How Much Should I Save?
If you have a 401(k) plan through your employer, you can contribute a percentage of your paycheck to your 401(k) for your retirement years. However, there are many different factors that go into how much you should save, and in what form of savings, based on your personal finance goals.
Ask yourself, What are my goals?
1. Prioritize Goals with a timeline:
a. Less than one year
ii. Emergency Savings
b. Less than 10 years
i. New car
ii. Buy a house
iii. Home Repairs/Renovation
iv. College Savings
2. Control Spending: How much should I be paying?
a. Mortgage = > 29%
b. Car Payment = > 15%
c. Total Debt = > 36%
3. Begin Saving: New to saving? Try the 50/20/30 method for spending vs saving
a. 50% Essential Spending
i. Housing, food, utilities, transportation, childcare, insurance,
minimum debt payments
b. 20% Savings
i. Retirement Savings, savings plans, additional debt payments,
c. 30% Flexible Spending
i. Entertainment, gym memberships, trips, etc.