Financial First Aid by Alyssa Davies

Author:Alyssa Davies [Davies, Alyssa]
Language: eng
Format: epub
Publisher: Union Square & Co.
Published: 2022-05-03T00:00:00+00:00

Another option when it comes to determining how much you should save for a household emergency fund is what the “experts” will tell you—and that is to save 1 percent to 5 percent of the purchase price of your home to cover these surprise expenses.

But when I asked Romana King, real estate expert and author of House Poor No More, if this was a realistic number, she immediately debunked the idea.

“We give this advice because we have no other answer,” says Romana. “In this situation, people who purchased thirty years ago are not saving enough, and people who purchased now are saving too much.” She says that if you are following this rule, you are leaving way too much money on the sidelines doing nothing for you.

Instead, Romana says that what we spend on maintenance each year, which is in the ballpark of $3,000 to $5,000, should be what we save to account for our planned household expenses, such as repairs and appliance replacements. You’ll spend a portion of this money each year, but you’ll accrue some money from simply saving up for these planned expenses.

Romana says, “People love rules, but I think the rule in this situation is just to have a goal.” Instead of worrying about how much of a cushion you have, the focus should be on the habits that help you save for that cushion.

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