Now that you know how to save 20% of your paycheck every month, here are 2 great places to start putting that money to achieve financial success!
Your Savings Account
Every person’s financial circumstances are different, so it’s tough to compare savings accounts with other people. A good rule of thumb is to have 3 to 6 months of living expenses saved in case of the loss of a job or emergency. However, outside of that goal, how much you have in your savings is unique to your lifestyle and personal spending habits.
It’s a great idea to start with setting smaller goals for yourself. If you are new to saving, aim to save an extra $1,000 every year, just to have, outside of your emergency fund. If you’re looking at it from the 50/30/20 savings recommendation, you will most likely have more saved by the end of a year.
Try not to get down about falling behind, and instead work toward trying to learn more about money and where you can save. These are great tools to start with, but keep in mind, the ultimate answer for how much to save monthly comes down to how much you’re taking home, what your expenses are, and how much, if anything, you’re paying toward debt.
Your Retirement Account
Saving for retirement is something a lot of young people don’t think about since it seems so far away and insignificant at the moment. But, the sooner you start saving for retirement, the better off you’ll be down the line. The earlier you get started, the longer your money will have to grow.
Many experts recommend saving at least 15% of your gross annual income (that includes an employer match) for retirement. More is even better, if you can swing it. If you can’t save 15%, save what you can — even if it doesn’t seem like much now. At a minimum, try to contribute enough to get your employer’s match if they offer one. Otherwise, it’s like giving away free money. As your income grows or you pay off debt, you can increase the amount you save.
If your employer doesn’t offer a retirement plan or you want to start a separate retirement account outside of work, consider opening an IRA. And if you’re self-employed, check out solo 401(k) options.
Years down the line, you’ll be grateful for your generous retirement savings. You can also set up automatic payments from each paycheck to ensure you’re setting your future up for success.
