When it comes to your money, it can sometimes feel as if you don’t have power over anything.
Markets go on short-term swings that occasionally defy rational explanation. The Federal Reserve, our nation’s central bank, can change the trajectory of interest rates with just a press conference. Companies slash bonuses or freeze pay raises seemingly on a whim. And candidates you never supported get elected and pass economic agendas you never agreed with.
Yes, it’s easy to feel defeated at times.
But at Simply Money Advisors we don’t want you to take that attitude. We want you to feel empowered. We want you to control what you can control.
And at the top of the list is controlling how much you spend… and how much you save. Because, while there’s so much in the world you can’t control, you have sole discretion over how you use your paycheck.
For a little guidance, aim for the Simply Money rule of 50/30/20:
- 50% of your monthly take-home pay should go to your “needs.” Examples include your mortgage, groceries, car payments, utilities, etc.
- 30% of your monthly take-home pay should go to “wants,” such as the latest smartphone or TV, your family’s Netflix account, dining out, etc.
- 20% of your monthly take-home pay should go to savings. This can be divided into different categories, such as building your emergency fund, saving for college, saving for retirement, saving for a down payment, saving for vacation, etc.
Yes, there can be some give-and-take between the “needs” and “wants” – but there shouldn’t be any wiggle room with the 20% savings. That should stay static.
And remember, saving 20% of your money every month is a goal. If you’re not there yet, take little steps every year to get closer: reassess your budget to see which of your “wants” you can cut back, automatically increase your 401(k) savings by 1% or 2% a year, and save any raises or bonuses when you’re fortunate enough to receive them.
The Simply Money Point
Most Americans, when recently surveyed by Bankrate, say their biggest financial regret is not saving enough. Don’t let this be you. Because then you’ve really lost all control.
Instead, focus your energy on just two simple things: how much you spend and how much you save. Getting on the path to retiring well doesn’t get any more cut-and-dry than that.
To educate yourself more about retirement planning, visit our Retirement Resources library. You’ll find downloadable guides and video tutorials on topics ranging from Social Security, to managing a “forced” retirement, to how to select a financial advisor.
