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Establishing a Savings Plan

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Saving money can be tough, because knowing how much to save every month is challenging. According to the 50/30/20 rule, 50 percent of your monthly salary should go towards essentials such as: rent/mortgage, insurance, bills and food. Twenty percent of your monthly income should be allocated towards savings. The last 30 percent should be spent on lifestyle choices like: cable, nightlife, concerts and dinner.  These figures might sound hard to accomplish, but don’t worry.

Follow these easy first steps:

Planning for the future: If you’re young, saving for retirement may not be a top priority. But, regardless of age, retirement should be something on your radar. According to you should consider saving 10-15% of your income for retirement. That sounds tough, but don’t let the numbers intimidate you. Most employers will match contributions to a retirement plan. So, if you save five percent and your employer matches five percent, you've already reached a 10 percent savings goal.

Planning for the unexpected: Once you have established a retirement savings plan, next you should focus on a fund for emergencies. A general rule of thumb is three-to nine-months of living expenses saved in case disaster strikes, you lose your job or your salary decreases. Calculate your monthly cost-of-living and divide that number in half. If you can save this amount monthly, you can achieve a six-month emergency fund within a year.

Other life expenses: Saving for long-term expenses should be something to consider. Try to make a list of major expenses that will or can occur in the next decade. These expenses can range from replacing gutters to planning a dream vacation. To make it easier, list items into broad categories like “home repairs” or “holidays”. Set an ideal savings target and deadline to reach your goal.

Remember, saving money shouldn’t feel like a chore. You can easily optimize your savings goals by establishing a plan and sticking to it. If you have any other saving tips or ideas, share them here!

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Categories: Smart Spending , Strategies for Saving

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