Money | How much of your income should you save?

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Planning on saving a lot more during 2016? We look at how much you should be putting away each month.

When you hear about people saving 50% of their income, do you shudder and wonder how anyone can save anything from their wage once all bills have been paid? Saving is not impossible but it is hard when you have bad spending habits, a low or even average income and saddled with a lot of debt and bills.

But when we cut back on discretionary spend and make other sacrifices, we all can save a little bit more. Even if it’s a small amount, it is something extra for the future that you will inevitably need.

Ideally we should be saving 20 per cent of our monthly income. Or so say the financial experts. They say that our monthly budget should be divided into three distinct categories of expenses: 50% should be reserved for essentials (such as mortgage/rent, bills, personal debt), 30% should be allocated for lifestyle choices (such as broadband, tv packages), and at least 20% should go toward that we call ‘financial properties,’ which include pension payments, savings plans.

The experts believe that most of us go wrong in saving 20% by devoting too much of our income to another category of spending.

To overcome this, you need to take a realistic look at your income and expenses. Identify the key areas where you can save on cash. What percentage of your weekly grocery purchases are you throwing away? Are you on the right mobile and tv package plan? Are you an impulse buyer?

If 20% sounds too daunting, start with 10%. Once you see your money accumulating in your savings account, you will be more motivated to set new budget goals.