I have been asked before by friends how much they should put into their savings account each month.  A nice general figure is about 10% of each paycheck.  This may seem like a lot of money, however, it really is necessary, especially in this day and age of financial uncertainty.  And really, you should start saving as early as possible.  Because the later you start, the more you will have to save each year to have enough to live on when you retire. 
     Of course, if your job has a 401k, then that is where your efforts should be focused.  There are a couple reasons for this.  The first is that what you put into a 401k is a tax free contribution.  Additionally, many employers contribute to the fund as well and that is just free money.  You can also choose how aggressively or conservatively your money is invested.  The younger you are, the more aggressive your investments should be.  Lastly,  these funds are often times managed by investors who know the market and help you earn the most out of your money. 
     Even if you have a 401k, you should still put money into a separate savings account.  Build up enough to have at least 6 months of living expenses and then you can start a separate portfolio.   The 6 months of living expenses is important in case you lose your job, have a medical emergency or some other emergency comes up. 
     If you cannot save 10% each paycheck between a savings account, an IRA, or a 401k etc; then start off with 5% and then increase 1% every year.  If you are having trouble thinking of where you can cut expenses, below is a guideline of what percentage of your paychecks should go to each general expense. 
    

• 15% transportation: Including all car payments, gas, repair, insurance, taxis, and public methods.
  
• 35% housing: This means your mortgage, taxes, home insurance, maintenance, and any other living costs (utilities, renovations, and the like). It may be hard to stick to this 35 percent because of real estate costs, but get as close as you can. Before you sign on the dotted line for a mortgage, create a new budget that includes what the monthly payments would be. If you're cutting it too close, can't save, or have to drastically cut corners, it might not be worth it.
  
• 10% savings: Put aside money for your 401(k), IRA, and any other retirement or safety-net funds. Saving the full 10 percent may prove difficult when you first start out, but try to save at least 5 percent and increase your savings by at least 1 percent each year.
  
• 10% debt repayment: This means credit cards and student loans. If you don't have debt, put this money toward your savings or housing percentages -- whichever needs it most. Just remember: Pay more toward your credit card debt and the minimum on your student loans. In most cases, student loans are cheaper debts (because of the low interest rates) that are okay to stretch out.
  
• 25% everything else: Before you get too excited about this chunk of cash, remember that it has to cover your medical expenses (doctor visits and prescriptions), food, clothes, entertainment, and travel. Besides medical treatments and the necessary food items, this is where you can be the strictest with your budget. Track this spending closely (on a computer or even in your day planner) -- it'll help you narrow down what you really need. After all, if you can save here, you might be able to put more money toward your home, your retirement, or paying off your debt.
• 5% miscellaneous: Charity donations, unforeseen additional amount needed by other categories.

     You will find as time goes on, it will get easier to save.  And by following these simple guidelines, you will be making progress towards your future and eventual retirement. 

Tags: Savings Financial Money