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What makes you financially ready?
Im really big on saving and I would like to know what amount of money is enough
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6 answers
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Jasmine’s Answer
Hello Amiya,
Fantastic question! It's really admirable that you're eager to deepen your understanding of finances. For budgeting and saving, a good starting point is the 50-30-20 rule. This involves allocating 50% of your income to your needs or essentials, 30% to your wants, and the remaining 20% to your savings. Feel free to adjust these percentages to better suit your current circumstances. Personally, I lean towards setting aside 35% for my savings as my wants are quite minimal.
When it comes to building a substantial nest egg, the amount can fluctuate based on your future aspirations, be it purchasing real estate, financing a car, or pursuing further education. My recommendation would be to accumulate savings equivalent to 5 months of your expenses (like rent, utilities, insurance, and so forth) plus an extra $3,000 to cover any unforeseen emergencies. You should be able to achieve this with a steady income, aiming for a total between 10k and 30k.
Please, don't feel overwhelmed! It's important to save at a pace that's comfortable and practical for you. I've known individuals who've moved out or relocated with just $5,000 to their name, some even with less. The future might seem daunting, but your initiative in asking this question is a clear sign that you're on the right track. I hope this provides the information you were seeking. :)
Fantastic question! It's really admirable that you're eager to deepen your understanding of finances. For budgeting and saving, a good starting point is the 50-30-20 rule. This involves allocating 50% of your income to your needs or essentials, 30% to your wants, and the remaining 20% to your savings. Feel free to adjust these percentages to better suit your current circumstances. Personally, I lean towards setting aside 35% for my savings as my wants are quite minimal.
When it comes to building a substantial nest egg, the amount can fluctuate based on your future aspirations, be it purchasing real estate, financing a car, or pursuing further education. My recommendation would be to accumulate savings equivalent to 5 months of your expenses (like rent, utilities, insurance, and so forth) plus an extra $3,000 to cover any unforeseen emergencies. You should be able to achieve this with a steady income, aiming for a total between 10k and 30k.
Please, don't feel overwhelmed! It's important to save at a pace that's comfortable and practical for you. I've known individuals who've moved out or relocated with just $5,000 to their name, some even with less. The future might seem daunting, but your initiative in asking this question is a clear sign that you're on the right track. I hope this provides the information you were seeking. :)
Rachel Thompson
Global Senior Wellbeing Manager
4
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Rachel’s Answer
Fantastic question! I've always been a strong advocate for saving. It's a skill I've had to cultivate over time, constantly keeping myself in check. The first step towards financial stability is crafting a solid financial plan. As you devise your plan, consider these crucial questions:
What are you saving for?
How much money will you need?
By when do you need to save this amount?
Then, figure out how much you need to put aside each month to reach your goal.
Throughout the years, I've discovered that dividing my savings into separate accounts for different purposes makes it easier to manage. I reassess it every quarter to determine if I need to increase or decrease my contributions. For instance, I currently have distinct savings for various needs like buying a new house, Christmas and birthday gifts, annual insurance premiums, and self-care treats.
In terms of savings, having long-term strategies is crucial, but it's equally important to maintain flexibility. Understand that what suits you now might not be what you need in the future. Regular reviews are key.
I wish you all the best in your journey towards financial security!
What are you saving for?
How much money will you need?
By when do you need to save this amount?
Then, figure out how much you need to put aside each month to reach your goal.
Throughout the years, I've discovered that dividing my savings into separate accounts for different purposes makes it easier to manage. I reassess it every quarter to determine if I need to increase or decrease my contributions. For instance, I currently have distinct savings for various needs like buying a new house, Christmas and birthday gifts, annual insurance premiums, and self-care treats.
In terms of savings, having long-term strategies is crucial, but it's equally important to maintain flexibility. Understand that what suits you now might not be what you need in the future. Regular reviews are key.
I wish you all the best in your journey towards financial security!
Updated
JOHN’s Answer
Hello:
All comes down to what you are saving for and/or what you want to do with your life.
When I was younger, I lived in roommate scenarios where rent was $400 or less for my half. I lived beneath my means, but was helpful in doing the following:
1. Having money in the bank - accumulating year after year.
2. Able to do more due to lower cost on rent. Music venues, beach trips, trips to various areas - locally or further, etc.
3. Due to that savings, was able to purchase two houses for a rental business. This could be just one house for someone to live in, in another situation.
4. Able to donate more often to help those in need.
etc.
Gratitude into your roads.
God Bless,
John German
All comes down to what you are saving for and/or what you want to do with your life.
When I was younger, I lived in roommate scenarios where rent was $400 or less for my half. I lived beneath my means, but was helpful in doing the following:
1. Having money in the bank - accumulating year after year.
2. Able to do more due to lower cost on rent. Music venues, beach trips, trips to various areas - locally or further, etc.
3. Due to that savings, was able to purchase two houses for a rental business. This could be just one house for someone to live in, in another situation.
4. Able to donate more often to help those in need.
etc.
Gratitude into your roads.
God Bless,
John German
Updated
Connor’s Answer
Hello Amiya,
I used to ponder upon this quite frequently, and rather than reiterating the same old advice, I'd like to propose a different strategy. After about a year into my profession, I gained a clearer picture of my living expenses, earnings, and potential savings. I then conducted an analysis, considering a comfortable sum of money I'd like to have each month or year after retirement, the number of years until retirement, and the duration of life post-retirement.
Here are a few assumptions you'll need to make:
1. The age you plan to retire.
2. The amount of money you'd like to have upon retirement in comparison to your current expenses.
3. Any significant expenses you might incur post-retirement (like a golf club membership, a boat, a cabin, etc.). Include these costs in your monthly or yearly savings goal.
4. The expected annual growth rate of your savings. Opinions vary, but a 5-12% growth rate is generally considered reasonable.
Next, use time value of money calculations to determine the total amount you need to save by retirement. This will help you figure out the monthly savings required to reach your retirement goal. I trust you're familiar with present and future value calculations, which can be done using Excel or an advanced calculator. There are also online resources available.
Now, with more experience in my career, I can make these assumptions with greater accuracy and determine a rough estimate of how much I need to save from each paycheck to meet my goal.
I hope you find this useful!
I used to ponder upon this quite frequently, and rather than reiterating the same old advice, I'd like to propose a different strategy. After about a year into my profession, I gained a clearer picture of my living expenses, earnings, and potential savings. I then conducted an analysis, considering a comfortable sum of money I'd like to have each month or year after retirement, the number of years until retirement, and the duration of life post-retirement.
Here are a few assumptions you'll need to make:
1. The age you plan to retire.
2. The amount of money you'd like to have upon retirement in comparison to your current expenses.
3. Any significant expenses you might incur post-retirement (like a golf club membership, a boat, a cabin, etc.). Include these costs in your monthly or yearly savings goal.
4. The expected annual growth rate of your savings. Opinions vary, but a 5-12% growth rate is generally considered reasonable.
Next, use time value of money calculations to determine the total amount you need to save by retirement. This will help you figure out the monthly savings required to reach your retirement goal. I trust you're familiar with present and future value calculations, which can be done using Excel or an advanced calculator. There are also online resources available.
Now, with more experience in my career, I can make these assumptions with greater accuracy and determine a rough estimate of how much I need to save from each paycheck to meet my goal.
I hope you find this useful!
Updated
Linda’s Answer
Hi Amiya.. It's great to see you focused on savings as one of your goals. I like to start first with my overall life goals.. both short-term & long-term... I got some great advice when I was young... to invest in the 401K of the company where I was working... they had a matching program so for every dollar I invested, they would match it up to a certain amount. As my income grew, I increased the percentage that I put into my 401K. They will offer you a few options to select as investment vehicles... the younger you are, the more you should put into stock funds... if you are confused about which ones are right for you, the company often has advisors to help. You should develop a budget to cover your monthly expenses including an emergency fund (usually up to 6 months of your living expenses) and some discretionary money to use for activities that bring you joy. It's also wise to invest in your health... start early! Find a good health club at a reasonable cost... this investment will pay dividends for years to come... I started exercising in my 20s... many years, later I am healthy & fit. Invest in good nutrition too... learn how to cook simple, healthy meals.. not only will you save money but you will have more energy & vitality to enjoy your life... make sure you are getting enough sleep as well so you can think clearly... plus sleep is a great investment in your future! Avoiding unnecessary costs; e.g, medical expenses... is just as important as your savings account. If you know someone who is happy, healthy & financially successful, spend some time with that person to learn how they have managed to life a balanced life. Wisdom from people you trust who have successfully navigated life is very valuable. Go Well!
James Constantine Frangos
Consultant Dietitian & Software Developer since 1972 => Nutrition Education => Health & Longevity.
3844
Answers
Updated
James Constantine’s Answer
Hi Amiya!
Preparing yourself financially means ensuring you have sufficient savings and income to handle your expenses, debts, and financial objectives. While there's no universal solution to the question of how much money is enough, here are some practical steps to consider:
Emergency Fund: Strive to accumulate 3-6 months' worth of living expenses in a savings account that you can access easily. This reserve can assist you in dealing with unforeseen expenses like medical emergencies, car repairs, or sudden unemployment.
Debt Repayment: Prioritize clearing high-interest debts as soon as you can. The longer you delay repaying your debts, the more interest you'll have to pay. Ensure you have a strategy to manage your debt and prevent it from becoming unmanageable.
Retirement Savings: Make regular contributions to a retirement account like a 401(k) or IRA. A general guideline is to save at least 15% of your pre-tax income for retirement. However, the amount needed for retirement will vary based on factors like your anticipated retirement age, life expectancy, and preferred lifestyle.
Investments: Think about investing in assets like stocks, bonds, or real estate to increase your wealth over time. Diversifying your investments can help you amass long-term wealth and safeguard against market fluctuations.
Insurance: Ensure you have sufficient insurance coverage to guard against significant financial risks such as disability, severe illness, or untimely death. Appropriate insurance coverage can help guarantee that you and your family are financially secure in case of an unexpected calamity.
Financial Goals: Establish SMART (Specific, Measurable, Achievable, Relevant, Time-bound) financial goals for yourself. Whether it's purchasing a home, launching a business, or globetrotting, clear financial goals can inspire you to save and invest intelligently.
Budgeting: Develop a budget that includes all your income and expenses. Regularly monitor your spending to confirm that you're adhering to your budget and advancing towards your financial objectives.
Credit Score: Preserve a good credit score by paying your bills promptly and keeping your credit utilization rate under 30%. A strong credit score can qualify you for lower interest rates on loans and credit cards, saving you money in the long run.
Professional Advice: Think about consulting a financial advisor or planner to help you devise a thorough financial plan that considers your unique situation and objectives. A financial expert can help you spot areas where you could save money or make more informed investment choices.
In conclusion, financial readiness requires a firm grasp of your income, expenses, debts, and financial goals. By adhering to these steps and crafting a thorough financial plan, you can strive for long-term financial stability and security.
GOD BLESS!
James Constantine.
Preparing yourself financially means ensuring you have sufficient savings and income to handle your expenses, debts, and financial objectives. While there's no universal solution to the question of how much money is enough, here are some practical steps to consider:
Emergency Fund: Strive to accumulate 3-6 months' worth of living expenses in a savings account that you can access easily. This reserve can assist you in dealing with unforeseen expenses like medical emergencies, car repairs, or sudden unemployment.
Debt Repayment: Prioritize clearing high-interest debts as soon as you can. The longer you delay repaying your debts, the more interest you'll have to pay. Ensure you have a strategy to manage your debt and prevent it from becoming unmanageable.
Retirement Savings: Make regular contributions to a retirement account like a 401(k) or IRA. A general guideline is to save at least 15% of your pre-tax income for retirement. However, the amount needed for retirement will vary based on factors like your anticipated retirement age, life expectancy, and preferred lifestyle.
Investments: Think about investing in assets like stocks, bonds, or real estate to increase your wealth over time. Diversifying your investments can help you amass long-term wealth and safeguard against market fluctuations.
Insurance: Ensure you have sufficient insurance coverage to guard against significant financial risks such as disability, severe illness, or untimely death. Appropriate insurance coverage can help guarantee that you and your family are financially secure in case of an unexpected calamity.
Financial Goals: Establish SMART (Specific, Measurable, Achievable, Relevant, Time-bound) financial goals for yourself. Whether it's purchasing a home, launching a business, or globetrotting, clear financial goals can inspire you to save and invest intelligently.
Budgeting: Develop a budget that includes all your income and expenses. Regularly monitor your spending to confirm that you're adhering to your budget and advancing towards your financial objectives.
Credit Score: Preserve a good credit score by paying your bills promptly and keeping your credit utilization rate under 30%. A strong credit score can qualify you for lower interest rates on loans and credit cards, saving you money in the long run.
Professional Advice: Think about consulting a financial advisor or planner to help you devise a thorough financial plan that considers your unique situation and objectives. A financial expert can help you spot areas where you could save money or make more informed investment choices.
In conclusion, financial readiness requires a firm grasp of your income, expenses, debts, and financial goals. By adhering to these steps and crafting a thorough financial plan, you can strive for long-term financial stability and security.
GOD BLESS!
James Constantine.