Making Your Savings Decisions

What Should You Save For?

A Rainy Day

• It is used to pay for unexpected expenses.
• Ask yourself: If your income disappeared, what essential bills and obligations would you still have to meet?
• To have a fully funded emergency fund, you must save enough to cover three to six months of expenses.
• The fund needs to be accessible immediately on demand.

Planning Irregular Expenses

• Annual membership: Sam's Club ($50)
• Semiannual expense: Auto insurance premium ($300/semiannual)
• Your car tires are beginning to wear thin; replacement cost is unavoidable in the near future.
• Strategy: Divide the cost and save part of the total each month. (e.g., Save $50 each month for auto insurance premiums).

Planned Large Expenses

• Example: You want to work on home repairs or buy a new leather sofa.
• Strategy: Estimate the expense and save part of the total each month until you can pay in full.

Retirement

• 401(k) or 403 (k)
• Traditional IRA, Roth IRA