How Much Should You Save a Month
How Much Should You Save a Month?
A popular adage says little drops of water make an ocean, and this is the ripple effect of consistency. A regular monthly saving, in the long run, becomes a substantial amount to meet high-budget goals. But, how much should you save a month?
Frankly, to answer "how much should you save a month?", you'll have to consider some factors. A rule of thumb is that 20% of your income should go to savings, but in some cases, 20% may not be enough. We will learn about the 50-30-20 budgeting method and see where it may not be most suitable.
The 50-30-20 Budgeting Method
The 50-30-20 budgeting method simply divides your income into three percentages; 50, 30, and 20, and allocate them to your needs, wants, and savings respectively.
Your needs get 50% of your income because they are important; you practically cannot do without them. They include food, accommodation, utilities, clothing, and other daily living supplies.
Wants are not "must-haves", they just add to a comfortable life. Things like dining out, shopping, vacations, subscription, and other luxuries. So, typically, they are things that you decide to spend your money on.
Savings is money you put aside for future expenses; down payment for mortgage, invest, pay for tuition, or purchase an item that costs much. If you have debt to pay, you can also save to pay for repayment, or to build an emergency fund.
So, the answer to "how much should you save a month?" based on this method, is 20%.
Factors That Help You Determine The Answer To How Much Should You Save a Month?
Putting aside 20% of your income is just a general recommendation, the amount of money you should save each month will vary based on your goals.
For instance, if your goal is to buy a house within 10 years and you earn $2000 monthly, following this rule may not give you the best results. Also, if you plan to retire early on this saving strength, you may not amass anything substantial, you may have to save up to 50%.
So then, how much should you save a month? Saving more is often advisable in such cases, not necessarily adding to the percentage, you can increase the worth of the 20%. And, a good way to do this is to increase your income.
You can get a second stream of income or ask for a raise in your pay, or make adjustments on your expenses (especially wants).
Another factor that impacts how much you save in a month is your expenses. If you already own a home, for instance, rent is already off the list.
In essence, you can consider these key points to help you determine how much should you save a month.
Your Savings Target
The amount of time available
Your monthly income
Other necessary expenses
Your expenditure and your savings goal will most likely determine how much you should save a month. However, if you would not have to consider these, ensure to save at least 20% of your income.