How much should I save every month?
A reader recently asked me how much they should save a month. With a healthy emergency fund and no consumer debt, they were feeling a bit lost. Well, I am so glad they asked! What a great question!
Everyone's answer will be different. Some people are committed to the savings fast-track and some are happy to work for a very long time to maintain their lifestyles. Absolutely up to you! You know which way I lean ;)
How much money you need to save depends on your goals. When we were buying our first condo our goal was to save for a down payment of 20% of the cost of the home. Now that we have secured real estate investments, our goal is to max out our registered accounts. The number is determined by what you want for your life.
Let's look at an example: Mackenzie's goal is to purchase a condo for $400,000. She needs to come up with $80,000 for a 20% down payment. This will allow her to avoid CMHC Insurance and will significantly reduce her minimum monthly payments. Currently Mackenzie has $25,000 in her RRSP which she'll be able to access because of the First Time Home Buyer's plan.
Mackenzie has to save $55,000 in the next 2 years. In cold hard cash that's $2291/month. Based on her current lifestyle, she can currently save $1500. That means she has to makeup about $700/month. As an accomplished musician, she is able to teach private vocal and piano lessons to hit her goal. Go Mackenzie! In two short years she'll be living in a beautiful condo with a manageable monthly mortgage. Woo hoo!
Do you have a number in mind that you shoot for every month? Is it based on a short or long term goal?