In the last lesson (post) we managed to cover the basics of allocating income to emergency savings accounts. Nearly all experts agree that building an emergency account is a necessity. The last, and least important, savings category is “other” savings; the final lesson in our three part series.

Some individuals are in great shape when it comes to retirement savings and have already built a nice emergency savings portfolio. These individuals have the opportunity to allocate income to this third category. Income within these accounts could be used for a slew of activities. Some of these activities include major purchases and family vacations.

As you can probably predict, there is not much depth to this lesson (post). The important takeaway from this lesson is that this savings category is the last choice when allocating income. If an individual needs to allocate 12% to retirement and has yet to build an emergency savings base, he/she should not allocate more than 1-2% of income to the “other” savings category.

Congratulations, you have successfully completed Income Allocation 101! Good luck with your income allocation.