Is saving 20 percent of income enough?
When I looked into how much I should be saving, most people suggested 10-20% of my income. But I thought to myself, is that enough? Because I wasn’t sure it was enough, I figured saving more wouldn’t hurt so instead, I decided to save 30% of my income. Why? Because I could!
To accomplish saving 30%, I have a tight clothes/makeup and household items budget. Why? Because they are the categories that I can control and if I don’t, my spending can get out of control quickly! Choose whatever category you spend a lot on, and you can control, and reduce it dramatically to reach at least a 20% savings goal.
How much I save
I currently save 31%, to be exact, of my after-tax income. This means that in one year, I save a total of $13,200. Pretty good right? It’s just me paying the bills so I’m proud of that number for now. My goal is to save more by adjusting my current budget and/or making more money.
I thought I was “really good” at saving until one day, I decided to actually track how much money I was spending. I created a google excel file and at the end of each week, I would enter the store name and how much money I spent. I did this for about 5 months and realized that I was spending way too much money on food, clothes, and things I didn’t really need.
I needed to change my spending habits ASAP because I couldn’t just spend whatever I wanted. Yes, I had the money and was paying my credit card in full each month but did I need to spend all that money? No. Absolutely not.
I created a budget and decided how much I wanted to spend on categories I could “control”. Categories like groceries, eating out, clothes, etc. We work hard for our money and we don’t want to waste it on things that just pile up in our closet or garage.
How many purses, shirts, decorations, board games, jewelry do you have that you actually use and get something out of them? It’s natural don’t worry, I’ve done it so many times. I say it’s “natural” because that’s how most of us grew up and that’s how society teaches us to be.
However, we have to understand that we need to be more mindful of our spending.
Here is the key to saving a certain % of your income.
how to set a savings goal
When you’re thinking about setting a saving goal, follow these steps to save as much of your income as you can.
Start by making a list of your fixed expenses. What payments do you have to make each month? These are my fixed expenses:
|Public Transportation / Gas||$110.00|
|1.5% of my income||$53.28|
Now that you know how much money you spend each month on fixed expenses. How much money do you have left? Choose how much money you want to save each month.
|My fixed expenses total is||$2,051.28|
|I want to save||$1,100.00|
|Leftover for variable expenses||$400.72|
Now that you know how much money you have leftover for variable expenses, assign each category a dollar amount. If you realize that you don’t have enough money for variable expenses, you may have to adjust your savings goal. I encourage you to not adjust your savings goal.
Be smart, mindful, and sacrifice if you have to in order to stick to your savings goal. That “sacrifice” might be; eating out less, spending less on clothes, making coffee at home, etc.
This is how much money I have assigned to my variable expense categories:
After following these three easy steps, you will be taking 100% control of your finances! You will know exactly how much you spend on fixed expenses and will choose how much you save each month.
In my example, I choose to save 31% of my after-tax income because I can. I’ve decided to not spend a lot of money on categories that truly won’t change my way of life.
saving goal takeaways
So how much are you going to save? How much can you save?
Follow the above three steps to figure out how much you can save. After you’ve figured that out, don’t limit yourself to just 10-20% if you can save more. It takes discipline to save a higher percent but discipline pays off.