Your savings account is more important to your financial wellbeing than you might think. So how much should you actually put away into savings each month?
3-6 Months Rule
One great rule of thumb for your savings account is to have enough money to cover 3-6 months of expenses to fall back on in case of an emergency, but this will vary for everyone.
You can visit Nerd Wallet’s Emergency Fund Calculator to figure out just how much to put away in your savings each month for the 3-6 months rule. The calculator takes into account your expenses for your rent or mortgage, utilities, phone, cable, internet, insurance, transportation, loans, and groceries.
The three to six months rule will help you save enough money to pay the bills if you have a family emergency or lose your job. You can always save more if you are able, or account for more or less time based on how long you think you would need to rely on those funds.
The 50/30/20 rule is a popular tool that can also be utilized to save money. For this savings rule, 50% of your income should go toward essential expenses such as rent and food, 30% should go toward discretionary spending, and the last 20% should go into your savings account.
Keep in mind that these are just guidelines and can be adjusted to fit your income.
What if my savings goals exceed my income?
If your savings goals exceed your income, you can first attempt to cut corners on certain inessential expenses, or go with cheaper options. For example, take a look at how much you may be spending on fast food each month, or subscriptions such as Netflix or cable television. Then, you can look into ways to make extra cash such as freelancing or side jobs.
Your savings goals may also exceed your income if you have debt or big expenses that arise at different times of the year. You can also work on achieving short-term financial goals such as saving a certain amount in a set amount of time, or paying off one loan at a time. Keep in mind that as you pay off loans, you will be able to put more into savings.
To sum it up...
The quick answer is to save at least 20% of your monthly income, or start saving enough to cover 3-6 months of expenses. But if you want exact numbers, along with professional financial assistance and advice, contact us today at First Community Insurance and Annuity Center by phone at (866) 937-5533 or online.
We can’t wait to hear from you and help you reach your savings goals!