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Financial Literacy - Emergency fund
SPOTLIGHT
Sharon Epperson
Talking to your partner about money is critical, says the author of a new book about couples and money.
Creating an emergency fund

Interview: Sharon Epperson


Visit the National Association of Securities Dealers at NASD.com and run a free broker check. Make sure there haven't been complaints against them: Call up your state securities regulator to find out how to do a broker check.

Guidelines for couples

You'll want to find out, and I talk about it in "The Big Payoff," about some of the designations that planners have. You can find that on the NASD site, too.

Simple 60/40 budget
The solution I've heard most often to cut corners and start saving is giving up coffeehouse coffee. I'm not sure how caffeinated authors think we are, but is that really the solution -- give up the demon drink and you'll be financially secure? Or do you have some advice for tea drinkers?


Monthly budget allocation
 

I think one of the keys to financial security is about seeing what money's coming in and going out. That's where the latte factor comes in. Do you have to focus on every latte? No. See what your committed expenses are -- including taxes and the six things you have to pay every month like utilities and car payment -- and try to limit them to 60 percent of your total gross income. Look at savings: Invest 20 percent in long-term savings (education, retirement) and then you have 20 percent left. Ten percent is for your emergency fund. You never know when the boiler's going to break. That's where emergency money comes in. The 10 percent that's left is fun money, this is what partners divvy up -- 5 percent each. If you don't have 5 percent that month, you don't have the fun.

It's important to separate an account for each partner. You want to keep a marriage exciting and fresh, and if you have a joint account you always know what's coming and how much it cost.

-- Posted: July 23, 2007
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