You cannot really start a successful investing program until you have great foundation under your own financial feet. For small investors, this typically means putting money away in savings account as accessible safety nets in case of an emergency.
But, the question is, how much should you save? Well, it depends on some factors and these include the stability of your primary source of income or your employment situation, your preferred standard of living, and level of the fixed expenses you incur monthly. The probability of large also demands on the resources, especially the ones that could arise on short notice. Another factor is the amount of money you require to feel secure. This is basically an emotional consideration, which differs from one person to another.
It is important take those factors in your life seriously if you like to determine the amount of savings that makes sense for you. You may also start with these following steps:
Calculate Your Expenses
When trying to know how much cash you must keep in your savings account, you must look at your own fixed expenses. If you lost all your cash overnight, how can you keep your standard of living? Most experts recommend having at least 6 months emergency reserve in your own savings account and some urge you to take for consideration of at least 1-2 years. It is more ambitious, yet you do not need to build your own reserve overnight. You work at that through setting goals and accumulating your surplus slowly. A good way you can get there is through reducing cash demands on the finances of your family.
Know Your Standard of Living
You can determine your preferred standard of living through taking account of both the comforts and necessities or luxuries in life. A lot of necessities include groceries, rent, and so on would be on your list of your fixed expenses. Luxuries or comforts are the expenses like streaming or cable services, concerts, movies, sports games, going out to eat, jewelry, and vacations. These could be anything you do not need to live. Consider making a list of such things in 2 categories and narrow down your comfort category if possible. Consider every item on your list and ask yourself if you feel that you should have it to be much happier or if you do without this, at least for a certain period of time.
Consider Asking Yourself What You Require to Feel Secure
The amount to feel secure varies for everybody. It could even change based on your life’s phase. You have probably a figure that comes to your mind immediately even if it’s irrational. For several people, it is $10,000. For some, it could be more than that. For instance, billionaires want to keep their minimum savings of about $20B. So, be honest about yourself and consider some important things in your life. Once you hit your own goal, you may start putting cash to your investments with high returns.