1. Retirement
You should consider saving 10 – 15% of your income for retirement. Sound daunting? Don’t worry: your employer match, if you have one, counts. If you save 5% of your income and your boss matches another 5%, you’ve accomplished a 10% savings rate. Our online tools can help you calculate your needs for retirement and other financial goals.
2. Emergencies
You should also consider establishing an “emergency fund” that can cover 3-9 months of your living expenses.
How can you save such a large sum? First, calculate your monthly cost-of-living. Assume that if you lose your job, you’ll sacrifice luxuries such as pedicures or your premium cable TV package. How much do you need to survive?
Divide that number in half. Can you save this monthly? If so, you’ll build a six-month emergency fund within the next year.
3. 50/30/20 rule
Did you want a simpler answer? No problem. Here’s a final rule of thumb you can consider: at least 20% of your income should go towards savings. More is fine; less may mean saving longer.
At least 20% of your income should go towards savings.
Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.
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