How much money should you save each month?
Maybe save whatever is left over? Argh! That’s good in theory but….
Well it’s not really good at all, and here’s why. Say you have $50 left over at the end of this month and you save it. Next month you have $60 so you say to yourself, “I’ll just spend another $10 as I only saved $50 last month”. The next month you are tracking to save $40 but because it’s not the $50 you saved in the previous months, you say to yourself, “I’ll do it next month”, and spend your $40. Spending, which most of us like to do, is all too easy, with ill regard to setting aside savings.
Unless you make a concerted effort to save, you won’t. Like any other achievements in life you need to focus and set a goal. When it comes to saving, your goal can be that next holiday, a car, renovation, anything really, just set that target and work towards it.
How do you ensure you do achieve your target? It’s not as hard as you may think. The best way is to be consistent. Set a fixed saving amount each and every month, but make sure it’s achievable. There is no point trying to save $500 a month if you’re earning $1000. Think around the 15-20% mark: that’s $150 – $200 of your $1000. That could be manageable with some cost savings in place, like not having that extra night out, or “I don’t really need those shoes.” You get the idea, you’ll need to work at it but the results will be worth it.
It’s an easy formula: Savings with no target and no consistent amount = Little or no savings; Savings with discipline and targets = Lots of savings. Which formula are you going to use?
A good start to understanding the savings process is by establishing Your Spending Plan