How Much Should You Save?

Posted by Bethany Dutcher, VP Marketing on Jun 23, 2014 11:18:02 AM

We all know we should be saving money, right? Of course we do. Just like knowing we should eat more vegetables and fewer cookies. It’s not necessarily fun or easy, but it is good for us.

While there are pretty clear guidelines about what we should be eating, the rules for how much we should be saving aren’t quite as straightforward.

So, how much should you be saving?


Honestly. It's that simple. Simple, but again, not necessarily fun or easy.

How much is enough?

There are lots of different guidelines you can follow, but we’re going to focus on four that are straightforward and easy to implement.

A. An age-based savings chart spells it out very plainly:





10 - 15% of annual income


15 - 25% of annual income


25 - 35% of annual income


Every penny you can!


B. If you don't have a lot of debt, a good rule is to divide your income into three bundles - 50/20/30. 


50% should be used for life essentials like transportation, food and housing; 30% for lifestyle expenses like movies, restaurants, travel and cable TV, and 20% for paying off debt and savings. This is a helpful tool to use when you're drawing up a simple budget for your expenses.

C. This plan is a little more vague, so if you're a number-cruncher this one probably won't appeal to you.

Let's call it Save 'Til it Hurts plan. If you're saving but still feel very comfortable meeting all your daily needs and wants, then you're probably not saving enough. (It's a little like dieting - if you're not a little hungry, you're probably not cutting back enough). If you feel like things are just a little bit tight and you're having to watch what you spend, then you're saving a good amount.

D. Since one of the primary goals of saving money is retiring, how much will you need to save so you can enjoy retirement?

Financial folks figure you'll need 8x your ending salary to see you through an average 25 years of retirement. While you may not know your ending salary when you're just starting your career, you can guesstimate and use that number as a goal to shoot for.

Here are a few quick tips on how to find the money you need to save:

  • Make one-time deposits. Deposit your holiday money, garage sale proceeds, tax refund, bonus or inheritance money directly to your savings.
  • Save your raise. This is a rather painless idea: don’t increase your lifestyle, instead continue to live in the same manner you have been and save whatever extra is added to your paycheck.
  • Create a budget. It's one of the best ways to save money and discourages you from overspending.
  • Stay at home more. Cut back on restaurant meals and seeing movies in the theater and you’ll save a bundle.
  • Watch your discretionary spending. Do you really need a new dress or a fancy TV?

No matter which method you choose, of course you know the more you save, the better. Most importantly, focus on the long-term benefit rather than the short-term inconvenience. After all, there’s no such thing as saving too much!


Topics: General, Saving

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