A lot of financial experts suggest we save 10-20% of our income. This is evident in the 50/30/20 budget and in books such as David Bach's Finish Rich Series (Smart Women Finish Rich, Smart Couples Finish Rich, Start Late Finish Rich). The short answer is that you should save a minimum of 20 percent of your income. At least 10 percent to 15 percent of that should go toward your retirement accounts. The other 5 to 10 percent of that should go toward a combination of building an emergency fund, creating other long-term savings, and paying down debt. (The Right Percentage of Income to Save Each Month,November 2021).
Why 10-20% of our income? Because for most people, this is a manageable amount to set aside and save. Chunking your money in this way is an easy strategy to manage your finances because it means you know exactly how much you have to spend and to save each month (MorningStar, 2020).
Try setting aside 10-20% of your income for the next 3-6 months and reflect on what you find. Is this easy? Is this challenging? Why or why not? This will help you to set aside money on a regular basis and help to build or maintain an emergency fund for you in case anything were to happen down the road. This is your personal "insurance" policy to help with unexpected expenses and events to ensure you have the money to spend on these emergencies rather than turning to credit. Give it a try and see what you think. Signed, Filipina Budget Girl.
