Although it certainly isn’t a sexy or exciting topic, monthly saving is something that everybody needs to do as a means of ensuring long-term financial security. One of the key questions that many people have is how much should I be saving each month for myself? It’s a tricky question, but there are some well-established methods which can be used to make it easier.
Almost every financial expert is in agreement that the number of savings you should accumulate can be guided by the 50/30/20 rule. This financial guidance tool states that 50% of your monthly income should be allocated to absolute necessities, 30% can be allocated to non-essential items and activities, and your average savings should be the remaining 20%.
In response to the question regarding how much is a good savings amount, our response would be anything above 20% of your monthly salary. Suffice to say, any question about how much I should have in savings will be dictated by the unique financial circumstances of the individual.
These figures might seem quite lofty for some individuals, and you may be sitting there thinking how I save this much money. Firstly, the key thing to remember is that it’s never too late to start and that today is better than tomorrow. By making some small changes to spending habits and your mindset, it’s possible to reap some very impressive results. When you reach your targets, it’s important to reward yourself and enjoy some down-time on services such as those listed in the $1 minimum deposit casino website platform.
One mental heuristic we would strongly recommend when considering how much to save is to think about how much money you would need to live without working for 6 months. Even if it’s ultimately never required, this is a great safety net to have if some unforeseen circumstances occur. As tempting as it can be to enjoy a lavish lifestyle by depleting your monthly salary totally dry, this is ultimately a short-sighted strategy that will backfire in the end.
Another way to consider what is a good savings amount is to think about both your short-term and long-term financial goals. Think about how much savings you would like to have in 5 years. Are you looking to purchase a house, a car, or a round-the-world cruise? Be honest with yourself and take the time to calculate how much you would need to put aside to reach that goal. We advise you take some legitimate effort into this exercise because nobody knows you better than yourself.
If you are looking for highly structured and specific advice relating to how much I should be saving each month, then you can complete the following exercise. Open up your laptop or grab a piece of paper. Write down all the major expenses (e.g. home repairs, weddings) that you anticipate encountering over the course of the next 5 years. Set a budget for each of these life events that you’re happy with. After this, divide each of these figures by 60 to work out what your necessary saving amount should be. For instance, if you want to have $6000 to allocate for home repairs at the end of this time, you will need to save $100 per month.
Add up all the monthly saving figures to get the amount you should be saving each month. In most cases, you will probably realise that it is neither a feasible nor realistic goal. If so, then you can reduce the amount you choose to set aside for each of these events, or you can re-evaluate the relative importance of each thing that made it onto your initial list.
Saving may not always be fun, but it’s hugely important. We would strongly advise you take this advice onboard.
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