The more I talk to people about finances, people often ask me, "How much money should I have in my
savings account?" It's a really good question. How much do you really need on hand in order
to make sure you're safe and you can continue to live the lifestyle you've become accustomed to?
In this video, I'm going to give you 5 things to think about when you're setting up how much money
you should actually have in your savings account because nobody wants to have a month where they
run short on money and not have money to back that up. So, there's a couple things to think about but
most people don't think about all of these things in order to set up this system because a savings
account is not just a place to hold money, it's a strategic investment tool. Let's get into the video.
So, the very first thing you have to know is what is your expenses? The expenses you have every month
really dictate the amount of money you need on hand for just in case. So, how much money do you
require to cover your expenses for a month? In order to know this, you'd have to list out all
of your expenses and make sure you understand what do I really need in order to cover
me and my family for a month? Without knowing that number, it's really hard to dictate what we need in
our accounts, especially in our savings account, in order to back that up. So, we want to list out
our expenses and see where we're at every month for our money. The 2nd thing you want alongside
of your savings account is an ER fund. You want a fund in order if something happens that's really
an emergency, you have some money to knock that out. If a car breaks down or a roof starts leaking and
you need to fix that or you have something in your life that you need to pay for, this pretty
large expense, you want to have that covered so it not only doesn't wipe out your savings account
but it doesn't impact your income and put you into debt. A savings account is one thing but we
want to build our ER fund before we start building a savings account. So, what you can do is look over
the last year or 2 of your expenses, see what kind of emergencies have come up. Have you had of
a car go bad? Did you have something on your house that needed to be fixed? What kind of emergencies
came up? Did you have a kid that all of a sudden needed braces or broke their leg and the co-pay
was a little bit higher than you thought and you had to pay for a little bit more of that insurance
or you don't have dental coverage and you needed a crown? These are things that will rob your savings
account and really make it hard to get ahead. So, when you ask how much do you need in your savings
account, that's a secondary question to making sure we have an ER fund that's essentially an insurance
policy against your savings account. And make sure you're not dipping into that every time you need
a little extra money to take out an emergency. And I like to have 3 to 6 months expenses
in an emergency account. If your expenses every month, your mortgage, your car, your food,
your gas, everything you have is $4,000 a month, I like to have in the $12,000
to $24,000 a month in an ER fund to make sure I'm covered because again,
let's say you lose your job and you have no way to make income, that'll give you 90 days to re-adjust
and pivot to find something else or even 6 months. Start with 3 months and then we can
move to our savings account. And if you feel like 3 months isn't enough, then we can beef that
up a little bit. Because again, as the emergencies go up, that account should get a little bit bigger.
As the possibility of emergency rises, then that account needs to get a little thicker. Now, what
is a possible rising emergency? The biggest one is children. The more kids you have, the more you need
into that account to make sure if some... one of them needs something or one of them hurts themselves
and needs to go to the hospital, you have the money to pay for that. If you have older cars,
that money needs to be a little thicker. Believe it or not, if you have really new cars,
you don't really need emergency for new cars. So, again, even the age of your car changes that
amount. So, I'd like to take my expenses and take 3 to 6 months of that. 4 months
seems to be a sweet spot. So, if you take like 4 months of your expenses put that in an ER account,
it's kind of an insurance policy against your savings account. So, a lot of people will ask me,
"Mike, how much should I keep in my savings account?" I will return that question. Well, do you have an ER
fund or an ER account? They're like, no what's that and then I'll explain of why we start with ER
then we move to savings. Because the truth is we want to start with ER because after you build up
to 4 months, you can leave that alone. You don't have to put more money into that then
you can start building your savings account and then when you use this, if something comes up and
like, "Oh, wow. We had 4 new tires we needed and that was $900. We weren't planning that this month."
We can pull for our ER fund and then we can repay that over a few months, pile that back up then we
go back to our savings account. Because again, that ER fund stands in front of our savings account and
protects it so we don't always have to dip into it every time a tire goes out, a roof leaks or
a kid needs new braces. Before we get to the last 3 tips, make sure you subscribe to our channel
and smash that thumbs up button. Also, hit that bell notification so you get notified every time we do
a video which is every single weekday. The 3rd thing is cash is a depreciating asset. So, when
people ask me how much do I need in my savings account? My answer is not much and here's why. After
I have that ER fund built, the more cash you have, you have one of the fastest appreciating assets
in the world and here's why. Especially at the time of filming this video, we are seeing the government
printing a lot of money. Well, we know that's going to devalue the dollar. So, as the dollar goes down
in value, the more dollars you have, the less value you will have over time on your cash.
Having a pile of cash in the bank might make you feel safe, but it's a very bad financial practice
and will cost you a lot of money over the years. I'm really not a savings account person. Do I
have a little bit of money on-hand? Yes, but in a few tips I'll tell you why I keep that on-hand.
So, understand, cash is a depreciating asset. Sometimes in the investment world, we say cash
is trash because it's devaluing. So, what we want to do is keep our money in things that are increasing
in value like real estate. One of the reasons I park almost all of my money in real estate
is because it produces money every single month. I park it in cash producing real estate. This isn't
real estate that's just a house. This pays me every single month. "And guess what Mike, but what
if the economy tanks?" Okay, I lose that value and it still pays me every single month until that value
returns. So, having it in the savings account doesn't do you any good. Might let you sleep at
night a little bit, but imagine what extra positive cash flow would do every single month. Not only
could you put that in your savings account if you wanted, but now you're investing in a money machine
not just parking your money in a parking lot where it just is devaluing every single day. Growing up,
I grew up with parents that were really really good with their money but I learned some really
poor practices. For example, I wonder if you've ever heard this term: money doesn't grow on trees. I used
to hear that all the time growing up, money doesn't grow on trees. It's people that say money doesn't
grow on trees obviously don't own cash producing real estate because my trees grow every single
month, whether I water them or not, and that's the power of parking your money in a money tree versus
just parking your money at the bank. And the 4th tip about how much money you should have in your
savings account depends on your income. Do you have a stable income or are you in an industry that's
questionable? If you're in an industry that's questionable and you don't know if you could
have a job tomorrow or next week, then you really want to make sure that you pad that account more
or maybe you have a seasonal job. For example, one of my cousins works for a road commission for the
government. They work on all these roads throughout the country, but in the winter times, because he
works in the Midwest, in the winter, they're really really really slow because it's really hard to do
roads in the cold weather they get. So, his hours get really really decreased in the winter and go
up to 90 in the summer. Well, the truth is if you're in a job like that, you might want to have a little
more savings for those months that you need to stretch where you're not making as much,
so your income patterns dictate how much you have in that account as well. If you have an ultra high
income, then again, it dictates you don't need as much. If your income is really high and you have
a pretty stable job and you make 6 figures a year, you don't really need to worry about
a bunch of savings. I would focus more on having cash producing investments that are paying you
every month than having padded account that keeps money in your bank because again, having that money,
devaluing asset. If you have a high income, money's coming in all the time. The savings account becomes
really less valuable the more your income really is. And you have to ask about your income, are you
a one income household? If you're married and you're the only one in your home that works or
you have a partner and only one works or you're single and you're the only income, you might need
to pad your savings account a little bit more just in case something does happen to your job.
If you're a 2 income household, well that changes things a little bit. 1 person loses their job,
somebody else can continue with that. So, again, the amount of income you experience each month
in relationship to your expenses can dictate your savings account. If you make twice your expenses,
that's pretty good. You can have your expenses all paid for, put a little bit into savings, put the
rest into investment. But if your income is really close to your expenses, you're not going to be able
to save much anyway but the truth of the matter is the closer it is to your expenses, the more savings
you need, but the less savings you can actually give. And the 5th thing I talk about with your
savings account is your investment patterns. If you are somebody that invests a lot of money,
then you need to have a little bit more money on- hand. In my company, we keep 6 figures on hand at
all times because we invest in big deals. So, if I'm investing in a lot of deals, I want to have money
on hand so I don't miss out on opportunity. If you invest in your 401k at work and it's just very
methodical and it's every month you get some taken out and your company matches it, it's very rhythmic,
perfect. You don't need to worry about that, then you don't need to have as much in your savings
account because again, it's being taken out of your check so your investment is already subtracted
before you put into your savings. If you're not in the investment game yet, please get there because
I really don't just want you to have a savings account that gives you a pillow to sleep on at
night. I actually want you to build financial freedom and wealth to impact generations to
come for your children and their children. And the way you do that is by having cash producing real
estate or cash producing assets that pay you month after month after month that also increase in
value. One of the reasons I love real estate as my primary investment is while it increases in value
as a rule, over the years when it's crashed, we call it reverse gravity. It always comes back up, always.
It always has, it always will because real estate is a controlled supply. We only have so much of
it. We can build some more but we can only really have so much real estate and that's why owning it
is a good thing to continue to own because it not only produces income, but it will continue to
increase in value. I also have a free gift I want to give you today. I have a free 60 minute master
class on how to bust into the multi-family market. No matter what you have in your savings account,
we need to get you start investing to build wealth and I have a free 60-minute training. If you click
on a link in the description, you can have my free multi-family master class where I walk through
how to bust into the multi-family market, start creating those passive cash flowing assets.