Are you wanting to save more money, but not sure how much of your income you should dedicate to it? The short answer is that you should always save as much as you can. But with monthly expenses and other things that drain your income, it can be tough to know the right amount to save. Here are some ways to determine how much you can save each month.
How To Determine How Much You Can Save
I know we talk about this a lot at Voila Moola, but it’s worth repeating: the best way to know how much you can save is by using a budget.
Create a monthly budget that lists ALL of your stable monthly income and expenses. Stable income and expenses are those things that don’t change much: rent, car payment, bi-weekly salary, etc.
Track your spending religiously for the first month! This will tell you exactly where your money goes, and then you’ll know where you can make adjustments to increase your savings.
Once you have tracked everything for a month or two, you will see patterns in the way you spend. How much do you spend on discretionary items? These are the expenses that could be cut to provide even more savings amounts.
Variable expenses can be reduced a little, but can’t be cut entirely out of your budget. But to increase savings, you could use coupons to save on groceries, cut cable and use Netflix, or ride the city bus instead of driving.
Determine A Savings Goal
Now that you are using a budget and have a good idea where your money goes, set a goal for your savings. A realistic goal to start with is the amount recommended by financial experts of three months’ salary.
Make a plan to help you reach that amount. You could decide when you want to have that much saved, and then divide by the number of weeks until that date to get a weekly savings amount.
Another way to determine how much to save is to plan on a flat 10% of your income. It could be before or after taxes, depending on your budget and expenses. If you need to, start smaller and increase the percentage as your income increases.
How much you can save each month ultimately depends on you and your dedication to your savings goal. Don’t sell yourself short!