Saving is an important step in ensuring your financial success and independence. However, it’s not always easy. There are daily obligations to take care of, bills to pay and loans to settle. It may seem all too overwhelming most of the time, and like there’s nothing left to put into savings.
While it may prove difficult to save most of the times, it’s a good thing to remember that your financial security is directly related to how much you save. Saving is what will enable you to keep up your lifestyle even after you’re out of your job or retired.
How much is enough when it comes to saving, however? What could be too little, and what could be enough to sustain you for years after you’ve entered retirement? There’s the popular 50/30/20 rule that states that half of your income should be used to pay for essentials such as rent, food and clothing. 30% should be used on nonessential things such as vacations, goods and services that are not mandatory, while the remaining 20% should go into savings. While everybody’s case is different and different rules apply given the specific circumstances, this rule can be used as a benchmark to show just how much you should save each month. Studies have shown that any savings below 20% may not give you the required financial security once you’re no longer earning, and that 20% and above is safe enough for most people.
Setting a budget every month is a step towards saving enough for your future. With a budget, you can take care of the essentials, prioritize the things you need to spend money on, and prevent wastage of money. Impulse spending can be one of the reasons you find that you have nothing left to save. No matter what your income is, there’s always space for saving. It’s vital to make sure that you do not spend more than you earn.
Even though 20% is the recommended percentage to save, it’s also a fact that not everyone can afford to put that much of their income aside and still take care of their essentials. In such a case, it’s a wise option to start at a lower percentage and slowly work your way up.
Investing some of your savings is also a way of helping you reach a good saving threshold. Interests and dividends earned can go into your savings and help you get closer to the 20%. In the end, saving up enough will require some extent of sacrifice. You’ll have to give up some nonessential things and practice smart spending with your essentials. Saving requires major financial decisions and self discipline. If your income allows it, you can save way more than a fifth of your income. You might also want to do that if your want to go into early retirement or leave your job. With saving, the most important thing is to start saving, and you’ll eventually get to the percentage that insures your post-work life.