Tips To Be Happy, Face Emergencies
The sooner you begin saving, the better, writes NAINA RAJGOPALAN
Saving money is crucial, but figuring out the right amount to save each month can be tricky. It ultimately depends on your individual situation. However, there are general recommendations that can help you determine a suitable savings plan.
How Much Should I Save Each Month?
The 50/30/20 rule suggests putting aside 20% of your income for savings. However, this is just a general suggestion and not a set rule. It’s important to customize your savings goal based on factors such as your current age, desired retirement age, and whether your employer offers a retirement plan match.
How To Increase My Savings Each Month?
1. Set up Automatic Savings
Automating your savings means making sure a portion of your income is put into savings before you have the opportunity to spend it. This can be done easily by using a zero balance digital savings account that offer features such as automatic transfers, rounding up transactions, and the option to have a percentage of your pay check deposited directly into savings.
2. Use Direct Deposit
If your employer has the option of direct deposit, you may be able to specify different accounts for different portions of your pay check. If this is an option, you could set a percentage of your pay to go directly into your savings account. This can help you prevent spending the money because it won’t be in your checking account.
A good strategy is to put the difference between your new salary and your old salary directly into savings, especially when you get a raise. This way, you can continue living on your old salary and the extra money can grow your savings.
3. Pay Off Debt
Having a large amount of debt can make it difficult to save money and put a strain on your finances. The best step is to focus on paying off any high-interest debt, such as credit cards and loans. Once you’ve made progress on paying off these debts, you can redirect the money that you were using to pay them off into your savings account instead.
4. Regularly Increase Your Savings
Creating a habit of saving is essential and can help you reach your savings goals. One way to do this is by gradually increasing the amount you save over time, according to Kevin Mahoney, a financial planning expert. It’s also important to ensure that the money you save is being used effectively.
Why You Should Save Money?
Here are a few reasons:
Emergency Fund: Having an emergency fund can provide financial security and peace of mind in case of unexpected expenses or job loss.
Retirement: Saving for retirement can ensure that you have enough money to support yourself in your golden years.
Financial Goals: Saving can help you reach specific financial goals, such as buying a house or starting a business.
Financial Freedom: Building up savings can give you more financial freedom and allow you to make choices about how to use your money.
Flexibility: Having savings can give you more flexibility in case of unforeseen events like illness, job loss, or other unexpected expenses.
Peace of Mind: Saving money can help you feel more secure and in control of your financial future.
Avoiding Debt: By saving money, you can reduce the need to borrow money to pay for unexpected expenses or large purchases.
Where Should You Save Money?
When saving money, it’s a good idea to put it into an online savings account, as it allows your funds to grow at a faster pace. One option to consider is a certificate of deposit (CD), which offers a higher interest rate on your savings, but requires you to keep your deposit locked up for a certain amount of time. Additionally, you should check if any of your credit cards, products, or subscriptions offer incentives for positive financial behaviour, such as waiving fees for setting up automatic transfers.
When Should You Start Saving Money?
The earlier you take action, the better, and this applies to saving money. A good strategy is to plan your budget for the next month in advance, so you know how much you will have for savings. Once you have paid your expenses, put the remaining funds into your savings account and make it a regular habit. By consistently saving money, you will gradually build a substantial savings fund over time.
Finally…
Knowing how much money to set aside each month is beneficial. If you’re not sure how much to save, start by putting aside whatever you can. The sooner you begin saving, the better. A financial advisor can be a great resource for helping devise a plan that works best for your individual situation.
The author
Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She’s been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo Save, a zero-balance digital savings account that offers a 7% interest rate on savings along with benefits such as insurance on balance, safe & secure banking, and so on. Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.
