How Much Savings Should I have?

How Much Savings Should I Have?

To start with, it's good you have understood that keeping savings is a crucial decision for a successful financial life. Your savings can be your way out on a rainy day or even help you sponsor your goals.

 

However, if you asked 5 financial experts the question: how much savings should I have?, you will most likely get different answers. This is because there is no one-size-fits-all answer to the question of how much savings you should have.

 

But, generally, it is advisable to have enough in your savings to take care of your basic expenses within three to six months. Now, let's see how to know the worth of your basic expenses for three to six months. This will help you answer the question "How much savings should I have?"

What are Your Basic Expenses?

Your basic expenses are those expenditures that are necessary for your survival. They include the costs for your food, housing, clothing, transportation, health care, child care, and other necessities.

How Much Savings Should I Have?

To determine how much you should have in savings or what your three to six months’ worth of expenses may be, you need to do a simple calculation. This is to figure out how much you spend on your major bills.

 

You can begin with tracking your recent credit card and bank statements to check the cost of your major bills monthly. Such bills as rent or mortgage insurance premiums, loans, and other debt payments, transportation, groceries, health care.

 

Now, let's do a typical calculation: let's assume you arrived at $5000 after you've tracked and summed up your major bills monthly. Now, if you ask "how much savings should I have?" Here, you'll practically be spending $15000 on those in three months, that's the least savings you are expected to have.

 

However, this is only a general rule, you could have more to make room for other expenses that contribute to a comfortable lifestyle, that is your wants. And if you have less, you could put some plans in place to add to it. Here are some steps to take to boost your savings:

 

• Cut Down on Expenses

If you spend less, then you will most likely have more to save.

 

So, look for those expenses that do not fall into the list of your major bills and see if there are ones you can entirely cancel out. Just find some little tweaks to reduce your spending.

 

• Automate Your Savings

To make savings easy and ensure consistency you can automate the transfer of a certain percentage from your paycheck to your savings account.

Bottom Line

Hopefully, we have been able to provide an answer to your question if you're asking "how much savings should I have?". Although the general rule says you should have enough savings to cover your expenses for 3-6 months, you can save as much as you can. It is always much better to have more than less of what you need.