Savings Fund

A friend once asked me – “What is your financial plan? Are you starting to save for your retirement?”.. I was quite surprised coz I honestly really do not have a financial plan on hand, neither a retirement plan – nothing at the moment! And then my friend advised me all about savings fund – emergency fund, savings fund, and investment funds. My friend said an emergency fund should be shed FIRST and it should be pretty much equivalent to at least 3 months of my salary. It should be easily accessible in case I need it for emergency reasons. Then followed by the savings fund which should also be equivalent to my 3 months salary. This is where I should get funds if I want to travel, or simply buy a pair of shoes. Then LASTLY, the investment fund which I should use for generating additional income, putting up my own business, or saving up for my retirement.

Now I looked at my passbook… needless to say… I was ALARMED!… So, I only have a savings equivalent to my current three (3) months salary from my 11 and 1/2 years of hard work!!! I don't have extra savings for emergency, and for investments! Where did my money go? At this point, I told myself, I need to do something! I have to change the way I budget my money and I should come up with a savings plan! It is better late than never.

Okay now, I have come up with my 3-year savings plan. I divided my current savings into 3 parts:

Emergency Fund – 60% of my current savings will be shed to my emergency fund
Savings Fund – 20% of my current savings will go to my savings fund
Investment Funds – 20% of my current savings will be allocated to my investments

And now, my timetable starts here:
Year 1: March 2010 to Feb 2011 – I have to raise the lacking 40% to complete the 3 months equivalent salary for my emergency fund;

Year 2: March 2011 to Feb 2012 – This period will be alloted to complete the lacking 80% to my savings fund;

Year 3: March 2012 to Feb 2013 – Yes you are correct! this is for investments! I have 20% now and I have put it in mutual funds which will yield me a higher interest rate than parking it with the bank.

So, wish me luck with my 3-year savings plan.. I hope to follow my timetable which will be finished when I hit the age of 35! For everyone out there, better plan out while you are still young, and for those who are not so young, as I have said – better late than never!…