Ah, yes, the age-old question for every adult – how much money do you have to save each month to secure a good living, and potentially avoid going to the moneylender. This is a tricky question to answer, as everyone’s got their own expenses and earns a different income. There is no bulletproof savings plan that can cover all people, but there are some general rules that you can abide by and use as guidelines during your effort.
How Long-term Is Your Plan?
How long-term is your plan is the first thing you have to ask yourself. Again, the answer might differ – maybe you’ve got a money goal rather than an age goal, maybe you’re thinking a decade, maybe two. However, there are the three standard plans for saving money:
· Rule of thumb
Let’s take a look at them one by one.
Rule of Thumb
This is the most general plan you can make. It’s very simple, and, ideally, it should act as a lifetime plan.The general rule of thumb is that you ought to save at least 20% of your income to ensure you have a decent amount of money by the time you retire. This rule of thumb rule is part of the so-called “50-30-20” rule in which you’re supposed to spend 50% of your income on necessary expenses, 30% on discretionary items and the last 20% goes into your savings account.
In Singaporean terms, the average person earns some $3.700 a month. Naturally, a piece of this money goes to your retirement fund automatically, leaving you with some $2.960 to work with. If you save some 20%, this will net you some $592 saved a month, and, if you open a standard savings account, you’ll get a 0.125% interest rate, netting you some $71.540 after 10 years of saving. However, this isn’t the most
efficient way to save money, as the interest caps at some $22.000, or six months, and you’ll have to think about investing it.
A short-term plan involves saving enough money to cover expenses that you might expect to occur in about a year. These involve taking vacations, holiday gifts, taxes, birthdays, anniversary gifts and other expenses that you might expect to arise within a year. When you do the math, you could save about $5000 in about nine months by putting down some $555, which is a sum close to that 20% we were talking about in the rule of thumb. This is also a good way of saving some money to start an emergency fund in case some misfortune befalls you.
Long-term plans involve plans made to cover expenses in the next decade. These plans are a bit more difficult to craft, mostly in part it’s hard to predict that far into your future, and partly because we often don’t think that far ahead, but concentrate on the matters at hand.
The thing about these plans is that you’re usually going to tailor them to a single goal. These goals might include buying a house (or making the down payment, at least), doing major refurbishing of your existing home, buying a car, replacing larger appliances around the house and similar things. In that case, you need to assess how much money you need to pay the expense and divide that sum by the total number of
months. However, a lot of things can happen within 10 years – the price on that house may go up or down, you might have unforeseen expenses that your emergency fund won’t cover, heck, even the stock market might crash, leading to an economic crisis. The key to making such long-term plans is constantly following the rules, and adjusting your savings efforts accordingly.
Long-term plans also include expenses you expect in a timeframe longer than a decade. Such expenses include forming a college fund or buying a new home altogether, perhaps even opening your own business. Again, these require lots of planning, calculating and following the news.
Lifetime savings plan is basically your retirement plan. Now, you might think you don’t need a retirement plan because your company includes a retirement plan, but, maybe you should do a little bit of saving yourself just in case. As a rule of thumb, you should be saving some 10% of your income to include a sizable amount of cash by the time you retire. This 10 % ought to come out of your 20% rule-of-thumb plan, which means you’re only left with 10% for your goal or emergency fund. However, this 10 % don’t need to come out of your own pocket entirely, as your employer’s match counts too. This means that, if you put down 5%, your CPF plan should add another 5%, which will easily take you to your goal.
What Should You Do if Your Savings Plan Exceeds Your Income
Cut spending and/or increase your income – it’s as simple as that. If you see that you won’t be able to fulfill the 50-30-20 plan, then you need to assess your monthly expenses and make budget cuts. Try to eliminate all the things you don’t need and things that you can live without. This might sound a little cruel, but if you want to reach your goal, you have to tighten your belt.
Secondly, increase your income. The two plans can be done in conjunction or individually, based on your income. Get a job on the side, freelance or even take classes and courses to better your skills and possibly land a better job. There are many options, you just need to find one that sits the best with you.
And, that’s all you need to know, ideally. As we said, however, there are many factors that govern our lives, and, by extension, our income. Even so, the maxims we’ve laid out for you today work, not just on paper, but in practice too. These are very common-sense pieces of advice, and, should you decide to follow them, you’ll find that they can and will lead you to your savings goals. In times of emergency, if you need fast loan, simply look for EasyFind Fintech Singapore as they have some alternative solutions available for you.