Your savings rate is the percentage of your income that you save. You can calculate your savings rate by adding up all your savings and investments for the year and dividing it by your total income for the year.
For example, let’s say you earned $50,000 in 2019 and you saved $10,000. Your savings rate would be 20%.
Your savings rate is important because it can help you reach your financial goals. If you want to retire early, for example, you’ll need to save a higher percentage of your income.
There’s no magic number for what savings rate you should aim for. It depends on your goals and your lifestyle. But in general, a good savings rate is 10-15% of your income.
If you’re not sure how to start saving, there are a few simple steps you can take:
Figure out what you want to save for
The first step is to figure out what you want to save for. Do you want to retire early? Save for a down payment on a house? Build up an emergency fund?
Knowing your goals will help you figure out how much you need to save.
Automate your savings
One of the best ways to save money is to automate your savings. Have a certain percentage of your paycheck deposited into a savings account or investment account each month.
Spend less than you earn
This may seem obvious, but it’s worth repeating: You can’t save money if you’re spending more than you earn. If you want to save money, you need to make sure your spending is under control.
Invest for the long term
Investing is a great way to grow your money over time. If you’re investing for the long term, you can afford to take more risk and invest in stocks.
Live below your means
If you want to save a lot of money, you need to be willing to live below your means. That means spending less money than you make and making do with less.
Saving money is a key part of building wealth. By following these simple steps, you can start saving more money and reach your financial goals.
