How Much Do You Need In Your Reserves
When it comes to your savings accounts, most people don’t know how much they should have saved and readily available. The general rule of thumb is that you should have anywhere from 6 months to 2 years of your current salary in your reserves. This reserve is used in case you or a spouse loses a job, incurs unexpected medical expenses, or if you have any other unexpected costs that might arise.
For example, lets say you make $80,000 a year. After taxes and contributions to your 401k, you take home about $45,000 per year. That means that you take home $3,750 each month. Now, when you multiple that number by 6 months to get the low end of your reserve, it comes out to be $22,500. Now, lets take $3,750 and multiple that by 24 months, which is 2 years, to determine the higher end of your reserve. That number turns out to be $90,000. So based on a salary of $80,000, and taking out taxes and 401k contributions, you should have between $22,500 and $90,000 in your reserves that would be easily accessible.
Every person will have a different result when it comes to how much they need in their short term reserves. For more information on determining how much you need in your short term reserves, reach out to Peter O’Brien today.