Is $1,378 enough to save in one year? Should you save more?
How much to save in one year depends on many factors including your income and debt.
One common piece of advice from financial advisors is to save 10% of your annual income per year. Based on that rule, the 52 Week Money Challenge is appropriate for someone earning $13,780 who should save $1,378 per year. If you have an annual income of $50,000, saving $1,378 in one year is not enough according to the 10% rule.
The 50-30-20 rule is another popular piece of financial advice that was coined by Elizabeth Warren. According to the 50-30-20 rule, you should spend 50% of your income on needs, 30% of your income on wants and 20% of your income on savings and debt repayment. Needs are bills that you have to pay. They include rent, groceries, utilities, and minimum payments on credit cards, mortgages and auto loans. Wants are things that you would like to have, but don’t need. They include gym memberships, eating out, entertainment and travel. The 50-30-20 rule has become very popular since it was introduced by Warren and many people have started budgeting based on this rule.
A newer savings strategy that is gaining popularity among people seeking financial independence and early retirement is to save 50% of your income. Saving 50% of your income requires serious financial planning. Proponents of this rule live well below their means and sacrifice they wants now for financial freedom. It is achievable if you set your mind to it and are willing to make sacrifices to meet your goals.
There is no easy answer for the question of how much money to save in one year. There are conflicting options and the answer is different for everyone. It depends on how much you earn, how much debt you have, your lifestyle and your financial goals.
A good rule for someone just starting to save is to start small and increase your savings rate every year. A savings challenge like the 52 Week Money Challenge is a good way to get in the habit of saving. Once you have adjusted to saving a little each week, you can increase the amount you save. When you receive a pay increase, increase your savings instead of inflating your lifestyle. As you pay off debt such as student loans and credit cards, apply that money to your savings.