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They say it is wise to save for a rainy day, but how much is enough? Here are the things to consider.
A rule of thumb I share with my clients is if you live in a two-income household, you should stash away at least three months of fixed living expenses.
If you live in a one-income household, then the savings amount should be increased to six months of fixed living expenses.
Fixed living expenses are those expenses you have to pay on a monthly basis. These expenses do not care if you have a job or not — like rent or mortgage, car note, various types of insurance, etc.
To figure out what your fixed living expenses are, jot down all of these expenses, add them up and multiply that number by 3 or 6. This is the baseline nest egg you should be working towards.
Listen, some savings is better than no savings. If you’re starting from $0, let’s set a goal of at least $2,000 in savings. Review your budget and pause on any discretionary spending (that’s basically code for unnecessary spending). Let’s save those dollars, because as we know, there will be some rainy days, and we want you to be prepared.
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Rianka R. Dorsainvil, CFP®️ is the Co-Founder and Co-CEO of 2050 Wealth Partners a virtual, fee-only comprehensive financial planning firm dedicated to serving first-generation wealth-builders, entrepreneurs, and thriving professionals. Rianka also hosts 2050 TrailBlazers, a podcast aimed to address the lack of diversity in the financial planning profession by engaging industry experts and leaders in conversation.
As an award winning successful, millennial Certified Financial Planner professional, Rianka offers a unique perspective not only on the current state of the financial service industry, but on how to stay relevant in an ever-changing world.
Rianka serves as a member of CNBC’s Digital Financial Advisor Council and CFP Board’s Diversity Advisory Group, is a Forbes Personal Finance Contributor, and has been recognized for her accomplishments and leadership within the industry by leading publications and organizations such as Investment News’ inaugural 2017 Women to Watch Rising Star and Wealth Management’s Ten to Watch in 2018. She has been published in PBS NewsHour, Forbes, USA Today, Black Enterprise, CNBC, Women’s Health, and more.