What percentage of our monthly income should we set aside for savings? This is a million-dollar question that almost never receives a sensible answer. Those who have figured out the right answer fall into the category of smart money managers.
The first two steps deeply depends on your financial planning abilities. The first step in allocating your monthly savings is to come up with a sound retirement strategy. The second step is to set aside money for your emergency fund. That Emergency Fund must be sufficient to cover at least a year’s worth of living expenses. The fund is crucial because it acts as a safety net, protecting you from becoming broke and helpless.
The third step is to set aside a sum of money to cover your needs, or items whose absence would severely disrupt your way of life. This category includes the most important things, such as paying rent and health insurance.
It’s critical that you pay off your debts as soon as possible so that they don’t eat into your income. That has to be your fourth point of action.
After you’ve set aside money for all of your essentials, you can assess what’s left and determine how much you can afford to save each month. After you’ve decided how much you want to save each month, you should only worry about allocating money for long-term and expensive investments like building a house or buying a new car.
You should strike the right balance between the amount of money you need to live a happy and comfortable life and the amount of money you want to spend on eating out, buying new clothes, and all those things that make your life easier and more enjoyable. Those Luxuries include things like getting a luxury car or a watch.
After you’ve done all of that, you should revaluate your long- and short-term expenses in order to increase your savings. Examine your expenses and determine how the amount can be adjusted to achieve the best possible savings.
Finally, after considering all of these factors, set a monthly savings goal. This goal should be something you stick to religiously, as well as something that is realistic and achievable.
A secondary source of income, such as a part-time job or mutual fund investing, can also be found. This will supplement your income while also allowing you to stick to your Monthly Savings Goal.
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