The amount of money you should save monthly depends on various different factors. Each person receives a different monthly amount and has different monthly financial obligations. It is important to recognize that a single amount of money will not be suitable for everyone. However, there are some basic guidelines you can follow when determining how much you should save each month.
10% Rule
A standard that many experts recommend is saving at least 10% of your income. This is a good starting point and easy to manage as it is a specific amount of money each month. It may be difficult to stick to, but it is manageable for many people and can be increased over time to 20% or even 30% to enhance savings and future planning.
Beyond Retirement Savings
It is important to save money above the amount you put into a retirement savings account. If you do not, you will not be able to save for an emergency fund or a down payment on your home. Additionally, if you want to retire early, you will need to have savings that you can live off separately from your retirement accounts, which typically cannot be accessed without penalty until you are 59 and a half years old.
Restricting Your Lifestyle
Another common way to measure whether you are saving enough money is to check if you are saving to the point where it hurts. If you feel that things are a bit tight, you are likely saving a good amount. You might want to ease things a little to gain flexibility in your budget, but make sure you are still saving enough to monitor what you spend each month. This does not mean you should never enjoy yourself or splurge, but you need a saving plan that limits that extravagance so you do not sacrifice your future.
It is good to start building good financial habits early, the earlier you start setting aside money in your twenties, the better off you will be. You can use strategies to help save in your twenties. Start with automating it. You will get used to putting money aside without thinking about it – before excuses come into play.
Increasing the Amount You Save
You may also want to work on increasing the amount you save each month. It is not unreasonable to start saving 20% of your income or even more each month. If you earn significantly more than you need to live on each month, you should really be saving a lot of money. A simple way to increase the amount you save is to save more when you receive a salary raise. This way, you won’t feel it as much. You can also challenge yourself each month to make sure you keep your spending categories at the lowest possible level.
Having a Goal
When you start saving money, you should give it a goal. For example, you should aim to keep three to six months of living expenses in an emergency fund. Then, you can allocate part of your savings to retirement. After that, you can think about setting aside money for that vacation or a new home, or simply to build wealth through other investments. If you know what you are saving for, it becomes easier to endure the sacrifices you need to make to get there.
Let Your Savings Work for You
When you start looking at ways you can save money, you will be surprised at the power your money has. It will begin to grow very quickly if you are diligent about saving every month. The sooner you start building good savings, the sooner your savings will start working for you.
Do you
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Sources:
IRS. “Early Withdrawals from Retirement Plans.”
Source: https://www.thebalancemoney.com/how-much-money-should-i-save-each-month-2386149
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