How Much Should You Be Saving?

If you find yourself contemplating how much money you should be stashing away each month, the answer is simple: it depends.

It depends on your age, debt, spending habits, short-term goals, long-term goals, level of income, and 100 other factors.

Okay, so not the answer you were looking for, but it is the correct one. Where people get lost, is when they hear all these factors and figures thrown around by friends, family, and financial experts on T.V., leaving them not quite sure which one is right for them.

The real question is not how much should you be saving, but rather, what do you value?

You see, most decisions in life can be boiled down to what we consciously and subconsciously value.

Someone who values experiences over things won’t think twice about spending large sums to travel but might cringe at the thought of purchasing a newer car to replace their old beater.

A mother or father who places a high value on spending time with their young children might turn down a new job with more pay, due to longer office hours.

What are some things that you currently value?

You may not value some or even any of these things. The idea here is that you list out the demands on your financial resources (including necessities), so that you can see your personal snapshot.

Once you have identified all that you value in the present, add to that what you know you will value in the future. Some of these may overlap, and that is to be expected.

Combining everything you currently spend money on, with what you would like to in the future will allow you to better determine how much you will need.

Only then can you answer that question for yourself.

A 25-year old might start saving 5-10% of their income for retirement, and an additional 10% for a down payment on a house for a total savings rate of 15-20%.

A husband and wife with adult children, might not be saving at all in order to pay down sizeable debt.

An individual with aggressive financial independence aspirations might save half or more of their income.

So, before you go chasing a figure that may not be right for you, begin with what you value so that you are saving with perspective.