A recent caller to my radio show asked whether saving 20 percent of one’s income is sufficient.
The answer, of course, depends on your situation. And in truth, no matter how much you’re saving, you should be saving more. (After all, nobody has ever complained to me about accumulating too much money, while many have lamented having too little.)
So, how do you know that you’re saving the right amount each month? It hurts.
Say you’re putting aside a portion of every paycheck into your retirement plan at work. You’re also adding to your IRA and stocking away some cash into a bank account. Does it hurt? If not, you’re not saving enough.
What do I mean by “hurt”? Simple. If your saving isn’t causing you to refrain from spending, you’re not saving enough.
You need to find yourself saying, “I’d really like to buy that item, but I can’t afford it because I’m saving money instead.”
So if you haven’t denied yourself some new clothes, a shrimp cocktail or an upgraded seat on a flight, you’re not saving enough.
Pass this advice along to your children and grandchildren to help them enjoy a bright financial future.
*Originally published in Inside Personal Finance August 2017.