How Much Money Should I Save?
Knowing how much money to save is key to preventing financial problems from saving too little or too much money. This depends on your financial goals and reasons for saving money. Common reasons for saving money include:
Building an emergency fund
Having an emergency fund is important for anyone at almost any age to have. Without an emergency fund, people can find themselves trapped in debt or blocked from their goals. Retirement is a process that takes a lifetime to save up for and depends on how much money you want and when you plan to retire.
Other reasons for saving money may include vacations, paying off debt, moving, and life transitions. Each of these reasons for saving money comes with different amounts of money that need to be saved. For an emergency fund, the rule of thumb is to save between six to nine months of your income.
Saving up to six months of income is recommended for people with stable and consistent incomes. Whereas saving up to nine months of income is suggested for people with inconsistent incomes. The amount you feel you need to be saved up may depend on what emergencies you anticipate whether they be medical or vehicle-related.
For example, you may need to save more money after a serious diagnosis than you would save for a new car. People can anticipate future expenses when their car keeps breaking down or their student loan repayment is about to start while they are moving out. Use this information to calculate how much money you need for these future expenses.
Steps for Building Your Savings
Once you know how much money you want to be saved by a certain time, you can start taking steps toward this goal. The most important steps for saving money include:
Balancing spending with saving
Deadlines are important for keeping yourself on track. Without a deadline, a savings goal may not be reached due to delays or forgetting to save. Balancing spending with saving is just as important. When spending outweighs saving, reaching a savings goal can become blocked.
One way around this is to separate needed expenses from unnecessary expenses. Then start cutting out expenses until you reach your savings goal. Automated savings can be the solution for avoiding saving money. Once automated savings is set up, you do not have to contemplate whether to save money.
Call Tom Bible Law
Filing for bankruptcy can be a stressful and often confusing process. You can call us at Tom Bible Law by dialing (423) 424-3116 for a consultation today about your financial dilemma. Our team of Tennessee bankruptcy lawyers is ready to help you explore your options for bankruptcy. We are located throughout the Tennessee cities of Chattanooga, Kingsport, and Tullahoma.