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How much should you save each month? There are many strategies

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Each of us sets different savings goals and has different financial commitments, so the simplest advice may be a cliche: save as much as you can each month. Budgeting and goal setting strategies can help you determine your monthly savings.

According to the principles 50/30/20 and 70/20/10 The appropriate amount to save each month is about 20%. Income (after tax). A budget based on the 50/30/20 rule assumes income is divided into three categories: 50 percent. 30 percent will be spent on things you need. For things you want, and 20 percent for savings and paying off debt. With a 70/20/10 budget it looks like this: 70 percent. You spend 20% of your income on your needs and wants. For savings and investments and 10 percent to pay off debts or donate.

Read also: We keep thousands in our mattresses. This is how Poles save

Patrina Dixon, certified financial educator, registered financial advisor, and founder and CEO of It’$My Money, points out that saving potential varies from person to person. If you can’t save 20%. Of your income, Dixon recommends simply saving as much money as possible.

Start with small amounts and increase over time according to your budget. This small amount can be as little as $20. Dixon says.

Once you’ve determined your budget, look for areas where you can cut back, Dixon advises. Over time, you may find that you can save more and more each month.

Other ways to increase your savings

In addition to budgeting based on the 50/30/20 and 70/20/10 principles, there are other budgeting methods that will help you increase your savings. If you want more flexible savings strategies and don’t set a monthly savings percentage, you can use one of the solutions below.

  • Pay yourself first: This strategy is often called reverse budgeting because it prioritizes savings goals. At the beginning of each paycheck, you automatically set aside some money for savings. The rest of the salary is then spent on monthly expenses.
  • The envelope method: With this strategy, you set a budget and allocate specific amounts of cash to each category. The money goes into an envelope and is used to cover monthly expenses. If you run out of money for a certain category, you have to wait until the next month to spend more. However, if there is money left in the envelope, you can keep it for future use.
  • Zero-Based Budgeting: The zero-based budgeting method involves setting a clear goal for every dollar you earn. This strategy is similar to the envelope method, but you don’t have to keep your money in cash.

Many people may find budget restrictive, but Dixon encourages people to change their thinking.

The transcript continues below the video

I encourage people to look at it not as a limitation, but as an empowerment. You set quotas. When money starts to run out, you will have the opportunity to make choices Dixon says. — That’s what I love about budgeting. You own it, you decide on it, and then you have the opportunity to modify it – he adds.

What should you save money for?

Experts recommend getting one Savings that will allow you to survive for three to six months. By creating an emergency fund, you will be protected in the event of an unexpected situation, for example when your car breaks down or you lose your job.

Read also: How do you save money from your salary every month?

According to Fidelity Investments By age 30, you should have saved at least one year’s salary for your future retirementAt age 67, you have savings equivalent to ten times your salary.

Moreover You can consider saving for your passion and improving your lifestyle. When creating a savings plan, it is helpful to set a clear goal so that you can implement it and achieve the desired results.

Where is the best place to save money?

The simplest option, of course, is just a savings account. This is a good place to save money for short-term goals or to build an emergency fund because it allows you to earn interest while still accessing your money.

If you don’t need constant access to your money, a certificate of deposit may be a good option. It allows you to get the same interest rate for a specified period of time. However, you usually cannot withdraw from your account without paying a penalty.

If you’re saving money for retirement or have a long-term goal, experts recommend investing. Although investing involves more risk, you can get higher returns than in a savings account. If you’re interested in investing, you can open a retirement or brokerage account.

How much savings do most people have?

According to the Federal Reserve’s 2022 Survey of Consumer Finances, The average American savings balance in bank accounts is $62,000. $410 (PLN 249,000).

As for Poland, the BIG InfoMonitor study showed this Nearly 4 in 10 Poles will have nothing to live on after losing their jobs. “13 percent of participants who managed to save something have money up to PLN 1,000. In total, more than half did not save more than PLN 10,000. 14 percent of participants saved from PLN 10,000 to PLN 30,000, and larger amounts It is a privilege for a third of participants who have savings,” we read.

Above is a translation of the article From the US edition of Insider

Translator: Matthews Albin

The article is supplemented with a Polish topic

Echo Richards
Echo Richards
Echo Richards embodies a personality that is a delightful contradiction: a humble musicaholic who never brags about her expansive knowledge of both classic and contemporary tunes. Infuriatingly modest, one would never know from a mere conversation how deeply entrenched she is in the world of music. This passion seamlessly translates into her problem-solving skills, with Echo often drawing inspiration from melodies and rhythms. A voracious reader, she dives deep into literature, using stories to influence her own hardcore writing. Her spirited advocacy for alcohol isn't about mere indulgence, but about celebrating life's poignant moments.

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