How much should I save? What do you think I should be putting away? What’s a good rule of thumb for how much money I should set aside each month? Is there a right amount I should be saving?
This is probably one of the most common personal finance questions, and this causes a great deal of anxiety for people. Most advisors say you should save 10% a year, but there are all kinds of problems with this. It’s not customized for the person, and it leaves a lot of cash on the table.
There is always this fear of not saving enough or not knowing if they are on track or not.
Problem solved. I created a very simple but powerful formula that works well for just about anyone.
Save half your age. That’s it. Done. Here’s how it works:
Take your age, divide it by two, and that is how much of your income you should be saving. For example, if you’re 20 years old and just starting your first job, you should save 10% of your salary. If you’re 44 years old, you should save 22%.
What are the benefits? When you’re younger and aren’t making much, reaching the target savings rate is easier. When you’re older, you’re not only saving a greater percentage, but you are presumably making more money and are saving a greater dollar amount.
The proceeding blog post is an excerpt from Get Money Smart: Simple Lessons to Kickstart Your Financial Confidence & Grow Your Wealth, available now on Amazon.