The 10% savings rule does it consist of your gross pay or take home?
Thanks.

WHAT RULE???

IS THIS NEW???

GROSS "IF" I WAS TO MAKE A GUESS

You don't need a rule, just save whatever you can afford to. If you can pull off 20% than do that. If you can save only 5% one month its better than nothing. If you tax returns come back and you can save 50% of that month's income GREAT!

I would say gross. 10% was recently recommended in the book "The Automatic Millionaire." Maybe that is what the poster is referring to???

If 10% gets someone to millionare status then surely 20%+ can get someone into TRILLIONAIRE status right? Keep saving all you can buddy.....

10% is the generic standard that most people throw out there.

Isn't that how much you're supposed to pay preachers???

Why the heck would anyone do that?

funny

every little bit helps
my grandma started working full time at age 65
she deposited 23 bucks a week into a 401k
at 78 she had $60,000. not bad for an old chick

The 10 percent of your income has been around, basically, forever. It was revived in the 1950's in the book "The Richest Man In Babylon", which by the way is an EXCELLENT read.

Probably still the finiest book ever written on personal financial issues.

Yeah that 10% rule is funny. I hear it all the time when someone is referring to why you should invest in you 401k.

I'm doing at least 11% regularly in my 401K and anything left over at the end of the month goes into a short term CU savings account.

Is that a Beretta Onyx in your signature?

Close, only 5k off or so: a DT10 Trident.

10% CHURCH
10% SAVINGS

I GUESS

15% 403b/IRA
6.9% Investments / High Int Savings

This is with my paying 1k per month extra toward principle on my mortgage to pay it off in 10 years.

30 percent savings is a better rule...

IF you have the level of income to be able to.

Example: It is easier to save 30% of your income if you are making $75,000 than if you are making $30,000/year.

It probably depends what your other montly obligations are. If you make 30K and have no credit card debt, no car loan, and own your house, you could easily save 30%. If you make 75K and have debt up the yin-yang then 30% probably wouldn't work.

DW and I were in the low $60's last year and put away $30K.
You DO NOT need a six figure income to be able stash money away, it's a matter of cutting lifestyle today in order to live better tommorow.

And sometimes it's not possible even if you cut out everything you could.

ETA: But I do agree that ya don't NEED to make a six figure income in order to save money...HOWEVER, I think your example of saving 1/2 your income isn't something MANY low income families (mine included) could do.

Angeleyeskkhr, most people should be able to save SOMETHING, even if it's not 10%. Newer cars are a big no-no for people with low incomes, if you income is low you should be driving cheap cars. Don't laugh, I see people making $20-30K drving around in new cars all the time. Pop over to the automotive finance forum and see what I'm talking about.
Our example of saving 1/2 our income is a bit extreme, most people would have bought newer cars (We drive '99 and '98 cars), a nicer house and taken a few vacations, as well as buying some "stuff". However we chose not to so DW could be home with the baby that is due in August of this year.
Your situation is a bit unique since you are going to school and all, but you have a PLAN to increase income long term. No you might not be able to save much now but if you don't spend all of your income increase when you graduate you will have plenty to save.
The main point is to get into a habit of saving regularly, even if it's only a few bucks a month.

Younger folks should probably be saving at least 15% since Social In-Security will not exist in it's present form about 30 years from now!

PAYING OFF CREDIT CARD/LOAN
DEBT AT 9.99%--19.99% (or higher) WILL MAKE YOU WAY MORE THAN
ANY SAVINGS ACCOUNT WILL!!!

I may be a bit biased because I simply DETEST car payments, but I see the buying of new cars as part of the problem for alot of people's financial woes. Don't get me wrong, there is a time and a place for a new car. I've bought two in my lifetime, myself. But, I do know many people that buy a new car every 2-3 years. And, I also know people like you mention, that buy a new car when their income is still borderline. Even buying a car only 1-2 years old can save a ton of money while still getting you basically the same thing.

I did say it doesn't take 6 figures to save. IMHO that means that most people could save at least something.

However, if you have a divorced mother with three children making $18k a year who's ex is a dead-beat dad, I seriously doubt she could save much if anything in *most* cases.

You're right, my situation is such that we have a plan to increase our earnings, however for some that isn't an option--or rather it's an option they would not think is possible with the expense of going to college. If you're in a lower income family and you're the sole provider for your children..Ya don't really want to think about whether or not you have to quit your job to go to school so you can make more money LATER. You worry about meeting your kids' needs NOW.

Yeah I would agree that probably the majority of people buy "new" things or things they don't "need"...However, I don't think EVERYONE is in that situation. I just didn't agree with the one size fits all "you culd save if you cut back" Not everyone buys a new tv every two years, or a new car every 4. not everyone pays for cable television or even has a phone in their home...there IS a minority that doesn't even get those things.

There is also the question of whether it's HEALTHY to completely cut out ALL methods of having "fun". It's easy to say when you're sitting there comfortably that if you cut out this, this, and this, or whatever that you'd have $xx dollars to save. But if that's their ONLY indulgance, and something that makes them relax...It may just be worth it. Now I'm not saying whatever they pick is worth it, it's very subjective. But if you're constantly worrying about $$ and stressing over whether or not you'll be able to save enough, etc...Then chances are if ya don't get some type of release, you're going to have problems emotionally and/or physically.

My dad had physical problems when he started stressing out about his kidney failure when it first happened. He couldn't sleep at all, and had to work 12 hour shifts. His dr. ended up having to prescribe him anxiety pills, because he wasn't sleeping and was having neck and back pain very often. All that from stress. Other people may sink into depression, or have any number of other things I'm sure. So if watching sci-fi helps them forget about their problems for 30 minutes, who are we to say they should 'stop paying for cable.'

ETA: congrats on the the baby!

That's where I'm at now. I am paying as much as I can towards my debt to get rid of it all completely asap. I'm also starting to save some. 6 months ago I was making minimum monthly payments and not saving anything, now I am starting to save a good chunk of my income and paying down debt as quickly as I can. It means I don't have much left at the end of the week to spend but the payoff will come when I am not wasting money on finance charges. At that point I'll up my savings even more.

We live by the rule:

Tithe 10%
Save 10%
Pay down debt 10%

Live on the remaining 70%.

Right now the only debt we have is a new car. All CC's are PIF and house is paid for.

So you only save 10% for long term and short term savings and you have no rent/mortgage? I'd think that percentage should be higher if the only bill you have is a car payment...

But congrats on saving SOMETHING!

I dont think reg54 was saying anything wrong.It was stated that "The main point is to get into a habit of saving regularly, even if it's only a few bucks a month."A few bucks a month really does add up to something.

Sharnese, I agree with his major premise, and if I didnt articulate that, I apologize I thought I had.

However, I had thought I read at the time, that he stated you can/should cut out any "non-essentials"--and while I do agree with that to an extent, there is a fine line. If you're paying $20/mo for cable and that's you're ONLY luxury, yeah it COULD save $240 a year, but again it's you're ONLY luxury--people need SOME kind of entertainment/relaxation, and most things cost SOMETHING (even if it's $1 gas and whatever it would cost for lunch to drive to the park for a picnic).

Yes,I dont agree too much on cutting off EVERYTHING fun to save money,believe me.I can see cutting off someof the extras like HBO on a cable bill tho.

I have read "the richest man in babylon" and it is a necessity for anyone wanting to do savings.

The answer I have come with is 10% is the given rule by MOST books and gurus. This is of gross wages as well.

Charles Givens wrote a book "wealth without risk" and it has same rule but quotes " pay yourself first" which I like to live by.
It is also quoted 10% in "The Wealthy Barber" by David Chilton who now works for TD Bank investments (one of the major 5 in Canada)

Now only saving 10% is not the only part of this that makes the magic happen for growth. You have to take into account for the interest and cost of living to not exceed the interest it is bearing or your purchasing power for your savings is actually decreasing.

You should instill the "Rule of 72". That is the interest you are given divided into this shows the time it will take for your funds to double with interest. ie

Lets say you place in CD's at bank and get 6% you invest 1,000 at start. The 1,000 will be 2,000 in 12 years.

Now by having this in a moneymarket growth fund in highly volatile arena you could gain on a long hold 18% which is not unheard of with properly selected fund. Your money would double every 4 years.

That is where magic of compund interest takes the drivers seat and your money is working for you not you working for your money.

After you have started a fund....work into the one time payment each beginning of year or tax time which ever is easier just spread it out 12 months from each deposit. Then each month add your 10% on top of this one time deposit. You would not notice it after a while but your deposits would grow significantly quicker and your costs per unit for your fund would be lowered by the dollar cost averaging of doing this. This eliminates the buy low and sell high mentality for the long holds.

Now depending on your age you would look at whether you would place these into a registered self directed retirement fund which then could be easily give you some tax breaks and ncrease your return which you would automatically take the difference for doing such from the previous year to show you the gain and direct this as an additional one time deposit.

Just a few thoughts.

here is my thing...

why should I be contengent on living a "rat race"... saving my entire life, at least my adult life, cutting back, sacrificing to "enjoy" what might be anywhere from 1 to 20 or 30 if I am lucky years of my life (retirement)

Don't get me wrong, I don't plan on living off of food stamps when I am older, but I mean, there has to be a balance in having some of the nicer things in life and saving every penny you have.

I am in a unique situtation.. I just turned 23, and I am on pace to make about 180k in taxable income, give or take (sales).

Now, I don't just throw money down the toliet, but, even when my income wasn't anywhere near that much, I lived by a couple of stringent rules:

Whatever I spent in entertainment, I had to save at least that much that month. If I go out of town next week and spend 1, 000 dollars, I won't let myself do it unless I have made 1000 to put in my savings account... at least somewhere near 1000 dollars.

I don't have a car note, mainly becuase I am a car salesman and i have a demo, but if I didn't, I wouldnt' have a problem toting a $350-$450 a month car note. Even if I didn't make as much as I do. What's the fun in life, going to work in a 1988 car that cuts out 5 times on the way to work, when you have 30k in the bank but yet can't "afford" a new car.

On the savings side, I put back at least $2k a month, I started back in May (i just found this forum) and my job doesn't offer a 401k.

Anything extra I have at the end of the month, I put 50% of it in a savings account.. but that other 50 percent I have fun with.

I have no credit card debt, just some debt from a company I used to own when I was a little younger, about 3k that I am debating on paying off because if I pay it off it will drop myc redit score, and it has already been 2 and a half years.

I'm only a little older than you and I typically save 12% of my pre-tax income in my 401K and 20% of post-tax income in a high-interest savings account. I also contribute a set amount to an IRA. It hurt at first, but within 3-6 months, I was accustomed to living off of less. I enjoy knowing that if I were to lose my job tomorrow, I'd be ok for a while. I also enjoy being able to take spontaneous trips on occasion and being able to do anything else I like within reason because I have the funds to do so. It's only deprivation if you make it that way.

i'm not talking about people who just dont' buget, I am talking about the other end of the spectrum, the people who save until the point where it makes no sense. If they have say, 600 dollars left of despensable income, they see 580 in savings.

YOU'RE RIGHT...YOU WILL LIVE FOREVER...YOU WILL ALWAYS MAKE 180k EVERY YEAR...

SNEEZE

This is a new phase for me. Money management AND savings. For right now I think I will have to start with a gradual level of savings. I reference some of the books mentioned in this thread.

Did most people jump in savings "X" amount of dollars/mo or choose to take a more gradual approach? Anyone willing to share their stories?

What I do is I have ING Savings take automatic payments from my checking account (where my paycheck is direct deposited) and I really don't miss it. I find that's the easiest way for me. Out of sight, out of mind, lol.

My wife and I are opposites when it comes to savings. We both prefer to save, but she prefers to have it automatically deducted and I prefer to make the transfers myself. I have found that I save more when I make transfer decisions based on what we have available in our budget at the time. She has found that she forgets to transfer if it's not done for her. So....YMMV

It's all part of the idea of "paying yourself", also known as "hide the money before you spend it"

Probably the most common method is to have a % witheld from your paycheck into a 401k at work. And because of the tax advantages of the 401k, this is really the way to go.

The next step is to take some amount of after-tax money to save. You might get your payroll department to split a certain amount into a different account, or maybe just set up an autotransfer out of your checking account.

Either way, the idea is the same, squirrel the money away somewhere where you won't spend it, and it has a chance to earn a decent return (either short- or long-term, depending on if it's for retirement, or save for a car, or whatever).

Personally, I have 15% of my paycheck witheld into 401k. After that, I'm pretty cheap naturally, so if I notice my checking account balance getting bigger than I need, I squirrel the extra away in something like a money market. I try to have enough squirreled away each year to put into a Roth IRA, which I usually do around tax time (which is when I think about it).

Saving money is tough, and the "pay yourself first" method of savings is, in my opinion, the only way to go.

I'm finally able to save 10% of my salary, and I do. It goes into my 403b (401k) account at Fidelity. My company matches the first 5% of my contribution at 50 cents on the dollar. Never EVER leave free money on the table. I plan to continue increasing this percentage once per quarter.

At my previous employer, I got paid once per month, and I LOVED it. (The first month was horrible, but it was great after that.) Now I get paid bi-weekly. So, I've decided to fund my checking account with 1/12th of my annualized salary. I'll do this on the first day of each month. This is the same as getting paid once per month.

On the same day, I'll pay every recurring bill I have, and any remaining funds will get transferred into my ING savings account. I use my CC for most purchases, because I get rewards and it's a great audit trail. I can see almost every dollar my wife and I spend. Unfortunately, I can't use my CC to pay a few bills, such as my mortgage.

As my actual paychecks hit my checking account, I'll transfer them back to my regular savings account. I'll repeat this process every month.

I found that I was able to save more money when I used to get paid monthly. In my opinion, a lack of savings can be directly correlated to a lack of cash flow. So, in my own way, I'm eliminating the lack of cash flow. YMMV.

As you use one of those "high mile" cards right GEORGE?

As they say easy come....easy go.....

Money can be here today....tommorow? Never know!

Totally agree....If I only knew then what I know now!!!!

Ditto

I was talkking about savings and credit...if I knew then what I know now...

Well, so far this hasn't worked out quite as well as I had originally planned. I paid my MBNA CC on 8/1, but the statement didn't cut until the 3rd. Consequently, now I have to make another payment in August.

So, I'll just have to wait until the billing cycle closes to avoid having two payments post in the same cycle. I owe the money regardless, so it's not the end of the world. But, it's unplanned money that I had to withdraw from savings. I think this is the only payment that prevents me from paying everything on the 1st.

I automatically have some money pulled from my checking account every week (paid bi-weekly.) It works out to about 11-12% of my take home income. If I see extra money in my checking account, I transfer it manually. This may happen once/week or once/month, depending on my expenses, but I always try to put away something extra, something more than what is automatically deducted. I calculate that I put away 24% of my take home income last month. This month it will be closer to 70% (stipend)

This system works for me, especially since I have no 401k or other automatic retirement vehicles.