Budget how much to save

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Part of. Debt Rules of Thumb. Savings Rules of Thumb. Retirement Rules of Thumb. Investing Rules of Thumb. Credit Rules of Thumb.

Knowing exactly how much to spend on each category will make it easier to stick to your budget, and help keep your spending in check. This budget may differ from one person to another.

This could be as simple as swapping to a different energy provider , or finding some new ways to save money while grocery shopping. It could also mean deeper life changes, such as looking for a less-expensive living situation. Wants are defined as non-essential expenses—things that you choose to spend your money on, although you could live without them if you had to. Although minimum repayments are considered needs, any extra repayments reduce your existing debt and future interest, so they are classified as savings.

This is true whether your ultimate goal is building an emergency fund , developing a long-term personal financial plan , or even preparing for a down payment on a house. Take a look at your payslip to see how much lands in your bank account each month.

If your paycheck automatically deducts payments such as health insurance or pension funds, add them back in. Instead, add that change to a separate savings account each month. However, the simplicity of this method can also be its downside. Having large amounts of cash laying around at home or on the go may not be the safest way to keep your money. Where the rule and the envelope system get complicated, the plan gets simple. The rest is yours to spend however you want.

Better yet, set up a direct deposit. Budgeting needs are different for everyone. Start by calculating your monthly expenses. Mortgage or rent expenses are easy to remember, but we live in the age of subscriptions, and those streaming or gym expenses may filter through unnoticed. This amount of money need not be put in a bank — often banks do not allow deposits at this level without fees — just a safe place.

A picture frame or piggy bank would be fine. It is important to do this because consumers often suffer most when they have a costly unplanned event and need funds. The avenues for getting these funds quickly are often very expensive. Having a small amount of money ready to cover these occurrences will pay off greatly. Once this amount is set up, the broader challenge is knowing what is the ideal amount for this rainy-day fund.

One may not reach this level easily, but it should be seen as a guideline for what is the next level of financial security. Once one has this level of precautionary savings, they can feel relatively secure against most financial shocks.

It is like a dress in that it should fit you well — one size does not fit all. My general recommendation is to try to do what is best for you, which typically includes saving as much as possible.