In general, the general advice is to save 20 percent of one’s income each month.
Try the 50/30/20 rule devised by Senator Elizabeth Warren, a university teacher of bankruptcy law:
- 50% of the monthly budget for essential expenses such as rent and food
- 30% for discretionary spending and entertainment
- 20% for savings
This recommendation to save every 20 percent of one’s income makes sense. But it is not always so simple to apply in everyday life.
The good news is that those who save 20% of their earnings will, in about 40 years set aside 25 times their annual income.
Basically, after 40 years of saving you can stop working for 25 years. All without giving up your usual lifestyle. Yes, it is a simplification, but it gives enough of an idea.
On the other hand, if setting aside 20 percent of your income doesn’t seem like a feasible goal at the moment, don’t get frustrated.
Saving is first of all a habit.
Source: financer.com
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Learn about other financial best practices
Good financial advice #19 | If you have to borrow you can’t afford it
Had it ever occurred to you that if you have to borrow money then it means you cannot afford to make that purchase. Learn to manage the budget you have, without having to take out loans–because it might say you can’t afford it.
Good financial advice #18 | Spend less than you earn
If you set as a goal to live within your means you will immediately understand what expenses you can or cannot incur to avoid having to ask other people or the bank for money.
Good financial advice #17 | live within your means
If you set as a goal to live within your means you will immediately understand what expenses you can or cannot incur to avoid having to ask other people or the bank for money.
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