I will have so much extra that savings shouldn't be an issue!! Thanks!
Bex -
"Yesterday is history, tomorrow is a mystery, today is a gift -thats why its called the present."
Bex -
I most definitely agree that you are doing the right thing by having these (seven, heehee) savings accounts. This is exactly the organization that keeps you from adding to your debt when these expenses come up. You are ready for them!
you have a pension..... Is this pension enough for you to retire on? or will you need additional income in retirement so you can live the lifestyle you would like? Don't forget to figure in inflation.
Personally, I would continue to save as you are. Once your debt is paid off, I would bulk up more savings to have ready, so, in the future, no matter what happens (new car, health issues, job loss, wedding) you would be very well prepared and not add to your debt once is it paid off. All this assuming that your retirement is taken care of.
Nice job!
Thanks for the link. Sadly, it doesn't work since I am in Canada and none of the subcategories work.
I am going to speak with my compensation advisor. I am lucky in that I work for the federal government so my pension is a defined
Bex -
Yeaks!
Norma
"Patience is the best remedy for every trouble"- Plautus
Essentialy what you have is a baby efund of about $1000, plus a small sinking funds account to handle expenses that you know are coming up.
I have never followed the 10% rule myself in regards to savings.
We do not do retirement. When my husband did it was a plan that the state had for its workers and they took out 4% of the gross before taxes and put it in the account Then the state matched it.
I have been reading about saving for a couple of weeks now. Here is what I have learned.
You are supposed to decide what type of risk taker you are. If you are young and a risk taker you are supposed to get more stocks, if you are older you are supposed to go with a more gauranteed investment so you don't lose your savings and the fact that you will be using it soon. Suz Orman says don't put anything in stocks if you are planning to use it in 5 years.
Savings(believe me I have trouble with this) is money put away that you do not spend(for a long long term goal)!, or borrow or touch or mess with from like an efund (until a certain date such as retirement or a child's education. This is money best forgotten about and reviewed every year to make sure it is on the right track or what have you depending on what you have done with it and what your goals are.
I like your ING account idea. I do something similar with my PC savings(but it is a lump sum in there) and track on a spreadsheet what every dollar is supposed to go to(property taxes, car maintenance, etc). Every month we put the amount we are supposed to in there and I change the spreadsheet. Except for your mutual fund ING account the rest is not savings. They have a predetermined destination that will be spent and replenished as you have stated per pay check.
I have a suggestion because I have read so many of your wonderful posts. If you want to save put the savings into something you will be penalized for touching(RRSP, I believe you can set it up to withdraw monthly right out of your paycheck and will help at tax time too)(you can also get a long term GIC). I don't think you are a huge spender, but you tend to rework and change things very frequently. This way it will be real savings and you won't be tempted to "tweak" it. You are young and have lots of time but you don't strike me as a very big risk taker with your finances either.
This is just a suggestion, I wish you luck in your savings plan!(I love reading your posts and you are a smart cookie!)
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