What Percentage of Your Income Should You Consider to Save Monthly?
We've all been taught about saving for retirement. The issue is that when you're in your 20s and 30's, retirement is decades away and you want to live and have fun now. The key is finding a happy medium that allows you to save money, while still being young and able to do the things you love.
Read more to learn about some of the recommendations for monthly savings.
What is the Amount Recommended for You to Save Each Month?
Set a monthly savings goal. The 50/30/20 (essentials/discretionary spending/savings) rule is often the norm when it comes to teaching students how much they should put in savings out of every paycheck. Putting 20% in savings out of every check will give you a nice cushion to fall back on in case of emergencies. If you can leave it in savings for several years, you will have quite the nest egg when you're ready to retire.
Saving approximately 20% of your check every pay period will allow you to accumulate enough money in savings that you will be able to live off of the interest or dividends t produces. It will take a few years to accomplish this goal, but continually adding to your savings account will allow you to reach the goal sooner than later.
How to Reach Your Goal Using Your 401K or Other Accounts
If both you and your boss are contributing to your 401K, that is considered as money saved. Putting a few dollars in CD's (certificate of deposits) and secured investment programs are also options. You should still add to your regular savings every week. This ensures you have easy access to your funds in case of an emergency.
What If That's Not Possible?
With today's economy, it isn't always easy to save 5% of your income out of your check and almost impossible to soot for the entire 20%. Don't worry about it. Save what you can. A few dollars in the bank every month is better than nothing. When you do get a little extra, put it in the bank.
What’s Next After I Attain 20 Percent?
Test your limits, and seek to step-up your savings percentage. You must remember that in order to reach your retirement goal, the required rate of your savings will probably be around 50 percent or more. Financial experts recommend that 25 or 30 percent of your income is a safer bet to guarantee you a comfortable retirement.
Take the time to evaluate your spending. When you figure out the areas where your money is mostly spent, cut a few of them out and put the extra cash into your savings account. There are many ways to save, but you just have to figure out what works best for you.
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