How Much Money Should You Save Each Month?

source: firstcitizens

It becomes tricky to assess how much money you should save monthly, especially when you cannot prioritise your goals. However, a great practice is to adopt strong savings habits once you secure a job in your 20s. After all, there is no amount exactly set for everyone or any minimum threshold when it comes to save money.

You may expect it to vary based on a person’s initial financial standpoint, ambitions, and lifelong decisions. Here, we have covered everything you must know about how much to save and why. Also, here are several money saving tips that you can employ for effective results.

It is normal not to grab most opportunities to save when someone has just started working. But instead of giving up and getting demotivated, they can save adequate cash by setting simple monthly goals. If you are wondering how, we have listed some money-saving tips that can help you out:

• Prepare a Budget Prioritising Debts: For instance, if you have multiple active EMIs, sincerely repay the ones attracting higher interest rates first, followed by the rest. Now, you plan for other expenses as per the remaining monthly income. Finally, stick to this budget if it is working for you.
• Avoid Eating at Expensive Restaurants: It is an unnecessary expense that heavily affects most people's budgets, who tend to go out to eat frequently. If you are craving exquisite delicacies, you may check for promotional codes offered by food ordering apps, but that, too, shall not cross your budgetary constraints.
• Avoid Smoking and Drinking: If you can afford to give up on these habits, it can be the wisest decision from a financial perspective and for your overall health. Smokers who have quit can notice significant improvement across their savings folios. You can enjoy this benefit too if you are determined enough.
• Reduce Housing Expenses: As per research conducted by CNBC, your monthly spending on housing should not ideally cross 30% of your gross monthly income. To abide by this record, calculate the cumulative costs, including maintenance costs, property tax, etc. If it is more than 30% of your monthly revenue, consider downsizing or shifting to a new locality.

If you are in your 20s or even 30s, you can roughly follow the idea of the 50/30/20 rule. Many consider this generalised rule the best way to save money for the long term. The reason is simple; when you keep aside 20% of your monthly income in risk-free options like FDs, ULIPs, PPF, or even regular savings accounts, you get to take slightly more risk with the rest of your income. Moreover, when you follow this rule, you may expect to yield an average of 8% returns on your overall investments annually.

Apart from this 20% savings scheme, you must try to save money occasionally in a separate account to fund vacations. Finally, we suggest you deposit at least 10% of the monthly revenue in a separate bank account to build emergency funds. Building a contingency fund worth supporting your family's living expenses for at least 6-7 months is more than sufficient.

In our world of innumerable options, it becomes challenging to control overspending, especially if we do not have clear-cut goals. If required, you need to adopt some extreme measures to curb impulse buying and become more financially disciplined. To assist you in this path, we have shared some tips to save without failing each month.

• Affix a Weekly Money Date: Make sure to keep a specific day of the week to revisit your transactions over the past 7 days. Putting this effort consistently will help you track progress and find ways to stay aligned with monthly savings goals.
• Be More Mindful While Spending: A great way to eliminate the effects of instant gratification is to wait a minimum of 48 hours before ordering a product or service online. Of course, you cannot follow this strategy for essential commodities like food ingredients for household cooking, utility bills, etc. Still, you may curb those expenses by setting budgetary constraints under each segment.
• Look for Freelance Services Online: If you are serious about saving to the fullest of your potential, this hack is for you. As an intellectual being, time is your greatest asset. Hence, hire professionals at a discounted price to save time while you dedicate extra hours to your work.
• Prefer Quality Over Quantity: Whether shopping for garments or edible products, this saying holds true for both cases. We often resort to inexpensive clothing, thinking we can eventually save money by purchasing more units and filling our wardrobes for a prolonged period. As a matter of fact, this is not true, as cheaper products have a chance of degenerating sooner. Similarly, consistently eating inferior-quality food may lead to greater healthcare expenditures.
• Stop Comparing With Others: It is vital to control emotions while acting as per a definite vision. We often end up spending on things that have little significance in our daily lives. The buying decision is driven by the urge to impress our peers or gain attention across social media platforms. It will help if you give up on these tendencies, especially when they stop you from reaching your financial goals.

Irrespective of your current lifestyle, earning potential and age, saving money is beneficial in several ways. Some widely accepted advantages include the following:

• Savings Ensure You Have a Secured Future: Systematic savings strategies let you accumulate funds necessary to fulfil specific ‘wants’ like buying a house, getting a new car, etc. Whatever your future goals may be, if you have a sufficient corpus, you do not need to depend on others.
• You Stay Tension-Free Regarding Children’s Education: Every parent desires to arrange for the best-in-class facilities for their children to ensure they achieve holistic growth. If you start monthly savings right before planning to have a baby, you provide abundant scope for the deposits to grow to their fullest capacity. Upon their maturity, you can easily afford to admit your child to one of the renowned institutions for higher studies.
• Your Short-Term Goals Meet Success: Some common short-term goals include specific tour plans, repaying a student loan, arranging funds for a business, etc. You can smoothly arrange your savings process to meet these goals with a proper allocation of resources in debt instruments, bank fixed deposits and additional options like post office time deposits.
• Adequate Savings Brings in Peace of Mind: Financial distress can arise anytime. Thus, when you have already made ample savings, you have guaranteed a protective shield for your loved ones. Attaining this sense of achievement undoubtedly guarantees peace of mind.

It is indispensable to save money in today's inflation-hit market. Whether planning to make a big-ticket purchase or simply gathering adequate resources to support unforeseen expenses, saving prudently can only help you safeguard all sides. Besides these, saving reasonable money monthly will ensure a comfortable retirement life, guarantee children's spot-on education and help fulfil lifelong dreams like buying a house.

Our money-saving tips will provide you with outright guidance if your goal is to start your savings journey right from today. Though you can ideate from the conventional 50/30/20 rule, planning a customised budget to suit your goals will be most effective. Wherever you get stuck, you can seek professional intervention to maximise the scope for monthly savings.