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How Much Money You Should Have Saved at Different Stages of Your Life

How Much Money You Should Have Saved at Different Stages of Your Life

Would you love to be financially independent? Personally, it means having enough money to do whatever you need to be done without having to worry about the state of your finances because your finance is still great.

Yes, I know saving can be quite difficult. But I’ve found that being too strict with savings can boomerang, you have to give little leeway to enjoy yourself and still save. You don’t have to cut off every enjoyable thing in your life to be able to save. So, my advice? Don’t be too strict on yourself about it, you can have fun while saving enough for the future.

This is achievable, yes, you can do it! Let’s see what you can do to make saving easier:

Important Rules to Follow When You Save Money

  • You do not necessarily have to have a specific sum. Instead, you should have a specific percentage.
  • A specific percentage is important because the percentage would adjust as your income and profit increase or decrease, without affecting your livelihood.
  • You do not have to increase your spending rate to match your income. Instead, you should rather increase your saving percentage if you find that you have a lot more money left after your taxes, expenses and bills have been met.
  • Collecting precious items can be an interesting idea to save money. You can collect gold, silver, diamond or anything that keeps appreciating irrespective of inflation.

How Much You Should Save at Different Stages of Your Life

The Stage of Starting your Career

At this stage, you are most probably in your 20s and saving is very unlikely to be a priority as there are numerous expenses. However, it is reasonable that you should aim to save 25% of your overall income yearly. This means that you would try to cover up all your expense (including debt repayment) with 75% and make sure you DO NOT exceed that. If you properly plan your budget, you should be able to save enough for the future.

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    The Stage of Bringing up a Family

    At this stage, you are in your 30s, 40s, and 50s and long term saving is even more difficult with lots of responsibilities, in addition to short and medium term savings for emergencies and children’s college fees. However, it is advisable that you should have twice the equivalent of your annual income saved up every five years. For example if your annual income is $50,000, you should aim at saving up to $100,000 in 5 years.

    Have your savings account linked to your main account so you can transfer your agreed funds into it at the start of each month. This would make it easier to save and remove procrastination.

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      Photo credit: Source

      The Stage of Thinking of Future Retirement

      At this stage you should take stock of your savings and work out what you might realistically expect from your lifelong savings plans.

      Through all the saving stages, some tips to help you achieve your main saving goals include:

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      Staying on top of your debts and getting a good credit score.

      Your credit score is your financial history and if things get dire you might need to get a loan and you want to be sure that you have been paying off your debts and keeping a clean financial slate.

      Having an emergency fund

      When emergencies happen or you lose job, to avoid dipping into your long term or retirement savings, you can fall back on your emergency funds.

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      At the end of the day, saving towards retirement is a long game of saving and saving and saving money. If you are unable to meet your saving goals, it does not make you a failure. The important thing is to get back on track as soon as you can.

        Photo credit: Source

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        Last Updated on June 6, 2019

        The Average Retirement Savings and How to Save Wisely

        The Average Retirement Savings and How to Save Wisely

        Are you on track for retirement?

        If not, don’t worry, I’m not sure either. I save each month and hope for the best.

        Fortunately, I’m at an age where most people don’t save so I’m ahead of the curve.

        But, what if you aren’t in your 20s? What if you’re near retirement and are looking to gauge where you stand?

        If so, keep reading. Here’s how to prepare for retirement and save wisely during the process.

        What Does the Average American Have Saved for Retirement?

        Saving for retirement is tricky.

        Tell someone straight out of college to save $10k a year for retirement and it’ll be next to impossible.

        Make the same request to someone decades older and they’d be more likely to be able to save this amount. But, a 20-year old college student can be “financially ahead” of someone saving more than them. Why?

        Age matters in your financial journey. The younger you are, the more time you have to save and put compound interest to work. As you get older and have more saving power, you’d have less time to put compound interest to work.

        Here are the average savings Americans hold by age bracket:

        20’s – $16,000

        During this stage, most people are paying loans and moving up the corporate ladder. Your best bet during this stage is to focus on eliminating debt and increasing your income. Don’t focus only on getting a high-paying job neither.

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        Instead, focus on learning via Podcasts, reading books, and taking specialized courses. Doing this will make you more valuable and give you more career options.

        30’s – $45,000

        At this stage, you’ve hopefully escaped your entry-level salary and work at a career you enjoy. Your earning power has increased but you now have more obligations. For example, marriage, kids, and a mortgage.

        Set a plan to pay off all your debt and focus on eliminating unnecessary expenses. Leverage financial tools like Personal Capital to ensure you’re on track for retirement.

        40’s – $63,000

        This is the stage where you’re at the prime of your career. Top financial institutions recommend you have at least 2 to 4 times your salary saved up. If you’re falling behind, start maxing out your 401K and Roth IRA accounts.

        50’s – $115,000

        During your fifties, you’re close to retirement but still, have time to save. You may be helping your kids pay college tuition and other expenses. Since you’re at the peak of your earning power, max out all your retirement accounts.

        60’s – $172,000

        By this point, you should have about eight times your salary saved up. If not, you’ll depend primarily on social security benefits averaging $1400 per month. Max out all your retirement options as much as possible before retiring.

        Ways to Save Money on a Tight Budget

        The sad reality is that most Americans aren’t saving enough for retirement.

        Even high-earning power isn’t enough to secure one’s financial future. You need to have the discipline to save for retirement while time is in your favor. Don’t wait for you to have a high salary to save, start with having a small budget.

        First, get a clear picture of where you stand. Write down a list of “needs” and “wants.” For example, Netflix and Amazon Prime are “wants” and a “cell-phone” is a need.

        Use tools like Personal Capital to analyze your spending patterns. Personal Capital allows you to add all your financial data in one place–making it a powerful option to gauge where you stand.

        Once you know all your expenses, organize them from highest to lowest expense. When you can’t cut more expenses, call your service providers to negotiate a lower price. If you’re not good at negotiating, use services like Trimm to lower your monthly expenses.

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        How to Save Money Each Month

        By this point, you know the average amount of money you should have saved for retirement based on your age.

        But, breaking this down into monthly goals can be challenging. Here are some rule of thumbs to follow:

        Aim to contribute 10%–15% of your salary each paycheck. Review your progress each week.

        Why so often? The reality is that life gets in our way and you will have many financial setbacks. Your goal isn’t to be perfect but to get back on track instead.

        Reviewing your finances weekly lets you know where you stand with your retirement. This doesn’t have to be a long process either. All it takes is login in Personal Capital to view your net worth and check how much you have saved for retirement.

        Turn saving into a game and aim to save more each month. It will get challenging but you’ll get creative and find more ways to save.

        Top Money Saving Challenge Tips

        To prepare for your financial future and not be another statistic you need to be different.

        How?

        By adopting new habits that’ll help you become a saving machine. Here are some ways you can save more:

        Automatically Contribute Towards Retirement

        If you’re working for a company, you can automatically contribute towards your 401k. If you’re not currently contributing more than 10%, make this your goal. Contribute 1% more today and automatically increase this amount a year from now.

        Odds are that you’re not going to be negatively affected by contributing 1% more. Many times we spend our money on things we don’t need. Contributing more towards retirement is a great way to secure your financial future.

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        Use the Right Tools to Know Where You Stand

        Once you’re contributing more towards your retirement accounts, gauge your progress. Make use of finance tracking apps to help you view the big picture of your retirement.

        When I’d first signed up for the app Personal Capital, I didn’t know I had a negative net worth. Despite saving thousands of dollars, my debt brought my net worth to the negative. Knowing this motivated me to save more and spend less.

        Now, I have a positive net worth. But, it was because I was able to view the big picture using the app. Find out what your net worth is using a finance tracking app and you may surprise yourself.

        Bring in Experts to View Your Blind Spots

        If you have too little or too much money saved, you should consider hiring financial experts.

        Why?

        You may need someone to hold you accountable to help you reach your financial goals. Or, you may need help managing your money as effective as possible.

        Regardless of the reason, getting help may help improve your financial situation.

        Before you hire an expert, find out which areas you need help the most. For example, if you’re constantly overspending, find a debt counselor. If you’re struggling with choosing the best investment options, hire a financial advisor.

        Speed up Your Retirement Contribution

        After learning how to manage your money well, the next best thing is to earn a higher income.

        You’re capped at how much you can save but not much you can earn. Even if your employer isn’t giving you a promotion, you can still take charge of your financial future. How?

        By starting a side-business.

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        This will be something you’d work on after you’ve finished your day job. Once you start earning income from your side-business, you’ll be financially better off.

        The best part is the more work you put into your side-business,[1] the more potential it has to earn more money.

        So start a side-business in an area you’re familiar with. For example, if you enjoy writing, do freelance writing for small e-commerce businesses.

        Once you’re earning a higher income, you can contribute more towards your retirement. Don’t wait for the right opportunity to secure your financial future, create one.

        Reach Financial Freedom with Confidence

        What if you were able to retire tomorrow with no problem, all because you’d have enough money saved up and little to no debt left to pay off? How would you feel?

        My guess is that you’d feel happy and relieved.

        Most Americans are falling behind their retirement goals for many reasons. They’re not prepared, they carry bad money-habits and are thinking short-term.

        For you to retire successfully, you need to work backward and adopt better habits. Contribute more towards your 401K and focus on growing your income.

        If you do, you’ll save money and pay debt faster.

        Don’t beat yourself up if you’re behind your retirement goals. Take the first step today towards a brighter financial future. Isn’t retirement worth the hard work and sacrifice to be at peace?

        Featured photo credit: Huy Phan via unsplash.com

        Reference

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