How do you start saving money? Simple, as soon as you get money from your job, put a portion in savings. You’ll be surprised how quickly it adds up!
Saving money is a good habit for everyone to get into and can be done at any age. The amount you need to save varies based on the kind of savings, but there are some savings goals that you can realistically aim for whether you’re in your 20s, 30s,.40s, or 50s.
Most people begin saving money when they first start earning a salary. It’s important to start saving as soon as you are making enough money to cover your basic needs.
However, not everyone has the same starting salary. You may be thinking, “I can’t save money at this point in my life.” But that’s not true. You should start now.
And when should you start saving for retirement? The sooner the better!
The idea that you’re too young to save for retirement has been around for decades. Don’t believe it. Why?
First of all, even though young workers may earn less today than they will in the future, putting away money early can give it a chance to grow through the power of compounding. But there’s another reason why young workers should save early: the habit of saving is easier to establish when you’re just starting out in your career.
Are You Covering Your Basic Needs?
Before you start saving money, make sure that you can afford your monthly expenses.
Start by setting a budget with your monthly rent, food (but not eating out every meal), car payment, debt payments, insurance and utilities.
You may need to do this on an entry-level salary, so find ways to cut costs by taking in a roommate, cooking your own meals or taking public transportation. It is always important that you can cover your monthly expenses before you start saving money.
You’re now ready to start saving. It can be tempting to live up to the more expensive aspects of your lifestyle, but before you do that it’s important to save some money so that you have a cushion in your budget. Ideally, you should save between 3 and 6 months of expenses and put them into an emergency fund.
This will give you a safety net if anything goes wrong and you don’t have to stress out about covering your expenses every single month.
The first and most important step to master when it comes to managing your money is to budget. Creating a monthly budget will help you keep track of where your money is coming from and going every month, give you a starting point as you set goals, and help you survive any financial emergencies that come up.
We recommend saving 20% of your monthly income, adjusting depending on your debts and financial goals—but the easiest way to start is with the 50/30/20 rule. This formula takes care of needs (50%), wants (30%) and savings (20%) and makes budgeting as easy as one-two-three.
Do You Have High-Interest Debt?
There’s always a time and place to save. It’s not often, however, that you are carrying a high-interest debt is one of them!
If you’re currently carrying credit card or other high interest debt, it doesn’t make sense to be putting a good amount of money into savings each month. It is possible that you are paying more in interest each month than you would be earning on your savings!
So, once you pay off your debt, you can begin to save.
Can You Cut Your Budget?
It’s nice to have fun and have quality things, but you cannot sell yourself short when it comes to financial security. Cut back on food and entertainment, avoid buying new assets you do not need, cut down your bills, and invest.
Savings is important to have in case of an emergency or unexpected expenses, and it can also give you peace of mind. If the thought of saving money makes you nervous, try looking for money-saving tips online or in books to help you get started.
You do not have to save a ton at first, but start with small amounts of money as it adds up over time. Then you can use that extra savings when an unexpected expense comes up.
Plan ahead for unexpected expenses, like a flat tire or emergency car repair. If you don’t have the cash on hand, you might turn to a credit card — which can add significantly to the cost of your emergency by adding interest to your tab.
Is There a Magic Amount to Earn to Be Able to Save Money?
As a rule of thumb, you should aim to save at least 20% of your salary once you reach full-time employment.
This can be difficult for many people, especially if they’re just starting out in their careers. They may feel like they don’t have anything to live on if they give up that 20%.
Don’t focus on the numbers. Rather, start off small. Start by saving for retirement up to your employer’s match as soon as you qualify for it.
Then set a goal — either as a dollar amount or percentage of your revenue — with the amount you want to have stacked away in savings every month.
It can be difficult to pin down a specific amount you need to make to have enough money to save. The cost of living varies from area to area and a $50,000 salary will cover a lot more in a rural area than it would in New York City or another metropolitan area.
If you aren’t sure what amount you should be saving each month, try thinking about a smaller number. Always save up to your employer’s 401k match and then set a goal for yourself with the amount that you want to be able to save each month. You may consider following the 50/30/20 budget rule if you want to work on saving more money.