Wednesday, January 19

How much to save according to my salary

Saving a small amount at the end of the month can be a very complicated task for people not used to planning their household finances. And yet there is a common denominator factor that everyone can apply when it comes to economizing on their finances: the percentage of salary that should be spent on savings is 20 percent.

This basic rule will require very different efforts if they are charged 1,000 euros per month that if every day 31 they enter the payroll 4.000 euros, but it is a simple measure that can help anyone to measure how much they should allocate to cover their primary needs and how many expenses can be eliminated, in order to add a savings cushion at the end of the month.

From BBVAFor example, it is highlighted that a good way to save with this method is to change the order of the factors, with this 20 percent being the first thing that is subtracted from income.

Discounting the percentage of monthly savings from the first moment, points out the financial institution, it will be possible to spend less month by month and accumulate more money for the future.

Stretch your salary by eliminating superfluous expenses

Following this advice of deducting 20 percent of income from the first day of the month, a person who collects, for example, the 2,350 euros received on average in Madrid in 2020, would have to withdraw 470 euros to his alternative account.

In this way, 1,880 euros would be available in expenses to spend the month that, following with BBVA’s recommendationYou should distribute as follows: 50 percent for basic expenses, and 30 percent for expendable expenses.

In the first 50 percent dedicated to basic expenses, which in the example mentioned would suppose 1.175 euros, would enter payments such as a mortgage or rent, the consumption of water, electricity, or gas, and food purchases, but also other items such as transportation to work or even the clothing necessary to go to the office or job every day of employment.

With the 705 euros that make up the remaining 30 percentMeanwhile, all leisure activities will be included or that can be considered basic, but whose payment can be considered an accessory, such as going to the gym or going out to dinner during the weekend.

And it is that although these activities are part of the free time offer that improve the enjoyment and quality of life of people, it must be clear that they can be dispensed with to a certain extent, if for example a savings objective is pursued ambitious.

The senator who invented the method

This rule of the 50/30/20 to organize the salary and save a constant percentage regardless of how much is earned has spread its application in recent years, conquering the recommendations of traditional banks, such as the aforementioned case of BBVA, but also neobanks, such as Openbank.

The German financial institution assures That by consistently balancing spending across these three areas, it’s easier to be mindful of spending habits and say goodbye to waste. From N26 points to the origin of this rule, which was first stated by the US senator Elizabeth Warren in his book All Your Worth: The Ultimate Money Plan.

American politician and former candidate for the Democratic Party primary elections put forward her idea of ​​a 50/30/20 spending plan with the idea that people have funds on hand for emergencies and savings for retirement.

According to his perspective, all households should prioritize the creation of an emergency fund in case of job loss, unexpected medical expenses or any other unforeseen monetary costs. And if, unfortunately, this emergency fund had to be used, the household should focus on replenishing it.

There is room for maneuver in the budget

The 50/30/20 rule is a good way to structure the expenses of a family economy to know that you will always have an emergency margin to undertake unforeseen expenses, but as highlighted from the beginning, it will clearly involve different efforts depending on the salary that is charged.

It is important, therefore, to highlight that the proposal can be made more flexible depending on whether the savings objective to be set goes beyond simply having an emergency deposit, or if economic circumstances mean that 50 percent of primary expenses are not be enough.

It may also happen that, after a study of the expenses incurred over several months, the saver in question considers that they can contribute a larger fraction of the total budget to their savings, either after cutting non-essential expenses or because they are lucky enough to cover all their expenses. basic without exhausting the 50 percent allocated to them.

Budgets must be adaptable to the person and to the moment, and this measure is one of the many solutions available to ensure that the savings account continues to grow year after year.

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