When someone asks how much a person should save from their income every month, know that there’s no single correct answer. Prevailing guidance suggests as much as 20 percent, such as the 50/20/30 budget. But is this the right fit for everyone? Image source: Pixabay.com The quick answer: No. Saving should be based on a one-size-fits-all approach, as how much one should save will ultimately vary depending on their circumstances. Many factors can come into play, including their income, age, and current savings. Ideally, one’s savings rate should depend on their goals – the specific and long-term reasons why one saves up in the first place. There are three timelines, for instance, that one can consider. In less than one year, one’s savings should be able to allow a vacation out of the country, fund taxes, or buy Christmas gifts. In less than a decade, one’s savings should be able to pay for a home down payment, cover one’s needs when in between jobs, or cover a number of car repairs. Now, when it comes to retirement, consider saving up to 15 percent of that income for it. For emergencies, it’s ideal to put up an emergency fund that can cover nine months to a full year of living expenses. Of course, this entails a number of sacrifices as it can come down to a huge sum. These will break down one’s financial goals into three: expenses coming up within less than a year, less than a decade, and in the very long term or a decade or two away. In the extremely long-term scenario, it could involve saving up for buying a second home or building the children’s college savings fund. Image source: Pixabay.com Consolifi is a debt resolution company with the objective of assisting consumers in breaking free from their debts permanently. For more reads like this, visit this page.
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