How much money should we be saving?
When it comes to money, we're often worried we're falling behind and not on track with what a normal person of (insert age here) should, could or would be saving. This idea is not restricted to saving by any means; you can find the same idea with the cars we drive, houses we live in and even our evening plans. We are constantly trying to keep up with someone else. But when it comes to saving money, how much should you actually be saving?
The Challenge of Saving Money
Saving money can be a challenge for even the most financially minded folks. You can find people on both sides of the fence, those that save too much and don't have any "leftover" for themselves and those who can never seem to save enough. To be an effective saver, you need to maintain a balance, be realistic about what you can save and don't be so hard on yourself if you stumble a bit along the way.
The General Rule of 20 Percent
Most financial experts agree that you should be saving at least 20 percent of your annual income per year. With that in mind, your living expenses should take up 50 percent or less, leaving 30 percent for discretionary spending.
Taking into consideration that people make different amounts of money, there is no set amount of money you should have. But if you aim for 20 percent and are consistent with it, saving money wise you should be in a good spot.
Where Should the Saved Money Go?
Just saving money as in putting it away isn't quite enough. You need to make sure that your savings are going toward something, though not necessarily in the sense of a down payment for a future house or the latest and greatest car. Most of your savings should be going into one of three categories: retirement savings, emergency savings and other savings.
Most financial experts agree that your retirement savings should be somewhere in the ballpark of 10 to 15 percent of your yearly income. And if your employer has a retirement savings matching program, you should definitely take advantage of it, because free money.
Your emergency savings are meant for financial emergencies — sudden job loss, large medical bills, etc. Therefore, most experts say that they should cover around six months of your expenses, though some people decide to aim to cover a full year.
Your everything else savings can be anything from investments to the down payment for your future new house. Whatever else in your life needs savings, this is where you save it.
The Key to Saving Money
The key to saving money and being financially sound is practice. Much like everything else, you're not going to come out of the gate as number one. If you feel like you're behind on your savings, start small and grow them. And if you think you're really struggling, try reaching out to a financial planner for a professional opinion.