If you are wondering ‘how much money should I save a month’ then you are not alone. Since saving money is an important part of your long-term financial well being, it is a great idea to have a monthly savings goal.
Although it can be a challenge to increase your savings on a monthly basis, doing so can have a big impact on your financial future. If you have a savings goal each month, then you are more likely to stick to a savings plan in most months. Even if you don’t hit your savings goal every single month, it is a good idea to hold on to some of your monthly income for a rainy day.
Let’s take a closer look at how much money you should be saving each month.
Why should you prioritize saving?
Many of us put off saving because the future seems very far away. It can be tempting to live only for the present and spend every last dime in the process. Beyond enjoying our youth, many of us are struggling to survive on a paycheck to paycheck basis.
In fact, 78% of American workers are living paycheck to paycheck! A combination of these societal pressures is likely why people aged 18 to 29 have no retirement savings and many are not setting aside any amount of savings each month.
The savings you create today build some flexibility into your life. Plus, provide peace of mind as you journey through life. With savings, you have more freedom in your decisions because you are not strictly tied to a source of income. You’ll have the option to build your savings for the things that matter to you most.
How much money should I save?
The amount of money you should save each month will vary widely based on your goals. Before you choose your savings goals, take a look at your life goals. Consider the logistics around large purchases such as a luxury vacation or car. Plus, think about long-term timelines for your big savings goals such as buying your first home or retirement.
Thinking about savings goals such as a luxury vacation or worry-free retirement can be exciting. But it can be difficult to break these long-term goals down to monthly saving.
For example, if you plan to retire early then you may need to save 50% of your income each month. However, if you want to retire in your 70s, then you will likely not need to have such an aggressive savings goal. The savings goal you set for each month is truly a personal decision. Make sure to factor in your own life plans when you set up your savings plan.
With that, a good place to start your savings goal is 20% of your income each month. Most experts recommend saving at least 20% of your income each month. That is based on the 50-30-20 budgeting method which suggests that you spend 50% of your income on essentials, save 20%, and leave 30% of your income for discretionary purchases.
So if you bring home $1,000 after taxes each month, then you would try to set aside $200 each month. You might divide that $200 into several different savings vehicles. For example, you might direct the savings you’ve earmarked for retirement into a 401(k) or Roth IRA. Or place some of the money into a high yield savings account until you are ready to spend it on your upcoming vacation.
Consider an emergency fund
In addition to your other savings goals, it is important to build an emergency fund. In fact, an emergency fund could be the best place to start your savings.
With an emergency fund, you prepare for the inevitable surprises that life throws your way. When you are faced with a medical emergency or unexpected car repair, you’ll be able to fund those costs without sinking into debt. You’ll have the peace of mind and be more able to focus on the actual emergency at hand instead of the finances.
Consider your unique situation
Of course, it might not be possible to hit a 20% savings rate in your current situation. And that is completely okay! You should take a closer look at your finances and determine how much you can manage to save each month. The goal of saving some money is much better than saving no money at all. Plus, every little bit adds up. Even if you were only able to save $20 each week, that still leads to $1,040 in savings at the end of the year!
As you move through life, reassess your savings plans along the way. For example, if you are able to negotiate for a raise, then you might be able to increase your savings rate. Or if you have a month with many unexpected expenses, don’t be discouraged if you don’t hit your savings goals. Life can get messy, you should expect to adjust your savings goals to adapt to the situations that life throws your way.
How to save more money
Once you set your savings goals, you might need to make some changes to your habits to meet those goals. Let’s take a closer look at some of the ways that you can save more money!
1. Evaluate your priorities
As you start to save more, evaluate your priorities. You should not slash things out of your budget that make your life enjoyable just to meet your savings goals. Instead, get creative with the spending that doesn’t make you happy.
For example, you might not be willing to eliminate weekly dinners out with friends. However, you might be able to cancel some subscriptions that you rarely use anyway.
2. Try to be frugal
Frugality can sometimes get a bad rap because people confuse being frugal with being cheap. Cheap means getting the lowest price possible, but frugal means aligning your spending with your values. Learning to be frugal can help you increase your savings without sacrificing the quality of your life.
Here are a few ways to build frugality into your spending habits:
- Seek out discounts. You can find a discount for almost anything. Whether you seek out a better rate on your car insurance or compare prices on everyday purchases, you can build more savings into your budget without too much effort.
- Find coupons. Coupons can allow you to save money on items without sacrificing on quality. Check out our favorite coupon websites here.
- Try the 24 hour rule. If you find an item you like, then consider waiting 24 hours before making the purchase. You might find that you don’t really want the item after 24 hours. This practice can help you to become more intentional about your spending.
- Meal plan. Meal planning can cut out last-minute fast food. Try our 30 day meal planning challenge to find out how much you can save.
These are just a few ways to be more frugal. Make sure to get creative in your own life!
3. Earn more
If you are unable to cut any spending out of your budget, then the best option is to earn more. Luckily, your income potential is not something with a cap.
The first place to start is by asking for a raise at your current job. You might be able to negotiate a higher pay rate for the same amount of effort.
If a raise is not in the cards, then consider a side hustle. With some creativity and hard work, you can build a side hustle to increase your income and supercharge your savings. If you are interested in building a side hustle, then check out our side hustle course which will teach you how to get started.
4. Try a savings challenge
A savings challenge is a great way to motivate yourself to save more. As you go through the challenge, you might find that you are able to save more than you realized.
You might want to start small with our 90 day savings challenge. The goal is to save every $5 bill that you receive over the for 90 days. With our challenge, you’ll have an accountability buddy that can help motivate you to stay on track. It can be surprising to realize how much you are able to save through this simple tactic.
The bottom line
Saving for your future is an important step to building a healthy financial picture. Although it can be a challenge to start saving at first, it will get easier with practice. Take a look at your financial picture and decide how much you want to save. Consider how much you are able to save based on your current income and spending. Then find a balance that works for your situation.
It is possible to make saving each month a reality. Although it might not always be easy, your future self will thank you!