To get the possibility to make significant purchases, one should save money. What is the amount to be saved to achieve the goal? Learn more about the matter.
How Much Money Should I Save Each Month?
This is a good question that lots of people start asking when their level of income makes it possible to save. To answer it, one should at least know the purpose of saving and the level of salary you get. The amount one can easily put aside monthly can be unattainable for another person. So, let’s find out approaches to identify this value for you.
The Rule of 10 Percent
If you have decided to save money, first of all, it is necessary to make sure that you have already opened the retirement account and started transferring money there. This is a crucial step as the retirement fund is not a regular saving that can be used on emergencies, buying a dwelling, etc.
Then, start saving 10 per cent of your monthly income. This amount is usually very easy to save. You may set the automatic rule and your bank will transfer 10% of every income received to your account. In a couple of months, it makes sense to evaluate if you have felt that this money is transferred to a savings account. Is there the possibility to increase to, let’s say, 15 per cent?
Increase the Amount to Be Saved Monthly
So, after you have managed to transfer money to the retirement and savings account, start analysing your monthly expenses and lifestyle. Is there the chance to increase the amount to be saved instead of splurging money on unnecessary purchases? Undoubtedly, there is. It does not imply that a person should not entertain, however, there is always the possibility to save a bit more than you are used to without huge harm to the lifestyle.
Besides, it is necessary to take into account the financial opportunities opened with the promotion and raise of salary. Set yourself a rule to increase the monthly saved amount once you have got the income increased.
Set the Purpose for Saving
The first savings account you open is the one for retirement. Then, it makes sense to think of the target. For instance, you need to collect money equal to the annual rent you pay. Then, this can be the first payment for the mortgage or a car. The next step is saving money to master trading for beginners and further investment. The latter is a great way to increase the wealth and the level of income. If you have managed to collect the fund for investments having already retirement account and emergency finances, this is the way to success. Even though investments are risky, you will start playing seriously. So, is this your intention? Then set the milestones and get on track to success!
Revise Monthly Budget Again
Why should this be done again? Usually, a person starts understanding the importance of regular savings after reaching several milestones. For instance, you have got an emergency fund and have paid half of the sum for the car. Isn’t it great? The further — the more. To have the possibility to make the first payment for a mortgage, it is necessary to possess a considerable amount of money. So, probably, an extra 5% can be saved per month to reach this goal quicker, right?
Besides, having a certain target, a person will spend finances differently. Thus, you may increase the percentage of income to be saved and leave the amount you need for living. In other words, one saves until it hurts. This is quite a radical approach. However, a year of a more strict saving plan will considerably approach you to the target.
The Importance of Right Financial Habits
Thinking about saving is one of the first steps to developing own effective financial habits. The earlier a person understands that saving is crucial and requires self-discipline, as well as analysis of expenses, the better it is. Someone may start saving reaching the age of 30, while another one starts saving from the years of studying in college.
Saving and Making Money Work for You
As mentioned above, investments are a great tool to increase own wealth. However, it is crucial to set oneself the rule that retirement, as well as emergency, funds should never be used for investments. This is tempting to get the feasibility to earn way more thanks to the mobilization of these financial resources. However, in such a way, you risk endangering all of your life and well-being. Thus, save money wisely, set and achieve milestones, collect the fund for investments, learn the main principles and strategies and get the source of additional income, i.e., become an investor.