Everyone understands the importance of saving. The critical question is “How much money should you save?” The answer is simple; you must save as much as possible.
Your monthly income and financial obligations may be different from others. Thus, a standard rule to how much money should be saved monthly cannot be implemented.
Here are five things that may help you make a decision.
- Commence with 10% of your earnings: Being able to save 10% of your monthly earnings should not be difficult. It is a good start and you must gradually increase this amount over a period of time. Eventually, you must be able to save around 20% to 30% of your earnings.
- Save beyond retirement: Apart from saving for your retirement, you must save more. If you do not inculcate this habit, you may never be able to create an emergency fund or have enough money to make a down payment on your home. One way to save for financial goals is through a systematic investment plan (SIP).
- Watch your current lifestyle: You must save until you find things to be just a little bit tight. You may cut down on your unnecessary expenses to watch how you spend your income each month. However, this does not mean that you never splurge; ensure it does not happen regularly.
- Increase your savings: Saving some part of your monthly income is not difficult. This is easier if you earn more than the amount you need to meet your monthly expenses. The best time to increase savings is when you get an income raise. Furthermore, reduce your expenses for a comfortable living.
- Purposeful savings: It is important that you have at least three to six months’ of your living costs as an emergency fund. Further, you must save for your financial independence after retirement. Another purpose may be to go on your dream vacation or buy a home. Saving becomes easier when you have a specific purpose. SIP investments are an excellent option because you may start with any amount and continue for as long as you wish, thereby giving you flexibility and liquidity.
When you start saving while paying off your debt, you will be surprised to find how easy it becomes. Furthermore, your savings are powerful and will grow quickly if you adopt discipline and commitment. It is important that you start saving from your first job and develop good financial habits at an early age. When you start saving early, you are able to build wealth due to the power of compounding.
Saving money regularly is an important habit that you must inculcate as soon as possible. There will always be reasons to delay this financial discipline. However, when you make saving automatic, it becomes easy to put aside a certain amount each month. You must set up an automatic transfer to ensure your savings occur without spending time each month.
Start investing early and make your savings work for you.