Jul 27, 2011

How Much Should We Save?

I called Mom today with this question. And you know what? She didn't have a magic answer. (Though after some conversation she did say she thought 20% of net income would be pretty damn good.)

Shy of not getting a magic answer from Mom, I hit the Internet. I really just wanted to know are we saving at a rate that's good, normal or crap? My gut said not crap since crap savings probably would mean we didn't care enough to be asking if our savings was crap or not. I was guessing normal to good.

I found lots of articles out there on the interwebs. Here's some of the advice they gave.
So we're looking at a 10-30% range for savings. Some of those include retirement (the 40% specifically does) and some don't.

I have to admit, playing with 30% of our income certainly sounds the most fun. A heck of a lot more fun than only playing with 10%. And where do vacations fall in there? We save every month...but then every few months we blow invest some of it in travel.

Also, what about things where you go above and beyond? That first link talks about "committed" expenses. His example is he committed to his kid's music lessons. You could cut or eliminate them but really you've committed. Our big "committed" expense is my school loans. I have Y due but we try our darnedest to pay Yx2 so one day they'll actually be paid off. (Lofty goal I know.)

Math isn't my strong suit and with all those variables (retirement, long-term savings, short-term savings, interest rates, net income, gross income - AH) this feels more like algebra by the minute. But I think I'm determining that at least 10% of our income should go to long-term and/or retirement savings. I can work with that number.

What's your take on smart savings goals?


Brittney Garneau said...

The hubs and I save 10-20% of our income every month. Yes, it means that sometimes we can't do the LEVEL of travel (fancier hotels or a day or so longer) that we'd ideally like to do, but it has not prevented us from doing anything we wanted to do. And it actually helps us really value the things we do spend/splurge on, as well as give serious consideration to purchases of any kind, since travel and "fun" purchases are things we refuse to give up, yet still feel compelled to be "responsible adults." :) Hope that helps!

Guest said...

We hadn't really thought about it in terms of a percent before. Actually crunching the numbers to figure a percent, I think we fall in the same range. For y'all, is that percent based on net or gross income and what "kind" of savings does it include? Long-term, short-term and retirement? (Assuming you don't mind answering)