Invested In U / Managing Your Money / How Much of My Paycheck Should I Be Saving?

How Much of My Paycheck Should I Be Saving?

Are you saving enough money for your future? That can be a tough question to answer. Saving for your future is about more than putting a few dollars from your paycheck to the side every now and then. To truly save in a way that will have any meaningful impact on your future, you need to really think about that question – am I saving for my future?

When life throws something unexpected your way, will you be financially prepared? Learn how to build an emergency fund.

Why U Should Save

If most people took a hard look at the financial decisions they are making, their answer would unfortunately be no. It’s not that people who aren’t saving for their future are irresponsible, far from it. Most people aren’t saving as much as they should because they feel like they have none to spare. Saving for your future requires you to be more concerned about a hypothetical future scenario that requires money that’s been saved away – which is hard to do when the water heater needs to be fixed right now. The idea of saving money can almost feel like a luxury.

It is possible to combat that feeling of being stretched too thin to save. By making a specific plan and critically looking at what is financially possible, you’ll be surprised at how quickly your savings will start to grow.

The first thing that you have to do, is determine just how much money should I be saving every month from my paycheck? To answer that you’ll need to know about the 50/20/30 rule. This financial planning system requires you to consider your monthly budget as three different categories.

The 50/20/30 Rule

Essentials – 50%

Half of your paycheck 50% of your budget should be used for necessities in your life. This may seem like a large percentage but it’s really not if you think of everything that would be included in this category. These are the expenses you have to pay and include:

  • Housing
  • Food
  • Transportation
  • Utility bills

Savings & Dept Repayment -20%

Dedicate 20% of your budget should go towards financial priorities which includes debt payments, retirement contributions, and saving for the future. If you’re thinking that 20% sounds like a lot of money – you wouldn’t be alone. But we’re here to tell you that it’s not only important to save that money, but it’s not that hard to do – not if you start planning your monthly budget using the 50/30/20 rule.

If you really and truly don’t think that you can meet the goal of 20% every month, that’s ok. Instead try 10% or 5%. The most important thing is that you’re setting a clear savings goal and actively trying to achieve it. Having a specific savings goal each month makes you more likely to stick to it rather than the vague notion of “Oh I’ll just save what I can.”

Personal Spending – 30%

The remaining 30% of your budget should be discretionary spending for lifestyle choices like dinner out or your Netflix subscription. This is the section that can make or break your budget because it’s where unplanned splurging happens. By capping your personal spending at 30% of your budget it will help ensure that you don’t put your savings at risk.

If you want a more specific amount for how much you should be saving, visit our financial calculator page.

Union Helps U Save 

If you’re looking to grow your savings account even more, consider a savings account with a competitive interest rate. A Certificate of Deposit would also be a great way to increase your savings – where if you put a certain amount of money into a CD for an allotted amount of time you’ll receive a higher interest rate.

You might want to think about opening a Cash Back Checking and Savings account. When you spend money with your cash back debit card, you’ll receive cash back that you can save in your cash back savings account along with your monthly savings.

Union Cash Back Checking Accounts Include

  • No limit on transactions
  • Monthly Cash Back Rebate on all pin-less based debit card transactions
  • Calculate cash back at a rate of 0.4% on purchases up to $750 per statement cycle
  • Calculate cash back at a rate of 0.6% applied retroactively on purchases over $750 per statement cycle
  • Free online banking and bill pay

Leave A Comment