How often do we complain that we aren’t being paid enough?
However, it could be sometimes our inability to manage expenditure that makes what we earn insufficient.
In the book “The Psychology of Money”, the author Morgan Housel shares the story of two individuals – a businessman and a janitor. Guess who was a millionaire at the time of his death? The answer may surprise many – the janitor.
So the moral is, it’s not about how much you make but how much you save.
The next time you get your salary try following the 50-30-20, the standard thumb rule of saving. This means that you allocate 50% of your salary to your needs like rent, groceries utility bills, etc. 30% could be allocated to your wants like haircuts, pedicures, etc. The rest of the 20% could be used for savings and investments.
However, Shon Anderson, a certified financial planner at Anderson Financial Strategies, says this “gold standard” will not apply to everyone or every situation.
He suggested another ratio, 80-20, with 20% of your paycheck allocated to your savings and the remaining 80% allocated to spending related to your needs and wants.
The idea is that the 20% allocation remains constant in either approach.
However, “There’s no one-size-fits-all answer here,” says Delyanne Barros of Delyanne “The Money Coach” about saving.
He stated that no matter the amount you save, it is very important to save money as saving would become second nature in you. Once it becomes a habit the amount could be gradually increased.
Guidelines for figuring out how much to save
Barros states that it is more important to acknowledge what you are saving for rather than how much you are saving. For instance, if you’re putting together an emergency fund to see through a few months, you’ll need to be saving at a higher rate since you’re working for a short-term, high-priority goal.
On the other hand, Barros notes, that if you’re saving for retirement and you’re in your 20s, you can get away with saving between 10% to 15% of every paycheck if you want to retire by age 60.
He further stated, that how much you should save depends more on how much money you plan to spend, not how much you currently make.
RR Author
Real Research News is the media platform that presents insights and studies of wide-range of topics. It focuses on insights gathered from its survey app.
