FUTURE FINANCIALS: HOW MUCH OF YOUR PAYCHECK SHOULD YOU SAVE?
Because you’re constantly balancing your needs with the things you want in life, saving a portion of your paycheck isn’t always easy. That may be especially true if you’re in your 20s and enjoying the fun, friendship and travel that are such a vital part of life as a traveling nurse.
Still, socking away money for your own future is a key part of being an adult. And the process can be easier if you think of savings as a method of "paying yourself first" instead of taking away from your fun money.
In general, financial analysts recommend stashing away 10 to 30 percent of your take-home income toward a savings fund that can be spent for retirement and other future expenses. For example, Harvard bankruptcy expert Elizabeth Warren advises keeping closely to a 50/30/20 plan in which half your income goes toward needs such as rent, food and transportation; 30 percent is allotted for wants such as entertainment; and 20 percent is split between savings and debt retirement.
Additional tips from financial guru Dave Ramsey when it comes to accruing savings:
- Start by establishing a $1,000 emergency fund for unexpected expenses such as car or home repairs or medical bills. That stash will allow you to handle reasonably large bills that come your way without having to take on additional debt. Prioritize keeping that fund replenished.
- Don't attempt to save more until you’re debt-free on everything except your mortgage. Instead, live as minimally as you can while paying off your debts from smallest to largest. “Cut your lifestyle to scorched earth,” advises Ramsey.
- Add more expendable income into your $1,000 emergency fund until it adds up to three to six months of living expenses. That will provide peace of mind should your future income be interrupted for any reason.
- Once you maximize that account, aim to put away 15 percent of your income toward your retirement fund, preferably starting with an employer-matched 401(k) or Roth IRA. If that's impossible, aim for at least 10 percent.
- Consider saving additional disposable income for your children’s future college fund(s) while continuing to pay off your mortgage.
If any of those have you intrigued, reach out to a professional financial advisor and see how they can help you make the most of what you're saving.