When someone is asking you “How much amount of money should I save every month?”
Within a couple of seconds, your reply would be “What are your savings goals?” It’s no surprise that your savings will depend on your goal. No matter whether you set for short or long term goal.
There are 3 timelines you need to examine
Less than one year – This could be a short-term saving goal. Your goal could be a holiday vacation at your dream destination.
Less than a decade – People save money to buy a car or villa. Also, use the money for the down payment while buying appliances.
Lifetime – This is the long-term goal. Retirement can your ultimate savings goal for a lifetime.
50/30/20 budget rule
The 50/30/20 is the popular budget rule. It is a simple plan that helps people to reach their financial goals. The budget rule states that people should spend 50% on their everyday needs such as rent, groceries, power bill and more. 30% of savings will be for debt repayment, car repair, etc. The remaining 20% of savings for retirement and emergencies.
Many people recommend saving 20% of your income each month.
Beyond Retirement Savings
You need to consider at least 10% of your monthly income for your retirement savings. It’s important for you to save money in your “Retirement Savings Account”. When you neglect retirement saving you might be at risk. If you plan to retire early, you need to have savings for it. How can you fulfil your daily needs without savings? Impossible right!!! Create a retirement savings account and save 10% of your income in it.
Creating an emergency fund is important for you. It helps you get rid of adding to your existing debt. Your emergency fund should cover nine months of living expenses. You can calculate your overall monthly expenses and save accordingly. Within one year you can create an emergency fund and saving 6 months of your income.
An emergency fund is a saving that you can use it for unexpected things.
Consider, if you got fired from your job, you’ll be end-up with empty pockets. How can you survive? Your car gets damaged and needs for a transmission. Therefore you should have an emergency fund to make you rescue. Use the emergency fund at those moments.
Create a record or list of your expenses within a decade. The list can consist of home repairs, rent, wedding, vacation and more. Make a saving goal and the deadline. Now, you need to divide that by the total months that is remaining to watch out how much money you need to save. If you’re planning to buy a car worth $10,000 in the span of 5 years. You should set a goal of saving $167 each month.
There are multiple ways to save money and accomplish your goals. Doing a secondary job, working for longer hours, freelancing, cutting down the current spending, selling unwanted items and more. This way you can make money. Combine these options and earn money easily.
Put a Crimp on Your Lifestyle
Are you squeezed while saving money every month? Yes!!! This can be a better thing for you. When you start saving you need to save enough money until it hurts you. Sometimes you might feel like everything is getting tighter, it means you’re probably saving great money. Few people require to lighten up to have a breath. But when you keep things tighter, you can reach your goal. Although you have enough money to fulfil your daily needs.
When you employ financial habits at your 20s, you can easily save more money. In fact, you will be saving money without feeling tighten or thinking about it.
Build Up the Amount You Save
When you start saving you’ll get habituated and without thinking you start increasing your saving every month. Though, it can be a daunting task to save 20% from your monthly income. When you set a budget limit every month, it will be easy for you to save good money. The best way to save money is by doing a part-time job or putting the money in your increments. Earning passive income will make you feel better while saving more money. Get motivated or set a challenge for every month to reach the specific saving budget.
Have a Purpose
Having a purpose while saving every month is important. Consider, you should put 6 months of expenses in an emergency fund. The remaining you can save for retirement. After retirement and an emergency fund, you can think about planning for a vacation. Or building a new home. When you know the purpose of saving, it will be easier for you to sacrifice a few things – parties, food orders etc.
When you set short term or full-term goal for your savings, your goal will take you to become successful. Because your goal itself will encourage and motivate you to save and earn more money. Having a purpose is a win-win solution for you.
Let Your Savings Work for You
When you turn back and look at the effective ways that you’ve saved millions of dollars, you’ll be amazed and surprised. Money is a superhero!!! Nobody can survive without money. When you know the worth of money, you’ll start increasing the amount of saving every month. The soon you collect the savings the soon your savings will work for you.
Are you planning to save money? Yes!!! You’re doing a great job. No matter whether you would like to save money for your retirement or emergency fund, it’s important to have money in your savings account to help yourself from unexpected things. These unexpected things can be car damage, appliance repair, accidents, crises and more. You can save a minimum of 20% of your monthly income. Keep aside your 6 months salary in an emergency fund. Start saving money when you completed your schooling, it means the 20s. You can earn more money when you start earning when you’re young.