How Much Should I Have In Savings? : Saving Tips And Tricks To Back Your Financial Health
How Much Should I Have In Savings? : Saving Tips And Tricks To Back Your Financial Health
“Do not save what is left after spending, but spend what is left after saving.”
? Warren Buffett.
Well, honestly speaking, all I have been doing these days is spending and crying about it later.
Savings, as they say, are the key to growing your financial health. Savings will not only help you have control over how much you are spending but also in times of need when you actually need a lump sum amount of money.
While I may sit here and lecture you on saving money, I will definitely not forget how I have been through the same road. I have been an obsessive spender.
Trust me when I say this – the amount of money that I had spent in my five years of college could have easily funded a trip to Maldives. Crazy right?
Well, let me just pop the bubble here. Work Life changes your perspective on spending.
Especially when you realize that the money you are spending (read wasting) is the one that you earned by working for days and nights; when money becomes your own, spending automatically decreases.
How Much Should I Have In Savings ?
While people may speak highly about saving, no one talks about how much saving is considered saving.
You can’t just expect to save a dollar each month and call that savings. It’s ridiculous!
Your savings must be a reflection of how much you are earning. Just how your spending habits are based on how much you earn and how much to keep in savings but also depend on the same.
To be practical, the correct amount of money to have in savings depends on how accurately you understand your expenses. If you have noticed carefully, your expenses will always comprise two main components: fixed expenses and variable expenses.
The fixed expenses are the ones that will necessarily stay the same for each month. You may also consider them to be your most important bills. Some of the fixed expenses may include:
Utility bills
Rent payment
Mortgage
Insurance
Internet or cell phone services
Debt payments are also included in this category if you are repeatedly paying it each month. Suppose you are liable for any additional child support or alimony; that will also be considered a fixed expense.
On the other hand, variable expense has more of a fluctuating nature. This means they keep changing from one month to the other. They may be essential or non-essential expenses.
Some examples of variable expenses may include:
Gas and costs of transportation
Groceries
Clothing
Hobbies
Entertainment
Dining out
Traveling
Once you have done the estimation of your usual monthly expenses, you can accordingly plan an efficient way to save the money how you desire it to be.
While the fixed expenses may be constant, you can reduce the other variable expenses to increase the margin of what you save each month.
This question in itself is pretty subjective. The definition of savings varies from one person to the other. While some may save $1,000 a month, for some, it might be their monthly income.
So, to accurately determine how much you must keep in savings is challenging. The factors that drive an individual’s savings vary from one person to the other; therefore, they are not constant.
However, if you are confused as to how much you need to save each month, you may as well consider some of these factors that can help you figure out the balance that you need to keep in your savings for it to actually help you in times of need.
What Are You Saving It For?
You must ask yourself this question before you start saving. This will help you figure out how intensively you need to save your money. While some people may only save generally, some have concrete goals as to why they start saving.
You are generally saving; your plans might not be as stern. But, if you are planning for a set goal, for instance, a wedding or a vacation, you will have to be more mindful about spending every penny.
How Much Can You Save?
While saving is a necessity, it doesn’t necessarily have to overtake your regular needs. You do not need to save while compromising on the things that you need. Cutting down on your expenses does not mean you must also stop spending on the necessities.
You legitimately cannot stop spending money on groceries and starve yourself to plan a Europe trip. That is impractical and unhealthy.
Your savings plan is a reflection of your income and expenses. There must always be a balance between the three factors: income, spending, and saving.
A lack of balance may just end up being troubling.
What Is Your Spending Pattern?
A spending pattern is a constant method in which you spend money as soon as you get it. If you have noticed it, and even if you haven’t, our spending habits always have a certain pattern.
Understanding that pattern is important in order to plan where and how you need to save.
For me, my spending pattern mostly revolved around spending money on materialistic things like clothes, cosmetics, food, handbags, and so on. So, for me to save efficiently, I had to put more emphasis on cutting down on these areas.
If I am constantly spending more on these unnecessary items while cutting down on groceries and starving myself, that would definitely not be a very successful savings plan.
Best Ways To Increase Your Savings Margin
Now that you know enough about how much to save each month, it will only be fair that I put some light on the ways in which you can easily save those hard-earned bucks.
You Must Be Your First Priority
What I mean to say is you must pay yourself first, rather than paying anyone else. Put away a portion from your monthly paycheck as soon as you get it rather than saving whatever is left after you have spent it all.
One of the most convenient ways to make a prior habit of paying yourself is to set up an automatic transfer process from your bank account to your savings account or, in certain cases, your investment account.
“Take a percentage of your paycheck or a random number and have it done automatically. Don’t think about it. Don’t go back to it. Just have it done,”
– Ronit Rogoszinski, CPF and Founder, Women + Wealth Solutions, Carle Place, New York.
Develop A Spending Prototype
A spending prototype, which is popularly known as a budget, is a list consisting of your monthly income and expenses. It helps you see how much money you are putting towards necessary as well as unnecessary expenses, and you can make changes as it fits your needs.
You can make your budget on an online app, a spreadsheet, or cash envelopes. It all depends on your convenience. Budgets must account for your regular and irregular expenses.
“Proactively identifying even just a few top one-off expenses through the year ? such as property taxes, car registration, tuition, back to school shopping, etc. ? and incorporating those can make a big difference in your plan accuracy and confidence.”
– Charlie Bolognino, ChFC, CPF, and Founder, Side By Side Financial Planning.
Down With The Spending, Up With The Saving
The very first step to saving more is to start spending less. It could be an expensive hair salon or the Starbucks you get each day, or branded clothes – you can always find one way or the other to cut down on your monthly expenses.
However, don’t just cut down on your unnecessary expenses for nothing. The money that you are saving shouldn’t just lie around in your wallet or bank account. While it is considered as spending, you can always find ways to spend it better.
For instance, you can use the saved money by paying back a debt or transferring it to your savings account where you can not access the money.
“Try to reduce one spending habit that is discretionary and bank the savings or put it toward paying down a debt,”
Rogoszinski adds.
The sooner you repay a debt, the earlier you can put up more funds towards savings. Make a dept list, and pay off the smallest balances or the highest rate of interest first.
Be More Creative About Money Making
There is no limit to earning some more bucks as long as you are willing to hustle more. To work for extra long hours may seem tiresome, but working a few extra hours, even temporarily, is the smartest strategy to meet some of your specific goals.
A side hustle doesn’t necessarily have to be a professional job. It can be any passion or hobby of yours that you feel can bring certain monetary benefits. It can also be a part-time job of any kind where you can easily invest some of your extra hours.
Take Baby Steps
Saving is a tough job. I am not going to expect you to ace at the first attempt. No one is asking you to save $500 in the very first month itself. That is not even practical.
It would be commendable if you could do it; however, there is nothing to be guilty about if you can’t either.
One way to save successfully is by taking baby steps. That is what I did too. The smaller the step, the more structured you will be with your savings in the longer run.
Start with small savings here and there. Start with some of the variable expenses. Cut down on your unnecessary expenses. Trust me; you do not need something just because it looks cute. It’s a trap. I have been there, so I can warn you of the same.
Small changes can make bigger differences. Once you start small, slowly and steadily, you can figure your way out with bigger and more impactful savings.
Tips For Saving Money Faster
If saving is your topmost priority, there are multiple ways to push your savings balance faster. Some of the ways by which you can tear out some extra savings may include:
Getting car insurance along with renters or a homeowners insurance.
Ask for safe driving discounts from your auto insurer.
Balancing the temperature of the thermostat in your home to save massively on electricity bills.
Try out a prepaid cell phone plan or switch to a plan that is less expensive than the one that you are currently using.
Cancel the subscriptions that you absolutely do not need or that you have not used for the longest time.
Try to cook more at home and reduce going out more often.
Walk to the grocery stores or supermarkets. This way, you will save more on gas.
Learn some of the maintenance skills at home. This will help you in saving money on minor repairs that you can easily manage yourself.
Frequently Asked Questions [FAQs]:
Q1. How Much Money Should I Have Saved?
Ans: Well, if you are asking how much you should have saved, I am hoping the money is already gone. So, it is better not to cry about what is gone and rather be more focused on how you can stop it from going away in the future.
Q2. How Much Should I Have In Savings?
Ans: Well, this depends on how much you are earning and spending each month. Your saving plan is, after all, a reflection of your income and your spending. However, how much you should have in savings would depend on what your saving goals are. Based on what you are saving for, you must take a step towards saving.
Q3. What Is The Best Way To Save Money?
Ans: While none of the existing ways have yet been coined as best, personally, I feel that keeping a budget is the best way to keep track of your money. Budgeting is something that has personally helped me out a lot, and I certainly believe it would be beneficial for multiple people out there.
Saving money is an essential step towards growing your financial health and helping you out during emergencies in the future. The more you take savings seriously, the more you will have a secure future financially.
Thank you for staying with me for this long. If you feel like adding anything else, please do not hesitate to drop a comment below!
Upasana is a budding journalist who has a keen interest in writing. She considers writing as therapeutic and is most confident when she writes. She is passionate about music, movies and fashion. She writes in a way that connects with the audience in a personal level. She is optimistic, fun loving and opinionated.
Upasana is a budding journalist who has a keen interest in writing. She considers writing as therapeutic and is most confident when she writes. She is passionate about music, movies and fashion. She writes in a way that connects with the audience in a personal level. She is optimistic, fun loving and opinionated.
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