Life is short and we have to take advantage of every available moment of it. But it is essential that we also prepare for the future. No doubt, these are opposing philosophies and when we move onto our twenties, it pull at us. At the same time, it gives us less time to prepare for our future. It is a bit bleak thought but as per financial experts, we need to put aside a limited chunk of money aside every month, without forgetting.
However, the biggest question here is how much money exactly you should be saving, while in your twenties. Is it even possible for the millennials today to save? More specifically, when you account for all the things that we are supposed to save for, our paychecks play an important role here, that is if it even allows for it.
Let’s take a look at how much exactly you can save!
Where does your savings go?
There are a lot of areas where your savings go and we are presenting you a basic breakdown of it all. We all earn different amount of packages and need different amount of savings in the future. By keeping this in mind, we are providing a relative study to you.
Emergency fund is named so because you can be in need of these funds anytime due to some kind of emergency. By saving a certain amount of money every month, you can use it in case something goes wrong. It could be anything, an emergency dentist visit, car breaking down or maybe you get laid off that would sooner or later will require you to tap into your emergency funds. Most people recommend saving at least an amount that equals to about three months salary for this emergency fund. It may seem like a lot to you but if you consider the fact that even after having health insurance, you will be still hooked with thousands of dollars after a hospital visit, it still might not be enough. However, the truth of the situation is you can’t plan for every emergency, but you can definitely mitigate the damage by having some sort of fund in advance.
You must be thinking, it is so far away, right! But you need to save as much as possible for your retirement. The general guideline to save for your retirement funds is about 10 to 15 percent of your income. And no way that you touch this stashed away money until you stop working for good. However, employers today help out the employees with retirement funds, that means if you there is a 401k program at your workplace, then make sure you enroll.
Yes, you read it right. Every one of us even the most workaholics, need some downtime every once in a while. But for this downtime, you shouldn’t ruin your monthly budget. No worries though, this part is the most flexible one from your savings budget that allows you to be easy with it. You can even dip into this fun fund in infrequent manner, though this amount is usually the leftover money at the end of a month.
Can this be achieved?
Your saving depends a lot on your standard of living and where you live. Talking about the average millennials, they are making somewhere around $3,000 a month or $35,000 a year. This helps us understand the problem in a much better way, let’s see:
An Ideal Budget looks something like this
Putting away around $8,800 for emergencies, that means saving $365 a month for two years
Having $437 a month in retirement fund
Coming on the rent, ideally it is 30 percent of your income that is around $850 a month. Surely, some spend less than this while some will spend a lot more, but we’ll only assume that you are somewhere in the middle of this
Groceries amount to about 10 perfect of your income that means about $300
Health insurance come to somewhere about $300
Monthly utilities are another $150
Student loan payments average out to be $150
All this adds up to approximately $2,600 a month that leaves you about $280 for fun and transportation. So, do you think that you can make this budget work? Sure you can!
Although, this situation varies as some may have student loan debt while others may not. The thing is you just have to ask yourself, is it really worth it to you!