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How Much of Your Money Should You Put In the Bank?
For many people, saving money is just something that is very difficult to do. For them, even the practice of merely spending less money than what they have or what they earn is difficult. Usually, the equation for these people is Income - Expenses = 0 (or worse, -$ or debt).
So, how much money should you save in the bank? And if there is anything left, what will you do with it? To determine how much money to save; where to place it; and the more difficult task of making sure it remains there, you must set realistic goals. Likewise you have to keep your spending under control. There is no other way to do it.
1. Set your savings goal. What are you saving for? If it is for a short-term purpose only, it is relatively easier. However if your goal is for a long-term purpose such to set you up for life (retirement), then proper planning is necessary. Aside from determining how much money to deposit in a bank account that you must set aside from your regular income, you also need to think of investment options to hasten the achievement of your goals. If you have enough money left after your expenses and savings, putting it in low-risk investment opportunities such as mutual funds or government-issued bills are good options.
2. Decide on a time frame. For long-term goals, set specific time frames for certain intervals, say every 5 years. Make sure that your savings in the bank is on track to your goals for each of your interim time frames. Do not be discouraged if you fail to meet your interim goals. Just try to make up for the deficit in future deposits.
3. Before you can determine how much money you can start saving in a bank account, you have to determine how much money you owe. If possible, eliminate your debt first. This is the quickest way on how you can free up some money that you can use for other purposes. The sooner you get rid of the debt, the earlier you can start saving. This will also afford you bigger amounts to save in a bank account.
Another approach is to set a definite amount from your monthly income to deposit in the bank while you pay your debts. Depending on your debt amortizations, monthly expenses, and your set saving goals, 10 - 20% of your monthly income is the ideal amount to set aside for savings; as soon as your paycheck comes in, immediately set aside a fixed percentage and make a deposit to your bank account. Once you have made a deposit, forget about it so you will not be tempted to spend it.
Limit your expenses to the essentials and for debt payments. Spend only the amount you have, net of your savings deposit. Make arrangements with your creditors and commit only what you can afford to pay with your remaining disposable income. Most debtors will agree to discuss restructuring rather than risk a total default on your part. Always focus on your savings goals in order to motivate you and keep you from spending irresponsibly.
Because we all can be smarter with our money.