Short Term and Long Term Savings?

[CaptMillwood]

So I am trying to get my finances in order a little bit and think more about the future, and would love some advice when it comes to long term planning. I am a professional cook so actually having extra income to think about the future is a new thing, and I am kinda unprepared for it.

 

In terms of savings I am doing it for three purposes.

1. Have money for classes. Right now I am in college earning a Restaurant Manger degree, as well as taking any outside classed that might help me with that.. I am paying for this out of my own pocket so making sure I have cash saved is important.
2. Having a cushion in case of emergencies. For me I am defining this as having at least a month's worth of income in case something happens. Most people advise three months but since I am having to split things up, I think one is a more manageable goal.
3. Start saving for a restaurant. I want to own one eventually, starting with a food truck to figure out what would be good for the area. Ideally this would be in around 12 years from now, when I turn forty as I will beginning to feel my age and not work the line as much as I used to. 

My questions is how much of my income should I be aiming to save for each? To provide context, right now all my rent and utilities are covered by 40% of my income. 

 

Any advice is really appreciated!

[james452]

First thing I want to say, I like your savings goal, owning a restaurant would be awesome and I wish you the best of luck towards that.

 

I guess the best way to do this is to figure out how much you actually spend each month/year, then that will tell you how much you can set aside for those savings goals. An easy way to figure this out is to use an "Allocation System" and to track your spending. This is actually harder than you think because you need to remember the irregular expenses (such as paying for car insurance once a year or receiving a larger gas bill in winter). It will take a few months of tracking to figure out how much you spend, and after that it will become easier.

 

The question I then have to ask is, How much do you want to achieve those 3 goals?

If those goals are really important to you, then I believe you'll do anything it takes to achieve them. As you are doing a college degree, I recommend using the YNAB app/site to set goals and track expenses. As a student, you get 12 months free (which is what I signed up for). Alternatively people say Mint is a good site/app to use (it isn't available in Australia so I haven't tried it out).

 

 

If you don't want to figure this all out yourself/try an app, then I suggest booking an appointment with a financial adviser. Go to that appointment with your set of goals and they can help set up a system to help you achieve those goals.

[abeebe20]

As a rule of thumb, every time I get paid, I "pay myself first", I put 10 percent away in savings right away. Pay my bills and the rest can be used for groceries and extras. 

[Nomad Jay]

Similar to james452, I recommend prioritizing those goals and save for ONE thing at a time. Trying to do everything at once is difficult if you're not already well established. Personally I would start with the emergency fund. If you're saving for your restaurant and find yourself in trouble, you may be tempted to dip into that fund. If you have an emergency fund in place, it's less tempting to touch your restaurant money.

[DaemonCorax]

Paranoid saver here:

 

What percentage of you income do you have available to save?

What are you willing to go without to do it? Is there a standard of living below which, you are just not happy (i.e. is air conditioning important? cable? expensive coffee?)

 

Then I would say, kudos for paying for school out of pocket. I would let the restaurant savings wait. Make a stash of 3-6 months of emergency funds, and THEN start saving for the restaurant.

 

Also, one trick I use to keep myself from being tempted to touch my savings is that I put it in CDs. They earn next to nothing, but there's no risk and I can't whimsically buy stuff with them.

 

 

[Lueretius]

Congrats on making your finances a priority. Below are some awesome blogs that I read related to personal finance, they have a lot of great ideas and ways to make your money work for you.

 

Please note that I am not associated with these blogs at all, I just think they're a good read as such I won't link them, just name them, if you can't find them send me a PM and i'll provide the links.

 

Get Rich Slowly

Good Financial Cents

Money Boss

The Simple Dollar

 

The above are done my American bloggers/Financial planners. Another good one to read is "The Barefoot Investor" just be aware that the author is an Australian Financial Planner so advice from this source may run to a different tune to what you need depending on where in the world you live.

 

I hope the above can offer you some help