Question for the Money Doctors

Question submitted on Mar 31, 2023.

Question

how much money should I have saved up as a reserve? My gross income is about 46K a year.

Answer

Good for you for thinking about a reserve/rainy day fund.  Generally, when targeting a balance in a reserve fund, planners will look at your monthly living expenses. Then, they'll often suggest an amount anywhere from three to twelve times that figure.  You may be able to get away with an amount on the lower end of that range if you have a steady, secure job and you don't have a lot of potential unforeseen financial obligations in the form of medical issues, for example.  However, if you're self-employed, or you are not the sole breadwinner in your family, you may want to consider an amount on the upper end of that range.

Be sure to ask your bank about their money market or savings account options so that your money will not lose too much purchasing power in this inflationary environment.

Good luck getting your fund established. 

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