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There are a few questions I’m asked about saving. One of them is whether saving $1000 per month good. It’s all relative in the budget.
“I can save $1000 per month. Is this good enough?” It’s a question I hear a lot. People aren’t sure whether they’re saving enough for the future, whether it’s an emergency fund, retirement, or even a vacation fund.
The truth is I can never answer yes or no to this question. Not right away, anyway. It’s important to look at financial goals, the budget, and overall finances which you may be able to handle better with this guide on how to do your finances.
What are you saving for?
When looking at whether saving $1000 per month is good, you’ll want to look at what you’re saving for. If this is for an emergency fund*, this could be a great start. You want three to six months of your income as an emergency fund. Let’s say you make $3000 per month after tax. By saving $1000 per month (and that’s unlikely on that income, by the way), you’re going to have a month’s worth of income in three months. Within a year, you have four months in your emergency fund.
Of course, let’s say your income is $6000 per month after tax. That means you need to save for six months just to get up to a month of your income. In a year, you’ll have two months of income. The higher your income, the longer you’ll need to save, but the more realistic that $1000 per month is going to be.
If you’re saving for retirement, $1000 per month could be good with the right investments. Don’t worry about being in a bear market right now. That will turn around. Volatile markets are a good thing. With the right investments, saving $1000 per month could give you the amount you need for retirement. We’ll get onto that.
What about if you’re saving for a vacation or for specific furniture? Saving this type of money is excellent. You’ll get to financial goals before you know it.
So, you want to think about the financial goals you have.
Know how much you need for retirement
Something that you must look at is the amount you’re going to need to save for retirement. This is something I can help you do. We’ll look at the amount you need each month in retirement and the amount that will need to be with inflation in mind. Then we’ll look at the amount you need to save each month to reach that goal. You need to include your retirement home so that, when the time comes, you will have a comfortable place to live.
In this case, saving $1000 per month could be good. If you start early enough, you could find you only need to save $500 per month. By saving $1000 per month, you’re doubling what you need. You’ll have more for retirement if you keep saving that way, or maybe you could put the excess into another savings account.
What if you need to save $2000 to reach your retirement goal? In this case, the $1000 is going to leave you short. You’ll need to find a way to add the extra money. This is common in those who think about retirement at a later age.
Is saving $1000 per month good?
If you can save $1000 each month, do it. If you start doing this from a young age, you’ll find that it is going to go a long way in various savings accounts. You’ll have your retirement set up, and you’ll have an emergency fund quickly.
Even if it isn’t ideal, don’t let that put you off from saving. There’s nothing wrong with only saving $1000 each month hile you figure out where to get the rest of the money for your retirement. If you don’t save the money at all, you’re in a lot of trouble.
MORE: What is the 50/30/20 rule in budgeting?
Do you need help saving money? Do you not know where to start with your savings goals? Get in touch to find out how I can help you.