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How much should you Save Every Month for a Secured Future?

dateKnowledge Centre Team dateFebruary 24, 2021 views343 Views
How much should you Save Every Month for a Secured Future?

Saving for the future should be your top priority. It is one of the most basic financial advices that you may get from everyone around you. And when you save something every month, you are making your future more secured. You are the only one who gets lost wondering about “how much money should I save every month?”. Undoubtedly, saving money to secure your family’s future is an integral part of your long-term financial well-being. For some of us, it may become a challenge to make a berth for savings every month as our expenses are more than what we earn. But saving money helps you in managing your money in a way that you will not be cheating your future self.

How much should you aim to save each month?

There is a wide range of factors to consider before finalizing the saving and investment goal. These factors may be the time of retirement, risk tolerance levels of the person concerned, financial goals, liabilities, and commitments, etc. The amount of money that one needs to save is generally expressed as a percentage of income or, to be more precise, the final take-home income.

As already said, there is no fixed number as to what amount should be saved, but for someone in the early stages of their career (say the 20s), the suitable amount to save would be 20% of the income as there may be many expenses like loan repayment. While for someone in their 50s, they should save above 50% of the income.

The amount to be saved monthly depends on the savings goals, i.e., the ideal savings rate depends on the specific long-term reasons for saving. There are three timelines to consider:

  • Less than a year- For all the 1-year goals, short-term savings can be used.
  • Less than a decade- For all the goals that need a good amount of money like, covering a major insurance deductible, staying afloat between jobs, replacing any expensive equipment or device, etc.
  • Lifetime- The one major lifetime goal is retirement or to provide life cover or death benefits to the beneficiary.

Personal goals, as well as financial goals, tend to change with age, but it's never too young or too old to save money. Now, there are many situations where one might need money; some of them have been broadly categorized as:

Your savings target will depend on your age, monthly income and outgoings, liabilities and debts, life insurance premium payments etc. Consider such factors to build your financial profile and then set a target by keeping in mind your monthly budget.

How to save money every month?

There are a lot of ways to save money. But remember, there is no “one size fits all” formula when it comes to personal finance. You may try each of the approaches for a month to compare for yourself and then you can pick the best one out of it.

1. 50/30/20 Rule

You must have heard about the 50/30/20 rule. This rule states that 50% of your monthly income may be reserved for spending on essentials like food, rent, medical bills, education fees, etc. While 30% can be put aside for discretionary spending and 20% of your income should go towards a saving pot. However, it is not always easy for everyone to set aside 20% of what they earn for savings.

2. Envelope system

It is an excellent way to keep a track of your money. While setting up the monthly budget, you must have allotted a specific amount to each of the category. Write down those categories on different envelopes. Put the assigned amount under each category inside the envelope. If you go overboard, you will get to know that you have spent more than what you had planned for spending. And at the end of the month, whatever amount is tucked away in all the envelopes, you can put it in your savings account.

3. Saving Plans

You can use saving and investment plans to put your money. A saving plan like Guaranteed Income4Life offers you a regular and steady source of income while also protecting you with a life cover. Such plans are beneficial to meet long-term financial goals as the corpus can help you attain milestones that you had set in life, for example, your child’s higher education, their marriage, etc.

5 Reasons you should save money

First of all, it is essential to know why one should save money. If any individual is looking to invest in long-term saving plans, then it becomes crucial to know why to save money. Here are some reasons why saving money can be beneficial:

1. Financial security

It is evident that saving provides financial security, and having money makes life easier. Any money piled up safely or invested somewhere with maximum returns, and minimum risk factors can help build a hassle-free life. Most people save money for their retirement plans and to stay financially secure during those times.

2. Can take calculated risks

There are many ways in which money can be saved for the future; one of the most common is to invest it somewhere. Investing money means making more money out of money. This kind of wealth creation comes with some risks.

3. Financial freedom

Saving can provide freedom. One need not be financially dependent on someone else when he/she has money saved up. It is also critical to have some cash set aside for emergencies and unexpected expenses. Saving gives flexibility with the choice of life; financial goals can be achieved easily. And this flexibility may be attained by setting a specific amount aside each month.

4. Provides for emergencies

Emergencies are unpredictable, and thus having an emergency fund can save the day. An emergency fund is cash set aside in a savings account only for unexpected situations such as accidents, an unexpected illness, etc. To keep emergency savings accessible and available, consider having an online savings account.

5. A comfortable retirement

One should aim to save 15% of the salary for retirement or start with a percentage that is under budget and manageable and then increase that percentage by 1% each year to ultimately reach an adequate percentage. The ideal way to save for retirement is by automating monthly transfers from the checking account directly to the savings account.

Saving money for the future is considered one of the important aspects of life. Money can be preserved either in a savings account or investing in some monthly investment plan. One must keep the proper understanding of the different types of investment options available in the market. Saving is a wealth collection method, while investment is a wealth creation method, and both can be worked simultaneously to secure a future.

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Tax Saving FAQs

How saving at an early stage of life will help you during retirement?

Retirement appears so far away when you're in your early age of life that it barely seems essential at all. It's actually among the most popular excuses individuals make to support not saving for retirement

How Do I File Income Tax In India

Filing Income Tax Return (ITR) is a mandatory exercise for all taxpayers, through which they report their gross taxable income in a particular financial year, claim tax deductions, and declare net tax liability to the Income Tax Department.

What is TCS tax in India

TCS or Tax Collected at Source is a tax levied by the government of India. TCS is payable by the seller who collects the tax, in turn, from the buyers at the time of sale of goods

What is the procedure to calculate the capital gain tax in India

Capital gains are described as the profits that you accrue or receive through the sale of capital assets. When you sell any capital asset for an amount, more than you paid for it, your sale accrues capital gains.

How can I save my taxes legally?

In India, maximizing tax savings is an integral part of financial planning. While you may include different financial instruments in your portfolio

How can one get a full refund of income tax in India?

In India, getting a full refund of income tax is only possible when the tax is deducted at the source, or you have paid advance tax, and the refunded amount is below the taxable limit.

How is income from other sources taxed in India?

The Income Tax Act 1961 lists ‘Income from Other Sources’ as one of the five heads of incomes, subject to taxation.

How is the tax calculated?

In India, calculation of the total tax liability, i.e. income tax payable is an essential activity for all taxpayers.

How much tax can I save?

In India, the calculation of tax liability is based upon different income tax rate slabs. In other words, the amount of tax you have to pay or can save depends upon your overall taxable income and the tax category in which your income falls into.

What are the provisions of advance tax in India?

In India, advance tax refers to the activity of paying a portion of your taxes before the financial year ends.

What is Dual GST (Goods and Services Tax) in India?

The Dual GST structure in India is essentially a simple tax with different taxation rates – the Central Goods and Service Tax (or CGST) and the State Goods and Service Tax (or SGST).

How can I save taxes on my FY 2019 - 2020 income?

For FY 2019-20, both salaried and self-employed individuals can minimize their tax income liability through efficient financial planning.

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