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How much money should you save each month?

This question always comes up when it comes to asking about personal finance. Many people want to know how much money they should be saving each month. And it makes a lot of sense. In order to be able to save money, one should have a plan, and knowing what numbers should be in that plan is important.

But the thing is, it’s impossible to give a quick answer to how much money you should save each month.

How much is enough?

How much money you should be saving each month depends on a lot of factors, and these factors vary per person. One person could be earning $3000 per month, for example, while another person could be earning just $800. It’s impossible to give exact numbers in this scenario because those amounts would vary from person to person.

That’s why a better answer to the question of how much money to save is through percentages. 

The 50-50 rule

If you’re lucky enough to be young, single, and with no dependents, then this rule will most likely (hopefully!) be easy for you.

You simply take 50% of your net income and put all that into savings or investments. That’s it. The other 50% is reserved for all your expenses, be it your fixed expenses like rent, gas, parking, groceries, etc., or your ‘fun’ expenses like dinner outs or impulsive purchases.

Like I said, this works very well for millennials who have no dependents yet, because they can still afford to focus all their effort towards saving money.

However, not everyone is lucky enough for this kind of scenario.  Also, not everyone is good at taking out such a big chunk of their salary and putting it into savings all of a sudden.

Start with the 20-30-50 rule

This is a fairly unconventional rule, but for millennials (like me!) who are just starting out on their journey to financial independence, the 20-30-50 rule is easier to implement. It’s 20% savings, 30% fun money, 50% expenses.

Before you say, “wait, there are better rules out there!” I just want to say that as a millennial myself, I know how hard it to suddenly stop spending cold turkey and go the savings route. The world today is filled with temptations, in the form of unnecessary gadgets, lavish restaurants, and spontaneous vacations. And millennials are known for their impulsive nature. The 20-30-50 rule is simply a starter, for those who are not used to minding their personal finances yet.

Basically, you take 20% of your net income and put that into savings. Do this before doing anything else. If you can, pound it into your head that you only make 80% of what you’re actually making. The other 20%? It belongs to future you, not the present you. Therefore, you have no business spending it.

The next 30% of your income can be used as your fun money. Perhaps you’re saving for a trip to the beach? Or for a fancy gadget? Whatever that may be, consider yourself free to spend this money.

The remaining 50% should be used for the required expenses. Any money left over here should be added to your savings.

Be consistent

No matter what percentage of your income you decide to put towards your savings, you should always remember to be consistent with this number. Even if you can only afford to save 5%, a little goes a long way if it’s something you do consistently. $150 saved each month from a $3000 income is still $1800 that you wouldn’t have had at the end of the year if you didn’t save anything.

I promise you, saving can be quite addicting, especially when you get to the higher numbers. I still remember when I was just starting out. It was such a pain to save money at first, but the more the amount in my savings accounts increased, the less I wanted to spend it. Soon enough, my fun money started decreasing from 30% to 20% to 10%. Nowadays, I have a separate bank account for my fun expenses, which I dip into every now and then for travels and small luxuries. I still don’t like impulsive purchases, though.

If you want to be able to allot more money towards your other purchases, you know what to do: create more income streams! More money to save, more money to spend, right?

Remember, be consistent with your savings. It takes a lot of discipline and effort, but it can be done!

Most importantly, start now!