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How Much Money Should You Save From Each Paycheck

By: Michael Millington


Saving money can be tricky when you don’t feel like you have a handle on your finances. If you’re constantly paying for something (even if it’s not debt related), you might allow your savings to dwindle. While it is tempting to do so, you should never neglect your savings account. Most people know that they want to put something into their savings account, but people don’t know how much they should save at any given time. Here we’ll discuss how much you should save and what should influence your decisions.

 

Pay Yourself First

If you’ve ever heard the phrase “pay yourself first” uttered by a financial advisor, know that it’s good advice. Taking a predetermined amount out each paycheck to save can help you in many ways. Remember, “paying yourself” doesn’t mean spending money, it’s saving money.

 

But How Much Should You Pay Yourself?

Great question, and it requires a bit of financial research and restructuring to answer. In order to know how much you should pay yourself, you should consult or create a monthly budget. This budget should encapsulate what you make and what you spend in one month. Ideally, your budget should reflect a surplus in your earned income after you handle your necessary expenses. Ideally, the remainder of your income would find its way into your savings account.

 

And In Non Ideal Situations?

You mean in the real world? Rarely do things work out ideally. But the concept still remains the same, even after frivolous payments, If you find that after you pay your bills and make whatever other purchases that you have money left over, it would make the most sense to split the remaining money in half. Half would be pocket change, the rest goes into your savings. This gives you a steady monthly deposit while allowing you to pay your bills.