How Much Should You Save?

This blogpost is going to be short. But sweet.

When I first started interacting with my friends about savings and investments, their top most question was how much ideally I should be saving.

This is a tough question and the answer might vary depending on your financial situation. Percentage of income that you can save can depend on whether you have any dependents, whether you rent or own, among others.

However, the rule of thumb is —

  1. If you can, save twice the percentage of your income as your age. If you’re 25 and if it’s possible for you to save 50% of your income, you should do that.
  2. If not, you save the percentage of your income as your age. If you’re 25, you save 25% of your income.

If  you’re in category 1, you can follow this rule till 30. The assumption is that by 30 you might start a family and your expenditure will rise exponentially. Saving more than 60% of your salary might not be possible unless you’re in a high income group.

If you’re in category 2, as a family you should try to save 30% of your combined / family income if both the partners are working. If you’re from single income family, the percentage might reduce significantly.

All in all, there’s no hard and fast rule for savings. You should try to save as much as you can and if you budget your income, expenses and investments, saving money isn’t that difficult of a job.