Wondering how much to save per month to best manage your finances?
The answer is simple. As much as you can.
Two different people will probably never have exactly the same salary, the same financial obligations, or even an identical lifestyle . That’s why giving you a fixed amount of euros to set aside each month wouldn’t make sense.
It will be up to you to determine how much to save taking into account your situation and your goals. But without having to deprive yourself of everything either!
Do not panic: this article is here to help you. Here are some basic rules to follow to determine how much to save per month to finally put enough money aside.
The 50/30/20 rule
The 50/30/20 rule is a very often used method when it comes to building your monthly budget . It suggests allocating your income to your various expenses as follows:
50% for basic needs : housing, essential bills (no, Netflix does not count) , groceries and other mandatory expenses.
30% for desires/pleasures : shopping, lunches or dinners outside, hobbies, holidays, outings… and other non-essential expenses.
20% for savings : all your financial goals, savings, investments , life insurance , emergency funds etc.
If you’re not sure where to start with your budget, this method can be very helpful in breaking down your expenses into basic categories .
This percentage breakdown will help you create a balance between your financial obligations, your goals, and your pleasure expenses.
This rule is a good starting point. But once you have taken control of your budget, you will surely need to adjust or create a budget more suited to your situation.
For example, if you live in a city where the rent is low and you pay little tax, it is possible that 50% of your salary allocated to your needs is a lot. Note your challenges over the months and modify your budget accordingly.
The ideal: stay around 20%
In an ideal situation, you should set aside no less than 20% of your salary for your savings goals.
This percentage is mainly to be balanced with your leisure expenses: the goal is to keep room for both in your budget.
If your situation allows it, this percentage will allow you to profit in the present while setting aside for your future projects.
It’s true : it’s better that you set aside 5% each month than 0%.
In fact, there are two situations:
A precarious situation that simply prevents you from putting aside. (If you are in a very delicate situation, consult this page on emergency financial aid.
Excessive and/or impulsive spending , which prevents you from saving each month.
If you’re in the second situation, the first step will be to create a monthly budget if you don’t already have one, then observe your spending habits.
Have you eliminated all your unnecessary expenses? In which categories do you spend the most? What expenses could you reduce — or eliminate — to reach your financial goals?
Remember: saving is not a punishment . It’s about putting money aside now so you can achieve your dreams and goals in the future. The important thing is to learn to prioritize — and your future should be a priority.
Putting aside even N10000 every month is starting to build habits little by little.
Pay yourself first
Another popular way to save every month? Pay you first.
That is to say, put part of your money in a passbook or another savings solution at the start of the month, before you can spend it on something else (for example, by programming an automatic transfer).
You can then freely spend the rest without having to ask yourself any questions.
Again, the goal is not to make you no longer happy. It is entirely possible to save while having fun and profiting. But you should save enough so that you don’t splurge with your money every day and can afford to set aside.
If you can spend without counting, it is surely that saving is not yet your priority.
Adjust over time
Saving a certain percentage of your salary each month is a good idea because as your income increases, the amount you set aside also increases .
On the other hand, you may be able to revise this distribution upwards and save even more in the future. I now save more than 40% of my monthly net salary after doing a serious job on my budget and eliminating or reducing unnecessary expenses.
If your salary increases, or you receive bonuses or other gifts of money, consider using at least part of it to increase your savings on time rather than wanting to spend absolutely everything, even on something you don’t need. .
Set yourself goals
Before knowing how much to save per month, it is essential to know why you want to save money. Some reasons are common to everyone. For example, you should plan to save between three and six months of expenses for precautionary savings .
You should also consider more distant expenses like a future home purchase or even your retirement (and yes — even if you’re only 25) . Then you can start putting money aside for personal goals like vacations, a professional project, a wedding… or even start building your fortune! If you know why you are saving, it will be much easier for you to do so.
Let your money work for you
Money makes money.
Your capital can grow very quickly if you save regularly and carefully, especially through the powers of compound interest.
And the sooner you start developing good financial habits, the better off you’ll be later on. Saving money regularly is an important financial habit to establish now.
Once you have money set aside in your precautionary savings, the next step will be to invest your hard-earned dollars .
Consider, for example, investing your money in life insurance or in a PEA , after having of course learned about the different types of existing investments.