Knowing how much you should be saving can be like asking “how long is a piece of string?”. Realistically, there are so many variables that can determine how much you should be putting into your savings each month. You might think that high earners would be better at saving their money; after all, having more disposable income after bills should leave behind more for storing in savings. However, research from investment platform Hargreaves Lansdown paints a very different picture. According to their figures, almost one in four people earning more than £100,000 a year are concerned that they wouldn’t have enough to support themselves in an emergency.
These statistics become increasingly worrying for even higher earners, with 12% of households bringing in £150,000 or more stating that they wouldn’t be able to survive on their savings for a single month. Seemingly, rather than achieving greater financial security, having more money means many people spend their disposable cash on luxury goods and services, rather than saving it. As an IT professional, you’re likely already or well on your way towards being a high earner; according to the Office for National Statistics (ONS), the average salary for IT project and programme managers is upwards of £50,000. As a result, you may need to reconsider your savings goals. Here are a few things to consider with your savings, as well as a couple of ideas on how to improve.
Supporting yourself now and in the future
The point of having savings is to ensure that you have money safely stored somewhere to support you and your family if you ever need it. That’s why your priority should be to have enough to cover your expenses in case of an emergency.
A good target for how much you should put aside for emergencies is six months’ worth of expenses. This amount ensures that you’re able to afford your lifestyle if your income drops for any reason.
Your expenses may be simple, consisting of food shopping, mortgage payments, and bills for yourself. Or perhaps they’re larger, including school or tuition fees for your children and maybe repayments towards an expensive car.
Regardless of how much your personal monthly expenditures are, knowing that you have enough to cover your expenses for at least six months is a good starting point.
Improving your saving habits
If you’re concerned that your savings aren’t quite sufficient for your needs, you might be reassured to find out how easy it can be to improve.
Here are just three ways you could consider increasing your savings:
1. Create a budget
Creating a budget can be hugely transformative to your finances, giving you a comprehensive picture of all your incomings and outgoings.
Crucially, having a visual way to see your money means you may notice areas where you can cut back your spending.
For example, you may have subscriptions and memberships that you don’t need or even use regularly. You could consider cancelling these and then putting this money straight into your savings each month, instead.
2. Prioritise saving over spending
It may seem obvious to say that you can simply prioritise saving to improve, but you can make a big difference to your savings by paying into them first.
Rather than saving whatever is left at the end of each month, pay yourself first. When you receive your income, include your savings goals as a necessity and put money into your account first before you start spending on luxuries and things you want. That way, you can be more confident that what you have left is truly disposable.
Much like with your budget, putting your savings first can help you to find expenses that you don’t really need to spend on at all.
3. The “50/30/20” rule
The “50/30/20” rule is a classic financial planning tool you can use to reach your savings targets. It involves splitting your income by percentage so that:
- 50% goes towards household bills and compulsory expenditures
- 30% goes on other things you want to spend your money on
- 20% goes into your savings and towards paying down debt.
Using the 50/30/20 rule is particularly useful as it prevents your available cash from filling the space, meaning you save a healthy amount each month no matter how much you’re earning.
Work with us
If you’d like help working out how much you need to be saving to live the kind of life you want, you should consider working with a professional financial planner.
At Bowmore Financial Planning, we can provide comprehensive, personalised financial advice that’s suited to you, your goals, and your personal circumstances, no matter what they may be.
Email enquiries@bowmorefp.com or call 01275 462 469 to find out how we could help you.
Please note
This article is for information only. Please do not act based on anything you might read in this article.
