TIPS BEFORE BUYING YOUR PERSONAL FINACE SOFTWARE

Saving to fund financial objectives is important, particularly for people who are concerned about the future. Everyone has different goals and priorities, and irrespective of what they are, something should be done to address them before it becomes too late. Worksheet 10.1 on page 56 illustrates the process of determining the amounts needed to fund objectives.
Some of the most common objectives are:

-Establishing an emergency fund

-Saving to buy and own a house

-Saving to pay for children’s educations

-Saving to start a business

-Saving for retirement

Emergency Fund This is the fund that is used for unexpected events. There is always the possibility of losing a job, getting sick, or having some other unfortunate situation occur, which could cause financial chaos. Having an emergency fund can help in such situations. The question is: How much should be kept in an emergency fund?
The rule of thumb is to have three to six months of living expenses in an emergency fund. The exact amount depends on your circumstances. If you have a stable employment situation and other accounts or sources that you can tap into for your short-term needs, then three months of living expenses would probably be adequate. However, if your income fluctuates, there is a greater risk of losing your job, and you have no relatives or friends who could assist you, then you should keep at least six months of living expenses in this account. There may be circumstances in which you need to keep more than six months of living expenses. If you have a high probability of losing your job and might not be able to and another job within a reasonable period of time, and you have no relatives or friends who could assist you, then you should keep nine months’ to one year’s worth of living expenses in an emergency fund.
Saving to Buy a House Owning a house is a high priority for most people. Not only are there the tax breaks of being able to deduct the mortgage interest and real estate taxes from personal taxes, but there is also the buildup in equity that comes from paying down a mortgage.

Funding Children’s Education Expenses. This is not as straightforward an objective as it seems because the current financial aid system works against parents with substantial assets and includes similar penalties for savings invested in children’s names after having controlled with the personal finace tracker. As of this writing, parents are responsible for an amount worth roughly 6 percent of their assets for their children’s college costs annually, and children are responsible for an amount worth 35 percent of the savings in their names. People with substantial savings and assets may not qualify for .nancial aid, and children with assets of $100,000 in their names would also disqualify themselves for aid, assuming private education costs are $35,000. Thus, funding this objective over retirement savings may be a mistake under certain circumstances. Parents should look into all aspects of their financial situations before funding this objective over other objectives.
Saving for Retirement The rule of thumb is that most people will need about 75 to 80 percent of their preretirement income in retirement to maintain their standard of living.

Some people may be able to get by on less and others may need more money to live on. Determining your needs for retirement is important because you can fund most of them through tax-deferred retirement accounts such as a 401(k), a 403(b), SEP-IRAs, Keoghs, Roth IRAs, and IRAs. Contributions to these accounts are generally tax deductible below threshold amounts and the earnings in these accounts accumulate free of taxes until they are withdrawn.
If the amounts saved in these tax-deferred retirement accounts are not suf.cient to meet your expected retirement needs, you may want to save additional amounts outside of your tax-deferred retirement accounts.
The future cannot be predicted, but by setting aside amounts for an emergency fund, big ticket purchases (car, home), educational needs, and retirement, you are preparing to cope for any .nancial changes in the future.

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