We’ve often wondered how much we should save out of what we earn. No one has to tell you that one size doesn’t fit all so we have to find what works best for us. Savings are fundamental in our daily life both in the short and long run as it affects every decision we make from buying daily groceries to saving for emergencies and retirement. As individuals, our sources of income vary depending on the economy and the type of job, so having a particular savings rule won’t work for all. Some follow the 50/20/30 budget which is very popular guideline that a lot of people follow to keep your spending in alignment with your savings goals. The 50/20/30 rule briefly states that 50% of your incomes goes for what you deem essential and absolutely necessary (such as housing, food, utility, transportation and so on). 20% goes to your savings which includes your savings plans, rainy day funds and debt payments; and 30% of your income goes into your personal expenses which include stuff like your cable bill, data plans and other things.
This however is one rule of how to manage your income and doesn’t work for all. Most people save based on the varying circumstances surrounding them. A young person in his or her 20s can have a lower savings plan when savings towards retirement while an older person will have a higher savings plan when saving towards retirement due to the varying timeframe. The trick is knowing which one works for you through carrying out your research on the various savings plans out there and choosing the best plan for you. We’d love to know what works for you.
Have a lovely Wednesday.