How much savings should I have?

So you have reached it: the mindset to start saving your money! The question is a bit hard to answer by itself because it depends on many factors, but you’re definitely off to a great starting point by going through this page.

The basics 

First of all, the initial and most basic saving amount that everyone should have is $1000 (or the equivalent in various currencies). This is an emergency fund that you can pick from for unplanned expenses.

After that, there are two schools of thought coming in. Depending on your lifestyle and life choices, you can target one of these two amounts as savings :

• Three months of expenses: with this amount worth of savings, you’re able to cover finances related to unforeseen events. Though you’ll have to cut down on non-essential expenses. 

Or,

• Three months of net salary: with this amount worth of savings, you’re able to maintain the same lifestyle as you would with a salary.

If you are not sure how to calculate those amounts, we offer this functionality in Miza! It’s all automatically and dynamically calculated over time.

Beyond the basics

So, now you have a solid financial structure. But in the case where you want to save for retirement, you might be asking yourself “How much should I save during my career?”. This depends again on what? MANY FACTORS.

Savings to target during your 30s

Usually when you reach the end of your thirties, you should have something that’s worth about your gross salary. While we find that great, I think it’s a bit aggressive considering all the expenses you might need from 25 to 40, and considering that you will have many promotions depending on your career. So, I would rather recommend aiming for a savings worth half your gross salary by 35 years old.

There’s also the question of ‘’Should I include my house investment or not?”. We would say that if it’s your main house, do not calculate it. You might want to live in it later, or you might need a bigger house. There’s also the question of  whether the market will be good or bad when you reach retirement. This factor is too hard to forecast and should not be taken into your retirement savings.

Savings to target during your 40s

Once you are in your forties, you usually should have around three times your gross income. Considering that you will be reaching your highest bracket by 50, it might be hard to actually save all that money. We prefer taking the route of twice your salary by 45 years old. That actually gives you a slack to reach three times your salary by 55 years old.

Savings to target while reaching retirement

At 55 years old, everything is managed under your country's retirement programs. You’ll have to analyze what you will be receiving, how much you need to withdraw, what are your expenses and so on. If you manage to save three times your salary by 55 years old, you already did 80% of the job. Now, you just need to work towards the details with a local financial institution or advisor.

Conclusion

Depending on your situation it would be interesting to have a financial advisor. For some people, savings isn’t complicated but once you start adding more factors to your finances, it can get tricky. An app like Miza helps to at least build a very strong structure and understand your spending habits. Adding an advisor to all that will definitely help you even more and reduce any financial anxiety!