Happy New Month!
Another month to get it right with your financial growth! To clear your focus, consider some things before deciding how much of your earnings you should save.
1. What are you saving for ?
One important question to ask yourself is, what are you saving for? If your goal is capital intensive, you might want to increase the amount you save to reach the goal. On the flip side, if you are saving for a less capital-intensive goal, this does not necessarily mean you have to reduce the amount you save, but you might consider allocating, more money to other pressing needs.
2. How much time do you have ?
When do you want to achieve this goal? If your goal is long-term, consider how much you need for it, and spread it across the time frame. This might reduce the amount you save. But if the time frame is shorter, consider increasing your savings.
3. Your income level
This factor leaves you with less choice. Your savings will come from your income. If your income level is low, it will definitely reflect in your savings, and vice versa.
4. Your necessary expenses
Notice we said necessary expenses. Yes, some expenses are quite unnecessary. If you have lots of dependents and inevitable expenses, then your savings will reflect that.
However, the last two factors shouldn’t be an excuse for you to save less. They should be motivation for your to earn more, so you can save more.
While saving 20% of every earnings is a more standard rule, use the guidelines above to help you determine what is best for your financial circumstances. Whether you’re able to save 20% or 5%, starting with any amount is better than nothing and will help establish the habit of putting money away, which is the most important thing.
