There are all kinds of equations, blogs, ideas, monthly challenges, spreadsheets, or apps, that can tell you how much you should be saving every month. Be it for a specific goal, e.g. a wedding, house deposit or a new car, or it could be for long term savings, e.g. investing, buying a rental property, aka passive income sources. Some say you should have at least 3-6 months of expenses as an emergency fund.
Sometimes how much money we ‘should’ save and how much we actually end up saving are poles apart. Saving is not the most fun thing to do but in the long term it will reap benefits like nothing else.
Know your monthly finances –
I swear by my month finances planning document (free pdf download here). It makes it so easy to just punch in the numbers and know how much money you should be putting aside every month for you. Initially our numbers didn’t match the table, we’d just bought our new home and were spending more on mortgage than the rent before, some new-home expenses were coming in. But slowly but surely we’ve pruned our expenses.
Knowing your finances is a game changer. You can achieve any financial goal by having clarity of your income and expenses. In the last six years, we have moved a continent. We moved to Australia as a student, worked part time and casual jobs. We’ve both had full time jobs for about 3-4 years now. We have been able to pay ~$10,000 for permanent residency costs, new car paid in full $27000, paid house deposit $50000, been on over 6-7 overseas trips, two of which were vacations, others to visit family, and several domestic vacations as well. We have also paid off about >$50000 student loans while accomplishing everything else. By no means do we earn an extravagant salary. We just plan everything in detail, put blinders on, and work like hell to reach a goal.
Pro-tip – Unless you are actively paying down debt, allow yourself some comfortable buffer with your expenses, so you can sustain this lifestyle long-term. Living in extreme frugality is really not sustainable for most people.
Every month is not the same –
Some months are so much better than others. Our goal is to save $2000 every month. Here is a picture of our savings in 2021 so far, its not pretty –
Some months we crush and some not. But we can stop living. We have emergency savings that doesnt get touched for anything. Its for well emergencies.
If you haven’t saved as much as you thought you would, don’t beat yourself up about it and plan to do better next month.
What if you dont have debts –
All of this planning is great if you have debts to pay, children to feed. But what if you don’t have debts, do you still plan your finances? Yes absolutely. Change your allocation to things to allow more flexibility with things you would need in proportion to your income. Continue saving to improve your long term passive income sources, or kids accounts, to allow yourself a comfortable retirement. Have a sustainable financial plan so you can keep living the lifestyle the you want into retirement.