No one is unanimous in assessing the optimal amount of cash to keep on hand. It all relies on your finances. What is your idea of how much money you should be able to get your hands on? Although an emergency fund may be available, use this experience to re-evaluate your priorities for the future. Your financial situation is the starting point for everything else. Because of poor budgeting, you may have no money left in your bank account. If you haven't already come up with an idea, now is the time to flesh it out. Here are a few ideas on how to go about it.

The Rule of 50/30/20

First, let's take a look at the 50/30/20 budget rule, which is a common one. In the book All Your Worth: The Ultimate Lifetime Money Plan, co-authored by her daughter, Senator Elizabeth Warren presented the concept. Your money can be divided into three buckets instead of being managed by an overly detailed and difficult budget.

Fixed Costs 50%

Regarding monthly costs, it would be good if you didn't have to worry about power, water, internet, automobile, mortgage. When it comes to these expenditures, there's little you can do except pay them if you've determined that they're necessary. Around half of your monthly budget should be allocated to covering fixed expenses.

Discretionary Money: 30%

Any and anything goes in here. You can do so if you'd rather spend your money on things you don't need. A surprising number of planners include food in this bucket since there are so many options when it comes to how you spend this money: You may dine out; you may cook in your kitchen; you may buy a generic brand or name brand, or you may purchase organic ingredients and make your own. A trip to the movies, a new tablet, or a donation to charity all fit into this category. It's all up to you.

Financial Goals: 20%

You're setting yourself up for future hardships if you don't make regular contributions to a retirement account, such as a 401(k), a 529 college savings plan, or any other suitable vehicle. 20% of your monthly revenue should be allocated to this. The money you're getting is critical to your long-term financial well-being. IRAs and Roth IRAs may be set up through most financial institutions. First and foremost, if you don't already have an emergency fund, this 20% should be used to build one.

Those Emergency Funds

Your emergency fund should take up most of your bank account's balance after covering your regular monthly costs and discretionary spending. The money for that fund should come from the savings element of your budget—whether it's from the 20% of 50/30/20 or Ramsey's 10%.

One cannot agree with everyone on everything. A typical recommendation from most financial advisors is to keep six months' worth of spending in cash: Save $30,000 if you need $5,000 a month to live on.

Suze Orman, a personal finance expert, recommends an eight-month emergency fund since the average time it takes to find a job is eight months. Other experts advise three months, while some say nothing if you have low debt, a lot of money invested in liquid investments, and high-quality insurance.

How Much Money Do I Need to Keep in My Savings Account?

Your budget dictates how much money you should retain in a savings account. Instead of making regular withdrawals from a savings account, they are meant to receive deposits instead. Generally speaking, you're only permitted six monthly withdrawals from a savings account.

Federal Reserve imposed an interim regulation that banks can no longer take money from savings accounts six times a month in the wake of the COVID-19 outbreak. As a result, clients can move and withdraw money from their savings at will. Check with your bank to see if this modification has been implemented.

How Much Cash Should I Keep in My Checking Account?

Many transactions can be handled using checking accounts, such as paying bills or withdrawing cash for everyday costs. So that you don't get penalized with overdraft fees, you should have enough money to pay your monthly payments and withdraw cash for additional obligations. A buffer should also be included. It's a good idea to have a large enough buffer to make you feel safe but not so large that you're tempted to overspend.

The Verdict

Thirty percent of Americans surveyed by the Federal Reserve in the July 2020 Report on the Monetary Well-Being of U.S. Households stated they would struggle to come up with $400 for an unexpected bill. That's a tiny improvement over the April 2020 report, when 36 percent indicated they would struggle, but it still doesn't leave room for saving. Most financial experts believe starting a savings account is a good first step. Make a long-term plan to raise that amount.