It’s no secret that the only way to get out of debt is to spend less money than you make. Everybody knows that. It’s common sense. But why do so many of us struggle to do it?
Most college students graduate with at least some student loan debt these days, so saving money isn’t exactly the first thing on our minds when we step into the real world. We’re more likely wondering how we’re going to dig ourselves out of this hole. (On a side note, how does one dig oneself out of a hole? Doesn’t digging just make the hole bigger?)
The truth is a lot of us don’t even think about saving money while we’re in college. It’s not until we get a job and start getting a paycheck that it even crosses our minds. Even then, whether or not we save any money depends on a lot of individual factors — how much we make, how much we owe, how much we’re willing to keep living like a college student, etc.
I consider myself fortunate to have landed a job out of grad school that pays enough for me to cover the cost of living, student loan payments, and more with money leftover. Now the question becomes — what do I do with the extra money?
Despite having grand intentions to save, some people end up spending all of their extra money, and they can’t figure out why. The answer is simple. They aren’t following the only rule you need to know to successfully save money — pay yourself first.
I’ve been paying myself first, since the first day I started my job. I started out small with 5% of each paycheck put into a Roth 401(k), and I’ve been gradually increasing the percentage ever since. Currently, 20% of every paycheck is automatically funneled into a Roth 401(k), a Roth IRA, and an emergency fund.
The beauty of paying yourself first is that you never really see the money, so you don’t miss it. By automating the process of saving, it prevents you from accidentally forgetting to transfer the money to your savings or retirement accounts and spending it instead.
What percent of your salary do you save?
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Currently I put 20% of every paycheck into a high-yield savings account, and once a month I take $50 out of there and put it into my IRA. So far so good.
Technically, I save 34.8% of my money — This is deceptive, though. I transfer $1000 a month into a savings account from my paychecks; if I didn’t, I’d spend it. This isn’t only savings but is for anything that isn’t a regular monthly budgeted expense. For me, that means it’s everything besides rent, utilities, insurance, food/toiletries/cat litter, gas, spending money, alcohol and my student loan payments. AKA no separate car stuff, no clothing, no travel, etc. I have some extra money in my budget each month, and if it plus the $500 slush I keep in my checking acct isn’t enough to cover these things I transfer from these “savings” to cover it. It is less of an emergency fund/long term savings than it is a non-immediate fund. Any money over the $500 slush left at the end of the month goes to my November family vacation fund, which is separate. Found money and survey payments go there, too.
Oh! That included my retirement savings, by the way (11% of the total 34%).
I started my first budget this month and saved 40% and now I am on track to save at least 50% for the second part of April. I get paid twice a month, so I break up my budget that way.
I mean if you want to pay yourself first, or save more, you need to have a backbone.
What I mean is why do you want to save more? Is it for a car, house, moving out, etc?
You need that goal and the motivation for it.
Why do you want to move out? You parents are driving you up the wall, they give off bad habits, you need your independence, etc.
I save 17.5% of my gross income, 5% to matched 401(k) and the other 12.4% to high-yield savings. That 12.5% is 18% of my take home pay. The amount that I keep is more than I require for my budget, so my checking account increases until I eventually sweep out the extra amount into my savings. I’m sure this will change/become more refined, but I’ve been in the working world for less than a year.
Last year I saved 50% of my gross income, although half of that was retirement savings, so my net worth didn’t increase nearly that much (argh, stock market!). This year it’s going to be a bit lower, maybe around 40%, assuming things stay as they are.
Right now since I have a temporary job (hopefully for the next 18 months); I’m saving around 35-40% of my take home pay. Right now it’s building up reserves until we get a six month e-fund stored. Afterwards, I’ll split it between house down payment and retirement.
I automatically take 10% out of my check and put it into a side vacation fund. I have an established savings account going so this is something for the side so I don’t have to worry about vacation when the time comes, because traveling is important to me. I need to start adding to an IRA.
No idea =)
Still living like a college student… cuz well.. still in grad school.
I’m saving whatever is left after misc. bills (for some odd reason my income is still “slow” and delayed but ohwellz)
I’m not sure if I treat money lying around in my checking account to be actually saving money… inefficiencies not withstanding heh.
I prolly save ~300-1k of each month’s paycheck. Now I need to wait for 09 to get regularized so I can max out my Roth IRA. And from there my money will be ???’d.
I’ve been out of college for almost two years. I followed my budget and successful stayed out of debt with my first credit card. But after that one year mark, it seems like my life started to get more active; I went out with friends more, needed to update my work wardrobe…I started to eat out a little more. And now, for the last 6 months, it seems like I can’t save extra, and I’m digging in my savings account just to pay for my monthly expenses.
Although I’m trying harder to not spend and trying to be a little less sociable (aka not sociable at all) I still had to get a third very part time job babysitting to try and save more and make ends meet.
Ugh! Could this be from the recession???
Good work my brotha, the more we save now the more we get later!!! I’m hookin’ it up with around 30% right now…
Who knows? I mean, I save about 15% for retirement, and a significant cash portion, but only some of the cash will never be spent. Does it count if it is for a vacation I know I’m taking this year? Does it count if it is for a car? Insurance I’ll pay in 6 months? But then do I only count cash I never intend on spending?
Hello!
I save 21.13% (I’m kind of rediculous about spreadsheets) – that includes my house deposit fund, my RRSP, Emergency fund, and saving to buy company shares (there’s a minimum). If I don’t include my House Deposit, because that’s technically long-term planned spending, I save 9.65%. I also put away $100 for planned spending (just under 4%). This is my gifts account b/c I spend a little crazy at Christmas.
Jessie
I put 9% of my gross away every month to max out my 401K. Then I save 35% of my net. My student loan payments make up another 40% of net and to keep myself sane I try and think of these as “savings” sometimes.
@Karen
Judging by those numbers, law school or med school?
I regularly save about 11.8% and another 3% in employer match. In addition, I average another 20-25% for savings, debt repayment and the occasional large expense.
Matt,
Yep, all law school and a little bit of college. Also I realize that 40% for loans should have been 26%. Once I get a good emergency fund I’ll put my savings toward my loans. Hopefully I’ll be paid back in five years. I like my job though so I’m still glad I did it.
My wife and I currently save 30% of my income. 15% is saved in pre tax and then another 15% of post tax income.
We basically live off 70% of my income (she doesn’t work.) Some months are better than others but we are saving diligently between the 401k, 529 for my son, Savings account, and stock investments.
I save a total of 16% per month – 6% into my 401(k) and 10% into my savings account; however, I already have 6 months worth of expenses saved up for an emergency fund. The 10% is divided into savings and a travel fund. Any extra that I end up with from the month is then dumped into the savings account and will eventually be transferred to my Traditional IRA. Unfortunately, my income stream has reduced quite a bit recently, so the rent on my apartment was well below what I made has suddenly become a tighter fit. I have less money to save or spend…until I get the car paid off in three months. My savings will increase dramatically at that point.
I save 10% off the top automatically invested (severall different funds). With what remains I pay all the monthly bills and lastly food and entertainment. Usually also try to downpay extra each month on the mortgage as we hope to have it paid off within five years. If you don’t put some away before your bills you will never save a penny. You only have a limited number of years ands dollars to save for the future.
I automatically contribute 4% of my salary annually to my retirement account. Since I am really young I have it primarily in risky international stuff. It is not doing well now but the 10 year outlook is good. I will re-evaluate that stuff in a few years.
Other than that, I save 15% of my salary into my ING. Every Friday I send about 100 or so bucks into it. I use this for my emergency fund. Thinking about setting up a Roth IRA soon as well when I can spare some more cash!
If I had a set salary, I’d tell you. I work on projects, so I don’t have a good average.
I used to save about 50% of my net income. And I think I can still do that. We’re moving to a smaller apartment, watching our grocery budget, and just .. spending less.
And my goal is still to save 50% of any earned income (blogging, freelancing, etc)
My goals are usually 50% net of everything I make, I save.
Last year (2009), I saved 20% of my gross income in retirement accounts (10% in my employer’s 401(K) and the other 10% in a Roth IRA). I also put another 15% into liquid savings for future needs. That 35% total of my gross income actually came out to be about 53% of my net income for the year.
For me it’s always an up and down number, I try to save at least 10% but at the same time sometimes other priorities get in the way of that. Luckily for me I am still relatively young, so I’ve got alot of time ahead of me to make up the ground I’ve lost by not saving for retirement.
Till then,
Jean
I know some friends who save more than 50% of their salary. It is easy if you have self control.
When I first started working, I worked up to having 40% skimmed off the top of every paycheck and deposited into a 401(k). Since then, however, my goals have changed: I’d like to retire early – and earlier than 59 1/2, which is the earliest age one can withdraw from their 401(k) without penalty.
So I now deposit 10% into my 401(k) and 20% (of my gross salary) into investments. As I continue to develop my earning capacity but anticipate maintaining comparable standards of living, I expect these amounts to increase.
First to sixth month, 0% or simply none can be saved. There’re lots of things we always wish to buy and finally we get a chance to buy them. So, I’ve spent everything for the first sixth month and after that stopped buying and started to save. Lol. I believe most of the people did the same as me unless he/she has 10k+ salary per month for the first year of his career.