Set Aside This Magic Number From Every Paycheck And Watch Your Savings Grow

Whether saving for a vacation, a dream home, or just to build an emergency fund to cover six months of living expenses, setting money aside is crucial. However, knowing how much to save gets complicated with so much contradictory information online and pretty much everyone's financial situations being unique. Some people may opt to save a certain amount each month, while others use the envelope system and save whatever is left after covering their expenses. But saving doesn't have to be complicated or random. In fact, it can be strategic, and one of the best strategies you can employ is saving a percentage of your paycheck instead of a certain dollar amount.

According to financial experts, aiming to save 20% of your paycheck can be a good financial goal. Saving 20% of your income is part of the 50/30/20 budgeting rule, a common financial strategy that helps individuals divide their money between needs, wants, and savings. Aiming for this number ensures your other essentials are still met, and this model is flexible enough to accommodate for many people's unique financial goals or unpaid debts.

While saving 20% of your income may not be realistic for many individuals in this day and age, it is still a smart financial goal even if you can't quite meet it. To start, it can help to understand how much of your income currently goes to savings and other areas. This can be done by digging through bank statements or using a budgeting app to make it easier. Many who come face to face with their spending habits may find they're overspending, particularly if they eat out constantly or have a tendency to make impulse purchases. Going through this process can help you find areas to cut back to reach the 20% savings goal. With some planning, you could even put the money in multiple savings accounts, which comes with its own set of benefits.

This strategy's flexibility is also a major win. Instead of creating a rigid budget, the rule allows individuals to adjust based on their personal financial situation. For example, if you're trying to aggressively pay off debt, you could temporarily reduce your savings percentage a bit to dedicate more toward loan payments, and adjust the portions of your income dedicated to wants or personal spending as needed. The rate at which you save might slow down, but saving in steady increments — even if they're not huge — will still help get you back into a strong position and allow you to continue building wealth.