As a millennial, you already know that saving money is key to achieving financial success. But how much of your salary should you be putting away each month? That’s the million-dollar question! The answer can vary based on factors like income and age.
Whether you’re a doctor, teacher or you install office water coolers in Bonegilla, let’s take a closer look at some strategies to help you save money each month so that you can start building up your nest egg.
The 50/30/20 Rule
This rule suggests that 50% of your take-home pay should be allocated towards necessities, 30% should go towards discretionary spending, and 20% should be saved for the future. This rule is great for people who have steady incomes and are just starting out in their careers. It makes budgeting easy by breaking down expenses into three simple categories, but it does not account for other factors like debt repayment or savings goals.
The 70/20/10 Rule
If you have more complex finances (for example, if you have a lot of debt to pay off or you want to save towards a specific goal), then this rule might be better suited to your needs. This rule allocates 70% of your salary to necessities, 20% to debt repayment and savings goals, and 10% to discretionary spending. This strategy allows more flexibility than the 50/30/20 rule by giving you more room to make progress on debt repayment as well as saving for things like retirement or large purchases.
The 80/15/5 Rule
This strategy is tailored more for those looking to aggressively build their savings without sacrificing too much in the way of lifestyle costs. It allocates 80% of salary towards necessities, 15% towards debt repayment and savings goals, and 5% towards fun activities or experiences. This might be a good option if you’re looking to save as much money as possible while still being able to enjoy life’s little luxuries from time to time!
Spend First or Save First?
Some people find it helpful to save their money first before they spend anything. That way, they never get tempted to spend more than they should. Others prefer the opposite approach – spending their money first and then saving whatever is left over at the end of the month. Whichever approach works best for you is great – just make sure that at least 10% of your pay check goes into savings every month no matter what!
Savings Categories
It’s important to diversify your savings in order to ensure a secure financial future. Try breaking down your savings into three different buckets: short-term goals (such as an emergency fund), mid-term goals (like a new car or vacation), and long-term goals (retirement funds). Allocating a certain percentage of salary towards each bucket will help keep your finances organised and on track for achieving all of these financial goals in due time.
Ready to get started?
Deciding how much of your salary should go toward savings every month can seem daunting at first; but with these three strategies in mind, it doesn’t have to be so intimidating. Consider your own financial situation when deciding which approach is right for you, and no matter what path you choose, remember that having an intentional plan will set you up for future success. Good luck!
