How Much Money Should You Really Save?

“How much money are you going to save?”

Someone asked me this recently. I guess they were fed up with me writing about personal finance. They wanted to know what my end game was.

This really got me thinking about the idea of saving up (can’t always be thinking about Friday night). Saving money gets really boring. There has to be a finish line, right?

How much money should you save?

You figure that after nearly a decade my friends would be used to me talking about personal finance and money management.

When I first heard of money management as a teenager I thought that it was pretty lame. My cousin was three years older than me and he was the first one to get a job out of all of us. He would call the bank number to see what his balance was when went over. Back in the day, we didn’t have fancy mobile banking apps. We had to go to the bank in person with our bank book to see our balance. We could also check the balance over the phone if you were advanced enough to set this up. This guy would always check his balance. He was saving up and would never do anything fun. For some reason, this drove me crazy.

Now here I am writing about money every single day. I’m sure that many of you are wondering about how much money one should actually save.

What do the experts have to say about how much money should you have in the bank? 

According to CNBC:

“By age 30: Have the equivalent of your annual salary saved, Greene says. If you earn $50,000 a year, aim to have $50,000 in savings when you hit 30.”

According to Entrepreneur:

“The earlier you start saving the more money you’ll have in your retirement savings. For example, if you initially put aside $20,000 you would need to save $1,598 indexed at 7 percent annually in order to become a millionaire by age 65. That amount, when adjusted at 3 percent inflation, would turn out to be $3,262,038 in 40 years.”

This article on Investopedia states:

“Fidelity suggests you should have 50% of your annual salary in accumulated savings by age 30. This requires saving 15% of your gross salary beginning at age 25 and investing at least 50% in stocks.”

All false modesty and awkward emotional stuff aside, my goal in life is to get as rich and as jacked as possible. There’s really no limit to how much money I want to save. I just want to have options.

I firmly believe in having money in the bank. We’re going to look at where you should save your money and how much money you should be trying to save.

Where should you save money?

The end goal is to have money so that you can relax and sleep at night without stressing about the upcoming bills or about having a decent dinner on the weekend. This figure is different for everyone. It breaks my heart when I hear an interview with a celebrity that I follow who has no money.

I believe that everyone should save enough money to be comfortable at all times. This is of course easier said than done. I realize that life gets in the way and saving money becomes impossible at times. I’m not here to lecture you. I want to show you the way.

Where should you save money?

Your savings account.

This is where you save your money for a rainy day. Some call this an emergency fund. Some just feel better with money in the bank. I like to keep cash in a savings account just in case. I also like to have money available to me so that I can make a move if needed.

Short-term goals.

Do you have any short-term goals? Are you saving up for anything in the near future?

This is where you save money for something that you want to buy in the near future. Common examples include:

  • Car.
  • Vacation.
  • New phone.
  • New pair of shoes.

It’s important that you get into the habit of saving up for what you want so that you don’t have to stress about your credit card bill.

I would never tell you not to buy a new phone or a new pair of shoes. I just want you to have the money for it instead of using your credit card.

I create sub-accounts for my various goals. This takes a few minutes to set up. Every week or so I put money into my vacation account. This guarantees that I’m always thinking about trips and am ready to travel if a random weekend escape opportunity pops up.

Retirement.

I’m assuming that you don’t want to work forever. It’s important to that you start saving up for retirement. I opened my retirement account as soon as I was old enough to do so. I don’t want to work forever.

I believe that you should enrol in your company’s plan (if you work a full-time job) and try to set up your own retirement account (for the tax benefits too).

Investments.

The whole point of saving money is to eventually use this money to invest it to make more money in the future. You can’t work forever.

Everyone has an opinion on what you should be investing into. Some folks are 100% into real estate. Some are all about BitCoin. Some love day trading. I can’t tell you where to invest your money. I can point you in the right direction. Check out my beginner’s guide to investing.

How much money do you need for a rainy day?

What’s all this talk of saving money for a rainy day? Why should you even bother thinking about this rainy day?

Here’s what people are referring to when they talk about a rainy day:

  1. Leaving your job. You could wake up and get fired one day out of the blue. You could also reach the point where you want to quit because you just cant handle it. You have to be prepared for this. You don’t want to be desperate.
  2. An emergency. Things happen. People die. I don’t want to be morbid, but you never know when someone close to you can die or become extremely ill.
  3. When shit happens. It’s funny how things happen when you least expect them to. I want you to be prepared when life takes an unexpected twist.

Life doesn’t always go as planned. I saw a buddy go from care-free bachelor to father with a mortgage within one year. That’s fast. If you’re not ready for it, well, guess what? You have no choice. That baby’s going to come. What are you going to tell your partner?

Sometimes you just need to have that money sitting in your bank account.

This leads me to the next question…

What would you do with an unexpected $1,000 expense?

How would you cover an unexpected expense?

This has happened to me a few times.

Here are a couple of examples of unexpected expenses that would’ve crippled me:

My car slid off the road when I was driving home from school all stressed out during exam season. Instead of studying in the library, I was at the mechanic shop reading books. This set me back a few hundred dollars that I wasn’t planning on spending.

Unexpected taxes/fees. I didn’t put enough money aside one year and I owed $3,000 in taxes. That caught me off guard.

Luckily, I had money in the bank to cover these surprises. I wasn’t happy about seeing my bank account go down, but it beat getting into debt.

It’s easy to go into debt and to fall off the plan when a surprise expense makes an appearance. You put this on your credit card and you fall behind. Then it feels like you’re never going to catch up.

What if you want to quit your job?

I’ve written extensively on quitting your job.

This is an important aspect of saving up money that hardly ever gets discussed.

“I hate my job.”

Whenever I hear this, I can’t help but wonder why this person doesn’t just quit. Then I remember the reason. They don’t have any money saved! You can’t quit when your bank account is empty.

Money in the bank means that you can leave a job that you hate to pursue a new gig.

Are you allowed to have fun?

YES!

  • I want you to get wasted and have a good time.
  • I want you to travel and explore the world. or do whatever interests you.
  • I want you to buy new running shoes without feeling guilty.
  • I want you to go axe throwing or to do whatever silly idea comes to mind.

This is why I save. I save to do whatever I want to do. I save to have money for everything that I want. I save so that I don’t feel guilty about going out.

So how much are you supposed to save?

I hold my money in cash until I’m ready to make a move. I’m always holding money because it helps me sleep at night. I have my condo, my rental property, investment in stocks, and my retirement account. Then I have Studenomics which I’m always reinvesting money back into.

Here’s how much I believe you should try to have in the bank:

  • $1,000 in your checking account to deal with life.
  • At least $10,000 or six months worth of living expenses in your savings account.

Then you invest. There’s no limit. Keep on making more money. Keep on investing.

If you’re in debt:

  • $1,000 in your checking account to deal with life.
  • Enough money to cover your debt payments. Be aggressive with debt. Pay off your debt like Jacquelyn did. I hate debt and believe that you should try to pay it off. Focus your efforts on paying off your credit cards and other high interest date.

The truth is that I don’t have a conclusive answer. I don’t see the finish line. I plan on focusing on the following:

  1. Making more money.
  2. Putting this money back into my business.
  3. Looking for investments.

I would love to hear from readers and writers.

How much money should you save? Is there an end game to this personal finance stuff?

2 thoughts on “How Much Money Should You Really Save?”

  1. That’s a good guideline. $1,000 in checking and about $10,000 in savings. Six months of expense seems a bit high, but anywhere from 3-6 is good.
    My final target is $5 million! I’ll call it good once we get there. 🙂

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