Find yourself wondering, “how much of my paycheck should I save?” Here are ten must-have tips on how to make the most out of your savings.
Did you know that 60 percent of Americans don’t have enough money set aside to cover a $1,000 emergency expense? Are you part of this group yourself?
If you don’t have a lot of money saved (or no money saved at all), what’s holding you back?
Is it a lack of funds because you live paycheck to paycheck? Is it because you have too many questions about the right way to save?
If you have questions about saving money — such as “how much of my paycheck should I save?” — keep reading.
Listed below are ten tips that will help you start saving and maximize your savings account.
The Importance of Saving
Most adults know that saving money is important. There’s clearly a disconnect between knowledge and action, though.
Saving money ought to be a top priority, whether you have a high-paying job or are barely making ends meet.
Of course, saving money will help you ensure you have access to funds in the event of an emergency. There are other reasons to save money from each paycheck, though, including the following:
- Accumulate capital for investments
- Avoid payday loans, excessive credit card usage, and the debt cycle
- Grow your wealth with the interest earned from your savings account
Having money set aside in a savings account will also help to give you peace of mind. You’ll feel better going about your daily life knowing that you have money in the bank should you need it.
How Much of My Paycheck Should I Save?
Clearly, a savings account is an important thing to have.
How do you know how much money to put into that savings account during each pay period, though?
There’s not one right answer to this question. A good rule of thumb to start with, though, is the 50/30/20 rule, which Senator Elizabeth Warren used to teach when she worked as a bankruptcy professor.
Based on this rule, 50 percent of your monthly income goes to essentials (rent, food, utilities, etc.). Another 30 percent then goes to discretionary spending (TV subscriptions, clothes, meals out, etc.). The remaining 20 percent goes in your savings account.
Bonus Tips to Save More Money
At this point, you might be wondering, “what if I have to spend more than 50 percent of my income to cover essentials each month?”
If this is the case and your essential expenses take up more than half your monthly income, you may need to look for ways to cut down on these expenses so you have more money to pay your bills and start building a savings account.
The following tips will help you reduce spending so you can become a savings master and ensure you have a good safety net in place:
1. Make (and Stick to) a Budget
The first thing you need to do when trying to save more money is to make a budget.
Figure out how much you need to live on each month and give every dollar you make a job. This will help you figure out if you’re putting money toward things you don’t actually need, too.
2. Use Money-Saving Apps
There are lots of apps you can use that will help you save money on things like groceries and gas.
Download these apps and check in with them on a regular basis so you can find the best deals and get more bang for your buck. Start putting the money that you save from using these apps into your savings account.
3. Eliminate Unnecessary Subscriptions
Take a look at your monthly spending and determine whether you’re paying for any subscriptions you don’t use on a regular basis.
This might include entertainment subscriptions or subscription boxes that are fun but are also eating into your bank account. Get rid of these subscriptions are reallocate that money to your savings account.
4. Buy Used
buying products used is a great way to save money. If you need new clothes, shoes, or furniture (ask yourself first if you truly need them), shop at thrift stores to find great deals. This is good for the environment and keeps clothing and other items out of landfills, too.
5. Ditch Your Gym Membership
Be honest. How often do you really use that gym membership? If you do use it on a consistent basis, it might be worth it to keep it around.
Think about what you could do with an extra $20-$50 dollars in your bank account each month, though. That money could be going straight into your savings account.
Consider canceling your gym membership and working out at home or outside for free.
6. Stop Using Credit Cards
Racking up debt with credit cards is one of the worst things you can do if you’re trying to save more money.
Accumulating more debt will just hold you back from adding to your savings account.
Take your credit cards out of your wallet so you’re not tempted to use them when you’re out and about.
7. Get a Side Hustle
Getting a side hustle will allow you to pay off debt sooner and increase your income. Both of these are necessary if you want to save more money each month.
Start driving for Lyft or Uber or dog sitting for Rover so you can earn more money whenever you have extra time in your schedule.
8. Automate Your Savings
Another easy way to start saving money is to automate your savings.
Set things up with your bank so that a percentage of your paycheck gets redirected to your savings account as soon as it gets deposited.
When you do this, you’ll be less likely to miss the money that’s gone, and you’ll have an easier time adjusting to working with less.
Start Saving Today
With all this information at your fingertips, you’ll never have to wonder “how much of my paycheck should I save?” ever again!
Keep this information in mind so you can get the most out of your savings account and make sure you always have access to funds should an emergency arise.
Do you want to learn more financial advice? If so, be sure to check out the Money section of our website today.
You’ll find all kinds of helpful articles there on everything from repaying student loans to saving for retirement.