A Better Way to Manage Your Everyday Money - Book - Page 110
Ongoing short-term savings can be either perpetual or limited.
● The set-aside amount for a perpetual ongoing savings is calculated by dividing the total
of the estimated annual expense by the number of set-aside opportunities in a year. The
amount of accumulated savings in the plan is allowed to grow without limitation.
A perpetual ongoing savings works well when the amount of the expense can fluctuate
unpredictably, or when you are setting up a new ongoing savings and cannot, with
reasonable accuracy, predict the total annual cost.
● The set-aside amount for a limited ongoing savings is calculated the same as for a
perpetual ongoing savings. The difference is that there is a limit on the total accumulated
in the savings ledger. When the amount in an ongoing savings ledger is at the limit
amount, no further money is set aside until the balance falls below the limit. The
set-asides are then resumed until the money in the ongoing savings ledger again reaches
the limit.
Limited ongoing savings are best for annual expenses that have a fairly well-known cost
but may not happen every year. Eye exams and glasses are an example.
Short-term savings can be switched between perpetual and limited at any time as circumstances
indicate.
Long-term savings
Putting money aside in a long-term saving account is how you reach a large future goal, like
building wealth or preparing for events such as retirement and loss of income.
An in-depth look at the myriad ways to grow your long-term savings is beyond the scope of this
book. There are many books, courses, and financial advisors available to help you along your
path to building wealth and ensuring a secure retirement. My intent here is to introduce to you a
few basic investing concepts so that you have an idea of where to start working toward your
long-term goals once you get comfortable using PerNetFlow.
Unemployment reserve
A major long-term saving concern is what would happen if there is an unexpected loss of an
income for any reason. There is no cookie-cutter solution for an interruption in your cashflow
since the reason for the decrease could be anything from a job loss to a medical or family
challenge.
How long the interruption will last is also a variable. Is the job market for your skillset strong so
that you could find another job in a few weeks after being laid off? Will your job search possibly
100
