How Much Money You Should Be Saving Each Month?
If you are trying to grow your savings while living in Mississippi, then you may be wondering if you are saving enough. While any amount saved is a good start, the exact answer is going to depend on your specific situation. Most guides say 20%: but that’s not always easy to keep up consistently, and trying to achieve it may actually be detrimental in the long term. After all, you don’t want to try saving so much that you feel like you don’t have enough afterward for essentials or to service debt.
That being said, 15-20% is a good baseline to start with. Here’s why.
Why You Should Save 20% of your Paycheck
The reason 20% is a good baseline for saving is due to the 50/30/20 rule. It’s named after how your paycheck should ideally be divided into three groups:
- Essentials: those things you have to buy or spend on before your next paycheck. That means ensuring you have food, gas for your vehicle, enough to pay your student loans, etc.
- Discretionary: those things you could live without, but don’t want to, like going out, new clothes, or investing in hobbies.
- Savings: this covers things like retirement, investments, emergency funds, and general savings
How Should I Be Saving?
One of the easiest ways to save is to find a bank that offers a great annual percentage yield (APY). This is how much money your savings accrue every year. A fantastic APY will be in the neighborhood of 1.7%. While this may not seem like a lot at first, you have to consider how much you will be saving over the years.
Let’s say you’re saving 20% annually and make $40,000. That’s already $10,000 in your savings after the first year. After 10 years, you will be receiving over $1,000 a year for simply having your savings stored with the bank.
However, you can also grow your funds quicker by instead investing your savings into stocks. Instead of leaving your money to sit in a savings account and slowly grow through APY, you can take it and buy stocks that you believe will increase in value. To get the biggest bang for your buck, you can work with an investment club to pool money to get potentially greater gains by buying larger amounts of stocks and investing in more expensive stocks that would not be possible individually.
The potential downside to investing your money in stocks is the risk: it’s possible to lose a lot of your investment if the market were to shift downward. So long as you don’t need the money in the near future though that’s not too much of an issue as the market always trends upwards over time.
Need Quick Funds? Visit Mississippi Title Loans, Inc. Today
Saving can be difficult in the face of a financial emergency. If you find that you are unable to pay for essentials then consider getting a loan for temporary relief. With the help of Mississippi Title Loans, Inc., you can get a payday or signature installment loan today at any one of our convenient locations.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.