{"id":2201,"date":"2020-09-17T16:11:09","date_gmt":"2020-09-17T16:11:09","guid":{"rendered":"https:\/\/yourcreditreport.info\/?p=2201"},"modified":"2020-09-17T16:11:09","modified_gmt":"2020-09-17T16:11:09","slug":"how-much-money-should-you-save-each-month","status":"publish","type":"post","link":"https:\/\/yourcreditreport.info\/how-much-money-should-you-save-each-month\/","title":{"rendered":"How Much Money Should You Save Each Month?"},"content":{"rendered":"
Figuring out how much to save every month is an important tool when planning for your future. But how much money you should be saving each month isn\u2019t always simple to figure out. There are rules such as the 50\/30\/20 income split but is that a good fit for you?<\/strong><\/p>\n One of the most important factors to long term financial security is your individual savings ratio. Determining the amount you should be saving every month is less clear. Should you save $100 per month? Half your monthly paycheck? If you have debt should you save or pay off the debt?<\/p>\n It is popular to save 20% of your monthly income.<\/p>\n The\u00a050\/30\/20 rule is broken down as follows<\/strong>:<\/p>\n This is a good rule to know how much to save each month is to follow if you\u2019re able to. Not everyone will be comfortably able to save 20% of their monthly income so determining what is a safe percentage of your income to save each month is important.<\/p>\n If you have a high-income level it is smart to keep your costs low and save more of your monthly income. But if 20% seems like an impossible figure to save remember that\u00a0saving anything each month is better than saving nothing.<\/strong><\/p>\n 20% is a good starting point. If you can save more, do so.<\/p>\n Being prepared financially for whatever life may throw at you is one reason why you should decide how much to save. Another reason is to maintain your current lifestyle as you get older. Having no \u201cnest egg\u201d for your golden years can mean hardship and anxiety.<\/p>\n I have a grandmother who finally retired at the age of 89. She worked because she loved to,\u00a0but she really worked at that age because she had to<\/strong>. Her and my grandfather did not do long term financial planning and therefore when he died, she was ill-prepared to pay the bills. So, she drove to Macy\u2019s 5 days a week at 5 am to do floor re-pricing for 4 hours a shift. She always told me growing up to plan for the future, and she meant savings and retirement.<\/p>\n It really depends on your circumstance. Are you willing to live below the poverty line, or do you need first-class trip flights to Europe every year for vacation? Or are you like most folks and are ok falling somewhere in between these two? Your investment performance will also impact your savings. Determining what sort of standard of living you want to keep now while your saving and also after you retire is important to determine how much you need in retirement to live a certain way.<\/p>\n There is a rule known as the\u00a0\u201c4% Rule\u201d which says you could theoretically take out 4% of your balance every year and live on it for the remainder of your life<\/strong>. If you can save 25X your annual expenses you can become financially secure.<\/p>\n But this rule has some drawbacks. Firstly, \u201crisk-free\u201d investments do not exist. Inflation or a stock market crash is always a threat to investments and savings. Depending on how much you save annually this can be a vastly different length of time. The more you save and the lower your expenses are the faster you\u2019ll save enough to be financially independent.<\/p>\n Tax friendly retirement accounts like IRAs and 401(k)s improve your savings level and can more quickly aid in becoming financially secure down the road. Taking advantage of these sorts of savings and investment accounts can make a huge difference when you hit retirement age.<\/p>\n Also, consider a Roth IRA if you qualify. When you\u2019re older and retire Roth IRA<\/a>s are tax-free when you withdrawal money in retirement. This is a huge advantage as the money you\u2019ll be withdrawing is tax-free at that point<\/strong>. Meaning if you take out $10,000, you get $10,000. Tax-free advantages like this are a huge plus for retirement.<\/p>\n Contributing to your 401(k) will also help you get to that 20% saving level especially if you have an employer match of 5%. You\u2019ll only have to save 15% of your income to reach 20% as your employer is covering that last 5%. The funds are also deducted directly from your paycheck before taxes are taken out meaning you are saving money on your cash taxes as well.<\/p>\n Not everyone has a typical employer-backed 401(k). If you\u2019re self-employed, it will be on you to set up your own retirement plan. That is where IRA\u2019s come into play (traditional IRA, Roth IRA, SEP-IRA, etc.)<\/p>\n Not everyone will be able to comfortably save 20% of their income every month. There is nothing wrong with that! Day to day life has expenses so be sure you\u2019re covering what you need to first and remember that saving something is always better than saving nothing.<\/p>\n Start where you can.<\/strong>\u00a0Will 1% be a safe saving level? What about 5%? Or 10%? Determine what your monthly average costs are and if there is any money you can save (no matter the percentage of your income) then do it. You want to get to 20% where possible but sometimes we must start small.<\/p>\n Cut expenses where you can as well.\u00a0 Smart personal finance means living within your means. If you think you can\u2019t put any money away every month but buy Starbucks every day for $5.00, then you\u2019re looking at this the wrong way.\u00a0If you cut out the coffee shop at $5 a day, you\u2019d have up to $150.00 saved each month (30 days @ $5.00\/day)<\/strong>. Start making coffee at home. This change on its own will be a great saving starting point.<\/p>\n By paying of your debt as quickly as you can you\u2019ll also start saving more money. When you\u2019re debt-free interest can not be accrued over time. This means that you will save even more as well. There are lots of ways to plan out getting to 20% of your income saved. If you have a job where your employer will match 5% of your 401(k) investment, then you can simply save 15% of your income and they\u2019ll add 5% which gets you to 20%. But there are other ways as not everyone has a traditional 401(k) to work with.<\/p>\nHow Much To Save Each Month<\/strong><\/h2>\n
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Why Should You Save Your Money?<\/strong><\/h2>\n
How Much Should To Save to Achieve That?<\/strong><\/h2>\n
Accounts with Tax Advantages Make a Difference<\/strong><\/h2>\n
What if Saving that Much is too Much?<\/strong><\/h2>\n
What About my Debt? Should I Still be Saving?<\/strong><\/h2>\n
\nTake a look at our article on\u00a0Getting Out of Debt On Your Own<\/a>\u00a0for some smart guidance.<\/p>\nHow can I get to 20% Saved Income?<\/strong><\/h2>\n