Growing up ain’t easy.
One day you’re filling up your piggy bank with quarters without a care in the world, and the next day you’re surrounded by bills wondering where all of your money went.
If there’s one thing that just about every adult asks themselves, it’s: “How much money should you save?”
Never fear. In this article, we’ll tell you how to save money along with some great tips and comparisons to help you learn more about your financial wellness.
Keep reading to learn more.
How Much Money Should You Save Every Month?
Saving up a nest egg is incredibly important, whether it’s to pay for unplanned expenses or setting your family up for a comfortable future. But figuring out how much to save can be hard.
Although some experts say that saving between 10%-20% is enough, that can be vague. Let’s take a look at some more in-depth strategies.
One popular strategy is the 50/30/20 budget. This means that you use your monthly paycheck like this:
- 50% on necessities
- 30% on wants
- 20% on savings and debt repayment
For example, if you bring home $4,000 in a month, you have around $800 left to put into your savings.
But another good question is…what does savings even mean? What does it entail? Well, it usually consists of the following things:
- Emergency funds
- Long-term savings goals
Some of that 20% can go into paying off any high-interest debt or credit card debt that you might have as well.
Make the Savings Plan Work For You
Although 20% is a useful benchmark to aim for, this doesn’t mean it works for every single person. Everyone has unique situations that they need to plan for. While some can save much more than that, others might barely be able to make it.
Look at your situation and do what is reasonable for you. If you can’t save the full 20%, there’s no need to feel ashamed. Try to use a budget planner to see where you can save more or even cut unnecessary spending.
For example, if you have a gym membership that you never use, make sure to cut that off!
Other variables that change your spending habits include your income, expenses, and goals. For example, if you plan on retiring at 40, you’re going to need to save much more than someone who isn’t planning to retire until they’re 65.
Start With Any Amount of Savings
If you can’t save 20% of your monthly paycheck, don’t give up. Don’t get hung up on a specific number (like 20%) either.
Any amount of savings is better than no savings at all. You can even start with very small, manageable amounts like $10 a week. Although it might not seem like much, that adds up to $520 a year.
In the best-case scenario, you’ll be able to save for multiple goals at a time. But for most people, it’s smart to prioritize your goals. For example, you can start by funding your emergency fund, then move on to your retirement fund.
If you’ve completed those goals, you can move on to getting that new car you’ve always wanted.
Reasons to Save Money
There’s an infinite amount of reasons to save money, but if you need some inspiration, here are some of the top reasons to save money.
Financial independence. Gaining financial freedom means you don’t have to be completely reliant on your paycheck to live. You’ll also have savings to fall back on so you don’t need to worry when you make major life decisions. Being financially independent can take all the stress out of living.
Living debt-free. Getting out of debt is not only a great feeling — but being in debt can get you into a lot of trouble. Save money to get out of the shackles of debt.
Unforeseen expenses. Life is full of surprises. You’ll need an emergency fund to deal with them.
Buying a home. Purchasing a home is one of the biggest milestones in any person’s life. Start saving to buy your dream home.
Medical emergencies. No one likes to think about what medical emergencies might happen, but it’s important to be realistic. Having an emergency fund for medical expenses is a smart decision. If you don’t do it, you could regret it later.
Tips On How to Save Money Every Month
Whether you’re new to saving or you’re a seasoned vet, there’s always room to learn more about more money-saving ideas. Take a look at a few of the best saving tips:
Pay yourself first. Every time you get paid, the first thing you should do is pay yourself first and add the amount you decide to your savings account. Then you can move on to handling your other finances.
Automate your finances. With most modern financial institutions, you can automatically have a preset amount that gets taken from your paycheck and into your savings account. Doing this not only makes it less work for you, but it is great for keeping that savings amount “out of sight, out of mind.”
Talk to a professional. Talking to a financial advisor can help you look at your finances and keep you moving on the right path. Even a wise friend or relative will have useful advice for you. Don’t be so ashamed or embarrassed that you avoid getting useful information from the people around you.
Audit your finances regularly. Things change, so it’s important to go back to your finances and update your strategy. What worked for you last year might not be the same this year.
Start Saving Today
That’s a great start to answer the question: “How much money should you save?” With these general guidelines, it’s now time to take a look at your finances and figure out how much you can save, and what goals you are aiming for.
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