What Percentage of Your Salary should You Save

Hi, I am sharing a plan below,

1. 35% on household expenditure : food, communication, entertainment, security, domestic wages, traveling costs, water, electricity, and school fees.
2. 25% on financial services : insurance, medical insurance, pension contributions, long term savings.
3. 15% on retirement savings. And if u r over 30. Increase it to atleast 18%.
4. 35% on debt repayments : home loan, personal loan, credit cards etc.
5. Make sure mortgage repayments are not more dan 25% of ur total income.
6. 5% on emergencies. Dis is not savings but emergency money. (sudden emergency in family etc)

I personally don’t think you should approach savings as a percentage of your income.

I think you should choose a standard of living that you feel is justified given your likely future income, and save any extra.

For example you might be 35 years old with a young family, minimal retirement funds and a salary of $60k/year but with skills that are becoming less marketable so they expect a significant drop in long-term income. In that situation I’d suggest saving very aggressively - at least $20k/year - because you don’t know when your income will drop and you really need to fund your future.

Contrast that with someone earning the same but with a hot skill set that’s very likely to see substantial raises - they might choose to spend almost all their income since their children are never going to be young again. 

That’s risky of course - they might destroy their future earning potential somehow.

I will explain it in a different way. Say you’re earning $60k and you have listened to the advice about 20%, so you’re saving $12k a year. You get a pay raise of $5k - do you increase your saving by $1k, or by $5k. I would strongly encourage you to increase saving by $5k.

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