We’ve said it here on our blog many, many times and, if you surf the Internet with any sort of regularity, you’ve probably heard it there as well; you should be saving more money.
The question that most consumers have however is exactly how much they should be saving, and how to figure it out. One of the first, and easiest, ways to determine how much money you should save is to have a goal and know exactly what you’re saving for. Is it to have a nice retirement “nest egg”? How about a new car, your first home or even a new laptop computer? If you know exactly what you are saving for, it becomes much easier to set up a strategy to get there, whether it’s the 10% you need to put down on your new home or the $1500 for that laptop.
Of course a goal like having enough money for retirement is quite large and, if that’s what you want to know how much to save for, you need to first come up with a set amount of money you’ll need to reach your goal and then determine how much to set aside in order to reach that it at a specific time (age 65, for example).
There are a lot of factors that come into play when determining these numbers, including the age that you wish to retire, the age you are now and what your lifestyle requirements will be, among others. On the other hand, if your short-term savings goal is for a car, vacation or something smaller, it’s a bit easier to determine how much to save every week or every month. Simply figure out what the actual cost of the item is that you wish to purchase, and when you wish to purchase it, and divide the dollar amounts by the amount of months (or weeks) that you have.
One very important fact to keep in mind is that, if you have a lot of debt, paying off that debt is almost equally as important as saving money. The reason is simple; debt, and the interest that you’re paying while you have it, is costing you money, and the quicker you pay it off, the less it will cost you. It might not seem like the same thing, but that’s actually a great way to save money. Considering the ridiculously high interest rates that most credit cards come with, it might actually save you more money to pay off that debt than you’re able to save.
No matter what your savings goal might be, having a plan is the best way to achieve it. Jean Chatzky, a well-known financial expert, has a great quote about saving. “Hope is not an investment strategy.” The fact is, without a plan any savings goal that you have is going to be much harder to achieve. Normally that plan includes creating a budget and, yes, sticking to it. Once you have a budget created, you’ll be able to see where you’re spending too much money and cut back in those areas, putting that money either towards paying down debt or saving more (and investing more as well).
If you don’t have a typical family budget, and don’t know how to go about creating one, there are plenty of budget apps and websites available today that can help. Simply doing some research, choose the one that looks best for you, and get to it. Once you do, and you set up some goals, you won’t need to worry anymore that’s what you’re saving isn’t enough because you’ll know exactly what you need (or at least close).