Emergency Money: How Much of Your Salary Should Be Set Aside?
Emergencies happen, and having some money can be a lifesaver when they do. Click here to learn how much you should be setting aside.
It’s almost that time of year again! Yep, you know the one I’m talking about — the holiday season.
Many are busy preparing, but others are already feeling the panic sneaking up. The holidays always put the dent back in our budget that we’ve been avoiding all year.
You’ve heard that it’s preventable, but how much of your salary should be saved? How can you start to save funds for the holidays and emergencies when you scrape by as it is? Read on to find out.
Let’s Analyze Those Bills
You won’t know how much you can save until you know how much you spend. So, let’s dig into those reoccurring monthly bills we all have.
Here’s how to get started:
- Create a table on paper or in Excel
- List every biller you have
- Write down the average monthly payment
- Add up these amounts to reach a total
This final total is the amount you spend on bills each month. You should compare this total to your average monthly salary.
If your salary is lower then this amount, then you’ve found the main culprit behind your inability to save. If this is true for you, then work towards lowering these expenses.
Contact your lenders or consider cutting back on some services.
Follow-Up With a Necessities Budget
Next, you’ll need to factor in other necessities that you buy. That means budgeting for groceries, prescriptions, gas, and other needs.
This step is one that’s often forgotten when calculating living expenses. Rent, utilities, and phone bills that come monthly are a bit easier to estimate and factor in.
Add up how much you spend on these necessities, and add it to your monthly bill amount. Take your total monthly salary and subtract these expenses.
How much money do you have left over? This critical number will help you determine how much you can save.
More Americans are now turning to Uber because they can’t afford an ambulance. Don’t let this type of situation happen to you. Instead, start building up an emergency bank.
How Much of Your Salary Should be Saved?
After the above steps, you should have a good idea of how much extra cash you have each month. Take this amount, and save at least 30% each month. If possible, then save 50%.
It may sound unfeasible at first. Remember, you’ve already got your necessities covered. So, saving this extra means cutting back on the luxuries you usually enjoy. Your future self will thank you!
Have you tried these methods and still come up short? It happens to the best of us. Consider researching a cash loan and how it works if you find yourself in an emergency situation.
Building Your Emergency Bank
So, how much of your salary should be saved? The answer is different for every person. By analyzing your bills and necessities, you should get a clear idea of how much you can start saving.
Building up an emergency fund is critical for both individuals and businesses. Are you looking for more actionable tips and strategies for your business? Head over to our business blog to see our latest content.