Budgeting is something that people take very seriously. It is something that is unique to everyone and there is no set way to do it. As people create their budgets, they often think of saving money. It’s important to save money and conserve as much of their funds as possible but it’s confusing for many to understand when they are supposed to save and where they put it in their newly crafted budgets.
Saving money is important. When people save money, they often have funds available to them to address emergencies as they come up. Those that are careful and have saved enough money are often able to do things they didn’t think they would be able to do before. Saving money is not easy to do for most but it’s something that is encouraged.
Saving before Necessities
There are a number of financial experts that say people should save a percentage of their income before doing anything, including paying their bills. It sounds like counterproductive advice to many but it makes sense to do.
The typical percentage of money that people are advised to save is 10% of their net income or 10% of what their check after taxes. This amount of money will be different for everyone. If someone has a check of $548.62 after taxes, they are encouraged to save $54.86 automatically. This money should go into an interest bearing account to accumulate and grow. Most financial experts would advise that people not touch this money and allow it to grow over time for a nest egg.
There are some that think of that and wonder how they will be able to automatically save any amount of money before they pay bills. It’s something that can be done very easily. Those that want to save 10% of their income automatically can contact their bank and set up a separate interest bearing account. Once the account has been opened, the deductions can be set up via direct deposit from a payroll check. For those that don’t want to have their 10% drafted from their payroll check, the funds can automatically be taken from their bank account. This is the best way to save because it’s not available to spend once the money is made available on payday.
Saving after Necessities
There are some that don’t think it’s wise to save before their necessities are paid for. This is something that can be done for those that are disciplined enough to actually do it. Saving money after paying bills is hard for most people to do because there are always excuses to spend money that is readily available to spend. Not everyone has the willpower to stop spending money after they have paid only the necessary bills. Most will pay for everything they need to pay for, discretionary bills as well and then save a portion of what they have remaining.
Another reason financial experts don’t recommend saving after paying for bills is because the amount of money saved is different in each instance. Those that save automatically will normally save more money than those that save after paying for their necessities. Those that automatically save 10% of 548.62 will save $54.86 consistently. Those that save money after bills have been paid will save a different amount every time. If after paying bills, there is only $154.96 left, 10% of that is $15.50. The difference in those two figures adds up to be a huge amount over the course of the year.
There is no right or wrong way to save. Everyone has a different set of priorities. Saving money will never be unimportant. The way people save money should be done in a manner that is comfortable for them. If saving money is a high priority, it may be best if the money is saved automatically. Those that are more concerned with paying for their necessities before saving should at least commit to saving a portion of the money remaining after the necessities have been paid for.