There are many ways to answer this question, but you need to take a close look into your
financial goals in order to find out the right amount to save. Savings can help you enjoy financial
freedom and also from many difficulties that come from debt. So in order to be financially stable,
it’s always advisable to save some amount of money while you’re earning so as to secure your
THE GENERAL RULE OF THUMB
The 50/30/20 thumb rule says that 50% of your income should be spent on your necessities,
another 30% should go towards your optional expenses and at least 20% of your income should
go towards your savings. The thumb rule is to have saved one time of your income by age 30,
twice your income by age 35 and three times by 40. But if you’re a high earner you can save
more by reducing the optional expenses. A good rule of thumb is to have three to six months of
income put aside to cover essential expenses as an emergency fund. This fund is meant for
certain events such as illness, or job loss. However, If you are a beginner and can’t go
according to this rule, then you should always start by looking at your financial goals.
In the due course of life, you may have certain financial goals which you want to accomplish.
But you may find it difficult to carry it out at a go. At that time, your savings can do a lot. So it’s
better to save some amount every month if you want to accomplish your financial goals.
Financial goals can be of three types:
- Short-term financial goals
- Medium-term financial goals
- Long-term financial goals
Short-term financial goals can be like say if you want to buy a smartphone, go on a vacation or
take up a subscription etc. Medium-term financial goals can be like replacing old appliances,
repairing your old house, buying a car etc. And long-term financial goals can be like building
your house or saving to meet your demands post-retirement. If you are a beginner then make a
list of your financial goals and set a savings target. This can act as a motivation for you to start
saving each month.
In the beginning if you are confused about how much you need to save, then think about upto
what extent you can compromise with your standard of living. Once you begin saving your
money, you should save it for a purpose. Like building an emergency fund, a portion for
retirement or to accomplish any financial goal. After all these, you can think of increasing the
money you save every month through various means. You will also be able to figure out how
much amount you need to save for a particular financial goal. You can prioritize your financial
goals accordingly. But, it is always advisable to save some amount each month for your long
term financial goals as they yield benefits in the long run.
TIPS TO SAVE MONEY:
● MAKE A BUDGET EVERY MONTH:The first step to save money is to make a budget
plan every month. Divide it into two blocks: Income & Expenditure. Write down your
expenses in order of priorities and also set a target for savings. Cut down your expenses
if they are more than your income.
● CHECK YOUR BUDGET : The next step is to check your budget and see if it’s justified.
Try to avoid extravaganzas. Plan out how much you need to save every month
according to your monthly budget.
● KEEP TRACK OF SMALL EXPENSES:
Small expenses add up and creep us out. Loads of small expenses add up to a large
amount every month. Keep track of small expenses and try to avoid them if possible.
● KEEP TRACK OF MONTHLY PAYMENTS:
Keep a track of your monthly payments and try to limit them. For instance, limit the
subscriptions that you don’t really need. This amount can go to your monthly savings.
● USE PERSONAL FINANCE APPS OR PRICE COMPARISON APPS:
These apps or websites help you manage your money better by reminding you of your
upcoming expenses and help you get the best price for services. So that you can limit
your expenses and start saving more.
Also if it is difficult to save 20% of your income, you can save at least 10-15% accordingly. It’s always better to save something than nothing. In the beginning, aim to save 10% of your income
or start with a percentage that is manageable according to your budget and standard of livin
and try to increase by small amounts like 1% every month or year until you reach 20%. In the
beginning, it doesn’t matter how much you save if you don’t have a financial goal but it’s always
better to start earlier.