If you are attuned to your financial health, you may be well aware that personal finance experts advise you about the importance of regular savings. Savings balances are directly correlated to personal debt and financial security. As savings balances increase, personal debts decrease. If you want to improve your financial health and well-being, it makes sense to contribute to monthly savings goals. However, you may not know how much to save or how to get started. With a closer look at monthly savings goals and strategies, you can better determine how to allocate your funds.
How Much Money Should You Save Every Month?
One of the primary questions people ask regarding saving money is how much money should you save every month. The answer to this question varies substantially from person to person. Some people who start saving early may be comfortable saving ten percent of their income per month. If you are start later in life, you may need to save 20 to 30 percent or more of your income each month. Many people initially save money in an emergency fund, and it is wise to have at least six to eight months’ of personal expenses saved in this account. After funding this account, many people then save money for retirement. Therefore, your financial need for an emergency fund as well as the number of years you have until retirement and your desired lifestyle in retirement will all play a role in how much money you should be saving each month.
Why Saving Early and Regularly Is So Important
The unfortunate reality is that saving money requires regular effort and a lot of hard work. You may have heard that starting to save early and regularly is important. However, you may be wondering why why saving early and regularly is so important. You may need to save thousands of dollars in your emergency fund before you even start to think about retirement savings. It can take many months to save up that amount of money, depending on your current financial situation. The earlier you get started, the more money you will have later in life. More than that, when you save and invest early, you can benefit from compounded interest and dividend re-investments. These are ways to make your money work for you.
How to Start Saving More Money
The first step to save money is to determine your financial goals. As a starting point, determine how much money you want to save in an emergency fund. Then, allocate a portion of your monthly budget toward savings. Set up an automated account transfer that moves money into your savings account on a regular basis. Over time, you will see this balance grow. When it is at a desired level, re-allocate your monthly savings contributions into a retirement account.
While getting started with a savings and investment plan can be frustrating, it can be one of the best steps you can take to set yourself on a path for improved financial security. Take time today to analyze your current personal finance status as well as your financial goals. By doing so, you can develop a great savings plan to follow in the coming years.
William Doonan is a tax law and legal expert in Bronx, NY.