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How Much Should I Save?

December 28, 2021

This is one of the most frequent questions I am asked despite age, job, marital status, net worth etc. The answer is actually really simple, but not easy. If you are a client of mine, you’ve more than likely heard me say the phrase, ‘Simple, not easy.” How do you wake up early in the morning? Simple, not easy. How do you build more muscle? Simple, not easy. How do you shed those Covid-19 pounds in time for summer? Simple, not easy. How do you become a great investor? Simple, not easy.

These results aren’t easy to achieve because you have to execute on the advice consistently. The advice on saving is simple, basic math. But if you don’t execute it means nothing. The 30-second budget is simple. Here is what I mean : 

              – Take 100 of your income and fill it in here $________

              – Deduct 30% for taxes $_______

              – Deduct 10% for giving $_______

              – Deduct 20% for savings $_______

              – Spend the 40% that’s left $_______

The 30-second budget is easy. Now, let’s talk through the hard part of following through on it.

Income

This is pretty easy. Take all sources of gross income and put them here. It doesn’t matter if it’s $10 or $10 million. The budget works no matter your income.

Taxes

Everyone’s favorite topic! I always list taxes first because, well, you HAVE to pay taxes or you go to jail therefore most people are pretty good about getting those paid. Obviously, this can change depending on what part of the country you live in, what your gross income is,and  deductions, etc. Regardless, we know the government is going to get theirs.

Giving

Unfortunately, there is not really an awesome way to write this without offending someone and their beliefs, but it doesn’t matter to me where you give your money. It could be a church, synagogue, mosque, or a charity close to your heart. What I know to be true is that giving changes our mindset on money and helps us not idolize it. Giving does wonders for your soul, and has the ability to help others. No, I don’t want to debate you on pre-tax income or post-tax income. Just give something.

Savings

20%. Minimum. Taxes aren’t your money (Well, it is your money, but that’s not how the government sees it.) Those who give money to God/Charity don’t see their money as their own either. Lastly, savings isn’t your money either! At least, not any time soon. This is for your future self. Your 75-year-old self is completely reliant on you today. When you can no longer work like you are now, your future self is going to be beyond grateful. Begin thinking of savings as a requirement, not a suggestion. Does the government suggest you pay taxes? If they did, how much would you pay? Little to none probably. Stop thinking of savings as a suggestion and begin thinking of it as a requirement.

Spend

This is the fun part. But it’s only fun if you do the above priorities first. Go spend every cent of that roughly 30-50%. This is where your lifestyle will be determined, which is the lifestyle you will be addicted to in retirement when you can no longer generate a paycheck. It’s called Lifestyle Addiction. 

              My industry teaches people that when they retire, they won’t NEED what they’ve grown used to spending and creating habits over their lifetime. And they are right. You won’t need it. But you will want it. Just like right now, you don’t NEED many of the things you have. You want them. 

              If you’re spending 60-70% of your gross income and saving 5-10% (what the average company matches in 401k benefits), how in the world will you be able to recreate that wealth in retirement? You won’t. This is typically why you hear people in the media telling you to take more risk and aim for 10%+ rates of return. Sadly, we can’t just snap our fingers and get that whenever we want it (more on this in a later blog).

              The easiest way to ensure your Lifestyle Addiction never gets out of control: Give and save 30% of your income. If you can do that, go spend the rest. Guilt-free. Your future self will love and thank you. 

              This is basic math. You don’t have to rely on markets giving you a specific rate of return, and it accounts for changes in taxes and income over time. 

Like I always say, simple. Not easy.


Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 4275 Executive Square #800 La Jolla, CA 92037 619.684.6400. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. WestPac Wealth Partners, LLC is not an affiliate or subsidiary of PAS or Guardian. Insurance products offered through WestPac Wealth Partners and Insurance Services, LLC, a DBA of WestPac Wealth Partners, LLC.  CA Insurance License #0L49687 | 2023-158307 Exp. 07/25

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Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 5280 Carroll Canyon Rd, Suite 300, San Diego, CA, 92121, 619-6846400. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. WestPac Wealth Partners LLC is not an affiliate or subsidiary of PAS or Guardian. Insurance products offered through WestPac Wealth Partners and Insurance Services, LLC, a DBA of WestPac Wealth Partners, LLC. CA Insurance License Number - 0L49687. Securities products and advisory services offered through Park Avenue Securities LLC (PAS), member FINRA, SIPC.  (619) 684-6400. PAS is a wholly-owned subsidiary of The Guardian Life Insurance Company of America® (Guardian), New York, NY. CA Insurance License #0L49687 | Terms of Use | Online Privacy PolicyImportant Disclosures |  2023-158307 Exp. 08/25