How Much Should I Save Each Month?

How Much Should I Save Each Month?

Confused about how much money you should be saving each month? It can be hard to work out how much to spend and how much to save from each pay cheque. However, there are some simple guidelines to follow for saving money more consistently and ensuring you have enough for what you want, what you need, and some left over for a rainy day.

How Much Money To Save Monthly

A good rule of thumb when saving money is to save 20 per cent of your total monthly income. Most people will spend half of their earnings on daily essentials, such as paying rent, buying groceries, using transport, and other required spending. Another 30 per cent can be used for ‘discretionary spending’, which includes things that you don’t really need, but make your life more comfortable or enjoyable. This leaves 20 per cent in savings.

If you don’t get paid monthly, you can easily calculate your monthly income using an earnings calculator. If you do contract or shift work or don’t get paid a set amount, you may like to monitor how much you make over a six-month period and work out the average to decide what your 20 per cent savings goal should be.

Saving Money At Different Stages Of Life

Although the 20 per cent rule is helpful, different people will have varying requirements when it comes to saving. Your ability to save money, and your desire to do so, will change across your life.

When you’re just starting out in the workforce for example, you may feel like you’re not making enough money to justify saving one fifth of it. Additionally, you may not have any significant savings goals and not feel motivated to save.

Later, when you’re thinking about saving for a mortgage, to prepare for having children, and other big life events, saving may become more of a priority.

If you’re further along in your career and you are making a lot of money, you may want to save more than 20 per cent per month. Often as we get older, we have more money to save and invest elsewhere.

How To Get Better At Saving Money

If you are daunted by the idea of saving 20 per cent of your income, you’re not alone. Many people struggle to manage their spending and don’t know how to save effectively.

It’s a good idea to put together a comprehensive budget so you can see exactly where your money is going. Track your spending for a month and see where most of your money goes. Have you been roughly following the 50 per cent on essentials and 30 per cent on discretionary rule, or does more of your cash go to impulsive and unnecessary purchases?

Once you work out where your money is being spent, decide some areas to cut back. Some common things to do include:

• Compare your energy bills and see if you can get a cheaper deal with a different provider
• Make a weekly meal plan and put together a shopping list to save on groceries
• Eat in more often and don’t spend as much on takeaway
• Find a cheaper phone and internet plan
• Consider your TV subscriptions and cancel any you’re not using much
• Save purchases of things like clothes to occasional pieces, rather than frequent buys.