Reserve Fund vs Savings
Depending upon the answer, this could be a request for help, or a suggestion for future improvement...
I am trying to input projected savings for an Emergency Fund, but cannot figure out whether to put this under Reserve Fund or Savings. In reality, it is the same thing, leaving me with the same Consumption/Discretionary Spending. But ESPlanner disagrees.
If I put the amounts in ESPlanner under "Savings," it tells me to save less, spend more. If I put it under "Reserve Fund," it tell me to save more, spend less. Of course, my next step is to split the difference, but I can't help but feel the software should be working to understand me, not the other way around. So... if there is an explanation that will help me understand better how ESPlanner interprets these categories, I would very much appreciate it. Otherwise, I guess I am requesting some type of change in a future update that perhaps will move "Reserve Fund" contributions from the Non-Discretionary/Special category to the Savings category.
RSS
Well, you CAN'T add it to savings (over time) as the amount of savings are calculated for you, not specified by you. You (well, ESPlanner acting as your agent) saves or withdraws as necessary to maintain your standard of living. If you put it in as savings at the beginning of planning, ESPlanner considers these as assets to be spent so it tells you so spend more, save less, no contradiction or problem there.
Emergency/rainy day funds are typically handled as deposits to a reserve fund. By putting those funds into a rainy day fund, you remove them from your income stream, your standard of living goes down (less cash flow, lower standard of living, more or less) so that's perfectly ok as well.
Moving reserve funds out of the special category is unlikely to happen since, by definition (ours, granted) reserve funds ARE special and are treated differently from savings which is completely out of your control. If you notice, reserve funds have their own interest rate, can be added to/withdrawn from exogenously, etc.
Best,
Dick Munroe
Hi, you want to enter this under Reserve Fund. Please call me at 617 834-2148. I think there is some confusion I need to sort out with you re the way the program works. If you tell it you have more savings already, it will spend more because you have told it you are richer. If you tell it you have some more reserve fund assets, it won't spend more because you are telling it that these are assets you don't want to spend.
best, Larry