How Much Money Should You Be Saving Each Month?
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How Much to Save Each Month as a Percentage of Income
50% for needs These are essentials, such as housing, groceries, gas, and minimum loan payments. 30% for wants These are nonessential expenses, such as vacations, shopping, dining out, and entertainment. 20% for saving and debt repayment This includes the money you put into your retirement fund, like a 401(k) at work, as well money you put towards other savings goals (like building your emergency fund or going on vacation). This category also includes paying off debt, beginning with high-interest accounts like credit cards.
Calculating Your 50/30/20 Ratio
Needs: $2,500 (50% of income) Wants: $1,500 (30% of income) Savings and debt repayment: $1,000 (20% of income)
What Is the Average Amount of Savings Per Month
Is It Possible to Save Too Much in Savings?
Saving Any Amount Is a Good Start
Ways to Boost Your Savings
Automate your savings. Also known as “paying yourself first,” automating savings involves setting up an automatic transfer of a set amount from your checking to your savings on the same day each month (perhaps on the day your paycheck clears). Take advantage of windfalls. If you get an extra check (such as a bonus at work, tax refund, or cash gift), consider putting it directly into your savings vs. your checking account. This can help you reach near-term goals, like building your emergency fund or making a downpayment on a new car, faster. Audit your spending. It can be a good idea to scan the last few months of bank and credit card statements and make a list of where your money is going each month. You may find some easy places to cut back (like a gym membership you don’t use or streaming service you never watch). You can then redirect that money into savings. Knock down debt. Paying off debt can help you save more money by eliminating interest payments. It can be well worth your while to come up with a plan to pay down debt as quickly as possible. Once the debt is paid off, you can put the money you were previously spending on monthly debt payments into savings instead.
Where to Keep Your Savings
Frequently Asked Questions
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