HOW MUCH MONEY SHOULD WE SAVE EACH MONTH?

HOW MUCH MONEY SHOULD WE SAVE EACH MONTH

HOW MUCH MONEY SHOULD WE SAVE EACH MONTH?

For some experts, 70% of your budget should go to cover basic needs and fixed expenses such as: housing, transportation, food, health, public services, among others, while 30% should be used for entertainment, debt payment and savings.

If financial freedom is a part of your goals, then committing some of your earnings to a savings account every month is vital. It’s impossible to build sustainable wealth without a healthy savings habit. 

A 2017 report by CNBC revealed that 39% of Americans have no form of savings. The same survey showed that about 35% of all American adults have just a few hundred dollars (less than $1000) in their savings accounts and that only about 15% of all American adults have more than $10,000 in savings. 

Now these statistics show that an effective saving habit goes beyond having a savings account. It also includes your ability to save a reasonable sum of money in your savings account. To achieve this, you’d have to review your earning and spending habits. 

However, there’s often a challenge deciding on how much you should save. You can find yourself going back and forth on the topic, conversing (or maybe even arguing) with your partner over it. Worse still, you get stuck in a place of indecision.

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The result of this dilemma, many times, is that you end up not saving a cent of your monthly earnings. While waiting to decide on how much to save, bills continue to show at your doorstep. Before you can tell what’s going on, you’ve spent the entire money. 

So, if you’re still quizzing whether it’s important to save money, here’s a quick answer for you:

Yes, it is. 

Developing an effective saving culture will help you build financial discipline and gain financial freedom. However, the crux of this post is how much you should save each month. First Mortgage Direct

Factors to consider before deciding how much to save every month

Before deciding on how much to save monthly, here are a few things you should consider: 

1. Your Gross Income 

As much as we may want to ignore it, your gross monthly income largely determines the amount of money you’d eventually save. 

If your monthly bills constantly outweigh your monthly income, saving becomes difficult. Even if you eventually save some money, there’s a chance it won’t be more than a few cents or dollars.  If you’re in this situation, here’s what you must pay attention to: 

  • Increasing your monthly income. If you can earn more from what you do, you would have increased your chances of building an effective savings habit. 

2. Your Expenses 

The money you spend monthly on bills affects the amount you  have left to save. If you have to pay so many bills, then you may find it difficult to save. This is especially true if your monthly income is fixed, like the case of an employee who receives a specific sum of money each month as salary.

To save more money, regardless of monthly expenditure, consider doing the following: 

  • Eliminate unnecessary expenditure. If you can’t yet afford it, you don’t need it. This may require you to move to a house where you pay less on mortgage, or to unsubscribe from some of your favorite Internet and TV platforms. Making these difficult choices would cut down on the recurrent bills you pay each month. Having less bills to pay will make it easier for you to have more money to spare and to save, eventually. 
  • Start budgeting. If you’re entirely honest with yourself, you’ll see that one of the major reasons you’re unable to save as much money as you want is because you don’t have a laid-down structure on spending. You move along with the tides. Living a budget-free lifestyle is one way to keep blowing money without check and this would eventually lead to financial problems. Think long term. 

3. Your Goals 

“Why do I want to start saving money?” The honest answer you give will determine just how much you can save. 

If you’re yet to see the importance of saving, you’ll be barely inspired and motivated to have a healthy savings budget. Without firm goals, you’ll be comfortable with saving little to nothing.  

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However, if your goal is to achieve financial freedom quickly, retire young and rich, and handle emergencies, you’d need to be strict with your savings habits. These reasons are valid enough to inspire you to save reasonable chunks of your earnings every month. 

HOW MUCH MONEY SHOULD WE SAVE EACH MONTH?

How much should I save each month?

Now that we’ve looked at the 3 main factors that determine how much you can save every month, let’s get to the main question. “How much should I save each month?”

The answer to this question depends on your purpose of saving. Here’s a quick rundown of suggested amounts, based on saving goals:  

1. If you’re still young, with limited responsibilities, develop the habit of saving a reasonable chunk of your monthly earnings. At least, 25% of your monthly earnings is a good percentage to keep aside. If you can save more, that would be awesome. 

2. If you have massive goals, like achieving financial independence quickly, save at least 20% of your monthly income. 

3. If you’re just saving for the fun of it, 15% of your monthly income isn’t a bad idea. However, you may want to learn the significance of building a healthy savings habit. When you have done this, consider increasing the percentage.

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Final thoughts on monthly savings

It’s important to learn that building a good savings habit doesn’t happen overnight. It requires a lot of discipline from you, especially when it isn’t convenient. Savings is a long-term game. You should approach it from this perspective. 

Remember that savings and investments are completely different. As a result, you may want to start looking at a number of sure-fire investment options. Investments provide another way to grow your income and gain financial stability. 

To learn more on finances, savings, and loans and investments, check out these common questions about HOW MUCH MONEY SHOULD WE SAVE EACH MONTH?

How much money from my salary should I save each month?

It is one of the key questions that should not escape your budget. Here we show you some formulas that could help you.

How much money from my salary should I save each month? (Pexels)

Bogotá — Saving is usually one of the golden rules that some parents teach their children at a very early age. They highlight the benefits of this to avoid financial collapse in bad periods or lean times. However, many are not disciplined with it, so it is important to set goals.

If you are one of those who have a job or constant income, knowing what percentage of your salary you should save will be key for your finances, and your pocket will thank you. But here, no rule applies to everyone equally; the economic circumstances of each one and the objective of saving must be taken into account.

It is important that saving becomes a discipline and is considered one more fixed expense within the personal budget. Below we will present several savings options that you could choose according to what best suits your finances.

Some tips:

  • The budget will always be key in a savings goal. Know how much you earn and spend to know what you should allocate resources to, such as monthly payments for services, food, rent, or apartment or house fees, among others. It will help you know how much you can save.
  • Be clear that the percentage of the salary destined to save should not be so low that the fruits are not seen later, nor so high that it compromises the payment of basic needs.
  • It is key that you define the savings objective as vacations, higher education, improving the house, and the arrival of a child, among others, so you will have greater motivation to save.
  • Define if your savings will have a certain term or not.
  • Be mindful of the amount you decide to save to avoid taking funds out of it by saying it’s an “emergency” when it isn’t.
  • Set a monthly goal to be successful in saving your salary. Avoid allocating only what is left in your pocket.

Some Recommended Formulas

The formula 70%-30%

For some experts, 70% of your budget should cover basic needs and fixed expenses such as housing, transportation, food, health, and public services, while 30% should be used for entertainment, debt payment, and savings.

This formula advises that the monthly debt payment does not exceed 10% of your income because if it exceeds it, it would mean that you are over-indebted, and your finances could be at risk if you do not know how to handle it well.

How much of the salary should you save? It is not a fixed rule for everyone; some experts recommend allocating a minimum of 10% of income to savings. This 10% arises from the budget distribution in which you should not leave aside basic commitments, personal tastes, or entertainment to find a balance.

Here comes another option that might fit your financial situation. The 50/20/30 rule establishes that 50% of salary should be used to cover basic needs such as paying debts, food, services, and transportation, among others.

The other 20% should be the percentage of the savings, whether it goes to the fund used to attend emergencies or for those who have another objective such as going on a trip, paying the down payment on their apartment, among others

Finally, 30% of this rule is completed by personal expenses for recreation, leisure, clothing, and outings with friends.

Finally, keep in mind that there are several alternatives to depositing your savings. An example is the pockets created in savings accounts where you can put the specific name of the savings goal and establish how much you want to be deducted from your monthly income.

Here it will be key that you do not take money out of those pockets to cover expenses that are not for an emergency, so you must establish how much you can save.

HOW MUCH MONEY SHOULD WE SAVE EACH MONTH?

HOW MUCH MONEY SHOULD WE SAVE EACH MONTH?

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