How much should you save per month? There can’t be a single answer suitable for every person. It all depends on your current financial situation and your long-term goals. We all may have various monthly income and different needs or obligations. There is no one-size-fits-all rule that will work magic for each of us. However, we are going to tell you about the most widespread techniques and simple rules on how to save money every month so that it’s not too challenging but still requires self-control and motivation. Here is what you need to take into account.
Set Your Saving Goals
Before we dive into the actual tips and expert advice, you need to understand what your current saving goals are. Why are you searching for new ways to save more money each month? How do you see your future in terms of your monetary status? What would you like to change or improve your lifestyle? If you are willing to boost your living standards and become more financially fit, it’s essential to begin with thinking about your saving goals and writing them down.
Financial coaches divide these goals into three main types:
- Costs that are short-term and are expected to be within less than a year;
- Costs that are long-term and are expected to be within less than a decade;
- Costs that are very long-term and are expected to be later than within 10 years.
Depending on each category you will realize how much to save per month so that all of your goals are fulfilled. Many people opt for zero-based budgeting which is extremely helpful when it comes to budgeting and managing your personal finances. Let’s dive right into each of these types.
#1 Short-Term Monetary Goals
Such targets are considered to be expenses that are most likely to happen within one year. For instance, the upcoming vacation, Christmas gifts for your family, birthday parties of your relatives, or paying taxes can be put into the first category. Another important idea of how much to save each month is to think about your emergency fund. This fund is necessary for every Canadian as it serves your safety bag during hard times and helps you to stay financially afloat.
One of the easiest ways to calculate the necessary amount for your emergency fund is to save six months’ worth of costs – then you will have an ideal sum to support yourself and your family. This amount can be easily saved within less than a year, so we consider it a short-term goal. How much should I save a month? If you need to save $4000 in ten months, you should put $400 each month toward this target. You need to think about all of your short-term monetary goals and write them down so that you know what to expect and how much to save per month to reach those targets.
#2 Long-Term Monetary Goals
This category includes costs that are expected to happen within less than a decade. They are large home repairs, replacing the house appliances, purchasing a house, or buying a new car. How much should I save each month for this category? It all depends on your personal preferences and needs.
#3 Very Long-Term Monetary Goals
Are you thinking about saving for your kids’ education? Do you plan to purchase a second house? Are you dreaming about a gorgeous wedding? How much money should I save each month? If you write down such long-term costs and divide them by the number of months necessary for reaching this target, you may see a large sum you can’t currently afford. But there is no need to worry.
You may just alter your plans and think about the possible options to minimize those expenditures. Maybe you will want to make a less expensive wedding ceremony or purchase a smaller house. There are always alternatives that should be taken into account when you think about the ways to save money every month. Remember about the only very long-term monetary goal that remains obligatory – that is your retirement saving.
How to Save Money Each Month If I Have Debt
Another important thing is to understand how your debt may affect your savings. Many people experience temporary monetary disruptions and opt for payday loans express to fund their urgent needs. You should realize that sometimes debt may even assist you in your savings. How much do you save a month if you have a personal loan? Well, if you are paying mortgage payments, then it may account for your investment as you are putting money towards your home repayment.
On the other hand, funding a dream wedding or purchasing a new expensive car may be not the best lending decision as this type of debt won’t count as an investment. You can always choose a cheaper option or finance certain expenditures with cash so that you don’t take too much debt.
How Much of Your Income Should You Save Per Month?
There are various options when it comes to allocating a certain percentage of your monthly income towards savings or investment. Let’s talk about the most common alternative of how to save money every month if you have a steady source of income.
#1 The 10 Percent Rule
The majority of financial coaches advise people to start saving from 10 percent of your monthly stable income. This is a great beginning if you are willing to finance your long-term goals and save for retirement. At least 10% a month will be enough to create a decent savings plan for your financial freedom. However, if your income isn’t steady at the moment or this percentage seems to be quite high, you may want to start with 5% or so and work your way up.
#2 The 50/30/20 Rule
How much of your salary should you save per month if you want to enjoy your life during retirement? There is a widespread 50/30/20 rule that tells us to spend 50% of our regular income on necessary expenditures such as food, housing, and clothes, spend 30% on other costs such as fun and entertainment, and leave the remaining 20% towards savings.
How much does the average Canadian save per month? It all depends on your salary. For example, if your monthly income after taxes is $4,000, then you should devote $2,000 for essentials, leave $1,200 for discretionary spending, and save the rest $800. But this sum may vary depending on your regular income.
How much should I save per month if I earn less? If you earn less than the average wage, it may be hard for you to stick to this rule. Then it might be wise to start by saving less and slowly increase the amount you feel comfortable saving without being too frugal. On the other hand, if your regular salary is higher than the average wage, you may save more than 20 percent and achieve your long-term life goals.
In conclusion, you don’t need to feel frustrated because you can’t save all at once. It’s better to save something rather than nothing. How much do you save per month to feel secure? Write down your monetary goals for the future and follow the above-mentioned rules to reach them faster.