Saving money each month has significant advantages. You can build wealth and retire sooner and save up for upcoming expenses. You can set up a vacation fund to plan your next getaway instead of going into credit card debt. While everyone’s personal finances are different, we should all set monthly savings goals to fortify our wealth.
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Ways to Devise How Much Should You Save a Month
Even though each person’s financial situation is different, several tried-and-true methods have helped people save money and grow their portfolios. We’ll cover some strategies to devise how much you should save.
Set Realistic Goals for Yourself
You can’t save every dollar you make. Some of each paycheck will go toward living expenses. Everyone pays for housing, food, utilities, and other essentials. Some people have obligations such as student loans that get in the way of profits. However, not every cost is essential, creating opportunities for improvement.
Setting realistic financial goals generates momentum. Saving $50/mo may not turn you wealthy overnight, but it’s a step in the right direction. Some people can cancel a subscription and put those proceeds in a savings fund. Your definition of “realistic” will change over time. Some people saving $50/mo reassess their finances and realize it’s possible to save $100/mo with minor adjustments. You don’t want to set an overly ambitious goal right out of the gate and then get discouraged along the way.
Determine What You Are Saving For
Your savings objective influences how much money you should save each month. It makes sense to stash more money if you’re saving for a down payment than if you’re getting ahead of holiday shopping. We know down payments require more capital than holiday plans. However, those expenditures vary significantly. It’s good to plan out how much you’ll need to achieve your objective.
A down payment’s total depends on the location, house’s size, and other factors. People saving up for real estate should look at the selling prices of properties that fit their criteria. For example, homebuyers seeking a $500,000 property on a 20% down payment should save $100,000. Lowering your down payment to 10% only requires $50,000 in the bank before a transaction. Homebuyers should then consider if they can afford mortgage payments before buying the home.
Holiday shopping is more straightforward than a down payment, but it’s no walk in the park. You’ll have to plan out how much money to spend on gifts for each loved one. Each savings goal has different requirements. Knowing the desired result and how much money you need to get there will help you save optimally.
Calculate How Long It Will Take You to Save for Your Goal
Once you figure out how much you need to save, you can calculate how long it will take to save enough money. If you are saving up for a $50,000 down payment and can save $500/mo, it will take 100 months (8 years and 4 months) to accumulate enough money. Saving money with a partner, house hacking, and increasing your monthly savings can help you achieve the goal sooner. This stark realization is better than a pretty lie. The truth can inspire you to pursue a side hustle or another opportunity to boost your monthly income. A mobile banking app can provide these insights and help with saving money.
Saving for $500 worth of holiday shopping doesn’t take as much savings. If you save $100/mo, you can reach your milestone in five months. Adding an extra $25/mo gets you there in four months. Knowing how long it will take will either make you feel confident in the current course or seek a new approach. A
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The 50/30/20 Rule
Some financial models present budgeting solutions for everyday consumers. While imperfect due to various financial situations, they shed light on common savings approaches. The 50/30/20 Rule is a popular budget rubric that suggests the following money allocation approach:
- 50% of your money goes towards needs
- 30% of your money goes towards wants
- 20% of your money goes towards savings
This method splits three major expense categories and asks you to decide how you’ll allocate each dollar. This approach puts most of your funds into needs and savings. Only 30% of the money goes toward purchases that aren’t necessary. Consumers can tweak this rule to their liking. Some people may flip wants and savings. Putting 30% of your money into savings increases your monthly contribution by 50%.
Some people don’t need to spend 50% of their money on wants. These people can embrace a 40-20-40 approach where the following takes place:
- 40% of your money goes towards needs
- 20% of your money goes towards wants
- 40% of your money goes towards savings
The more money you put into savings, the less you’ll worry about it in the future. Of course, you don’t have to follow 50-30-20 to a tee, but you should decide the percentages for needs, wants, and savings.
How To Boost Your Savings Each Month
Higher savings create more financial possibilities. You can save up for a high-ticket item or retire sooner. Regardless of the reason, many people want to save more money. These personal finance strategies will help you boost your monthly savings.
Track Your Spending
Savings are a function of income and expenses. Making more money and lowering costs helps you realize more profits. Expenses are easier to tackle initially since you can make changes overnight. Canceling a subscription immediately increases your savings. Tracking expenses makes you more aware of unnecessary costs and establishes reliable savings habits.
Most people don’t track spending because it’s difficult. Reviewing every expense item can get exhausting, but Current (*) can help you manage your money with instant spending notifications and monthly budgeting. Current is a mobile banking app that simplifies tracking expenses. Current (*) provides personalized spending insights and budgeting tools to keep you focused. You’ll have greater clarity on opportunities to cut costs.
Automate Your Savings
People forget to move money into their savings accounts as life gets busier. Their money clumps together into a single account, causing some people to misuse funds. You should create a bank account for each goal. An emergency savings account can help with a rainy day, and retirement accounts make the future feel more certain. Automating your savings across each account ensures proper money allocation even when you forget. You can automatically move money to other accounts and portfolios to your preferences. This process also saves time since you don’t have to manually transfer money to your savings accounts.
Current (*) enables users to set up automatic savings. You can set up automatic deposits and build your nest egg with every purchase. Current’s Round-Up feature rounds up every purchase on your debit card. If you spend $12.74 on an item, Current (*) rounds it up to $13. The remaining $0.26 goes into your savings. These features help you accumulate funds automatically on every purchase. Simplified systems help you achieve financial independence, but they don’t remove all of the thinking. Automating some steps lets you focus on optimizing other areas.
Increase Your Savings Gradually
Increasing your savings helps you arrive at your goals sooner. However, raising your monthly savings target too aggressively can lead to burnout and discouragement. Increasing savings gradually leads to sustainable growth. A Current debit card (*) will bolster your savings with every purchase and provide up to 15x points towards cashback on qualifying purchases (1) . This gradual growth makes long-term goals feel more attainable and generate momentum.
Invest Your Savings
Investing your savings puts your money to work. Many people use investing as a vehicle for retirement. Some people worry about losing their money in assets. People can put their money into Current Savings Pods (*) to earn 4.00% Annual Percentage Yield (APY) (2) on their savings. Current (*) provides daily payouts on funds up to $6,000 to their members. You can get started with Savings Pods and Current’s other features by creating an account on their website today.