As you age and go through the different challenges in life, your financial and personal goals will change from time to time. However, no matter what phase of life you’re in, you can never be too young or old to save money. Expert accountants on property and construction can guide you through saving for your new home and paying your taxes.
However, how much should you exactly be saving for your lifestyle? Although there’s no ‘one size fits all’ approach to this, here are the ‘ideal’ estimates of how much you should be saving in your 30s, 40s, and 50s.
In Your 30s
When you reach 30, you should double your yearly income savings and begin investing for significant returns. The earlier you start, the more time and opportunities you have to let the compounded interest work for you. You can do this by opening an account with no ATM access or search for long-term and better yields, so the penalties can deter you from tapping into your savings.
Moreover, consider making a 10-year financial plan to help you determine what you can do during this stage of your life while planning for down payments on a home or investing more in your career. It’s also ideal if you start thinking about saving for your retirement, and at this stage in life, you should be saving around 16% of your annual income to let yourself comfortably retire at 65.
In Your 40s
When you reach 40, you’ll want to save at least three times your current salary in savings. At this stage of your life, you should be focusing on trying to make as much money as you can as it’s the stage where you’ll be considering expenses for your home, cars, and your children’s education (if applicable).
A great way you can keep your finances intact at this age is by following the 70-20-10 spending guideline. It encourages you to spend around 70% of your income on living expenses, including monthly bills, 20% on debt if you have some, and place the remaining 10% on your savings.
In Your 50s
When you reach 50, you’re more likely to enjoy an income boost or getting paid more than you ever were in your life. You don’t need to be a CEO or a company executive to achieve this — if you’ve stayed in one organization for decades or longer, your tenure will ensure that you’ve been receiving fair pay increases and bonuses. At this point, you should save around five times your current annual salary.
However, it will still depend on your monthly household income. For instance, if your income is $75,000, you should try to save at least 3.9 times of your annual income to retire at 65. Or if you have a higher household income, you’ll need to save more since Social Security usually gives out a lower percentage of pre-retirement income to high-earning individuals.
There are no hard and fast ‘rules’ regarding how much you should save based on your milestones, but using your age can serve as a guidepost when determining how much you should save for different life events. Try following the recommended estimates, and you’ll be living the rest of your years comfortably, lavishly, and happily.