The first thing you may ask yourself when you look for a new job is, “How much money should I be making.” This question also comes up when you are bargaining for a new contract or increasing your current salary. You want to make sure you are being compensated fairly for all your efforts. The best way to answer this question depends on your situation, occupation, and market value.
Knowing your market value is the best way to answer the question But to begin answering this question, you need to consider how much money you should save in each stage of life. This will give you a basis from which to answer the question about how much you should make. Continue reading below to find out essential information about how much you should save every month and how much money you should be earning.
How Much Money Should You Save In Every Stage Of Life?
The amount of money you can save at every stage of your life depends on your income. Your income changes as the years go by, depending on certain factors, such as your type of job, job promotions, salary reduction or increase, and so on.
People have many reasons for saving, such as:
- Going on vacations
- Buying a car
- Making a home deposit
- Paying off debt
- Retirement
Everyone should save for retirement and emergencies. The amount of money you can save at every stage in your life varies.
The amount you should save at the different stages of your life may be divided into the following stages.
Stage 1: The Beginning Of Your Career
Almost everyone begins this stage in their 20s. Saving at this stage of your life can be difficult. This is because of the many expenses associated with this stage. However, you should try your best to save up to 25% of your yearly earnings irrespective of your challenges. This leaves you with 75% to take care of your expenses. You most likely have debts to pay off. However, it’s important not to use more than 75% of your income for expenses.
Having a budget is important at every stage of your life. At this stage, having a budget helps you to meet your financial and saving goals.
Stage 2: Starting A Family
Most people begin this stage of their lives when they are in their 30s and 40s. This stage can also extend into your 50s. This stage is bisected with even more financial responsibilities. You now have the added responsibility of saving for emergencies and college funds for your children.
At this stage, your savings is recommended to be twice the amount of your yearly earnings every five years. This means that if you earn $60,000 every year, then in five years, you should save a total of $120,000 or more.
To make things easier, connect your main account to your savings account. This way, you can easily transfer an agreed amount to your savings account at the start of every month. Doing it this way also prevents procrastination.
Stage 3: Thinking About Your Future Retirement
This is the stage where you start thinking about what you can get out of your lifelong savings. You have to sit down to take stock. This helps you know what necessary steps you can take to make things easier in your retirement.
Below are some tips that can help you achieve your saving goals.
Keeping Your Debt To A Minimum And Maintaining A Healthy Credit Score
Your financial history is a reflection of your credit score. You have to make sure you are paying your debts so that you maintain a clean financial history. This way, you can easily get loans when you need to or when you are in a financial crisis.
Keep An Emergency Fund
Emergency funds can save you in times of emergencies. Time like this can be when you lose your job or experience an unexpected health emergency. Emergency funds keep you from turning to your retirement savings. You can always easily depend on emergency funds in times of crisis.
Saving for retirement can only be possible if you stay committed to saving and you save through the different stages of your life. You are not a failure if you can’t meet your savings plan. You can always get back to saving once you get back on your feet.
How To Determine The Percentage Of Income That Should Be Saved
Everyone wonders how much they should save each month? Although this question has many answers, the best answer is that you should save at least 20% of your earnings each month. Of the 20%, 10-15% should be for your retirement savings. The remaining 5-10% should be for your emergency funds, paying off your debts, and other long-term savings.
Although this is the ideal way of saving, it isn’t the only method. To calculate how much to save every month, you have to consider your financial goals.
Financial Goals
- Your financial goals are divided into three groups;
- Expenses that can come up in less than a year;
- Expenses that can come up in less than a decade; and
- Very longer-term expenses that are more than a decade away.
Short-Term Financial Goals
Under this goal, expenses include going on a beach vacation, paying your taxes, and saving to celebrate a birthday. Another expense under this goal is saving to buy holiday gifts and building up your emergency funds to 6 months worth of expenses. You can take care of all these expenses within a year.
Long-Term Financial Goals
You can usually take care of expenses under this goal in less than a decade. Expenses under this goal include buying a new car, updating appliances, and repairing your home. Another long term saving goal might be saving for a house deposit.
Very Long-Term Financial Goals
These financial plans are usually longer than a decade. You may want to save for your children’s college or buy another home under this goal. Saving up for retirement is also part of very long-term financial goals.
Make A List, Plan, And Calculate
Make a list of everything you are presently saving for. Don’t forget to include expenses like home repairs, weddings, college savings, travel, and holidays. Put down your perfect saving target with the ideal deadline. Do the same for all the expenses you have on your list. Divide the time needed to achieve each goal by the amount of money the goal needs.
For instance, if you want to save $50,000 to buy a car and you want to do so in the next three years. Then you have to save approximately $1390 every month to make $50,000 in 3 years.
Do the same calculation for all the goals on your list. After doing so, you will probably realize you can’t practically save for some things on your list. If this is the case, then you have to make adjustments to your goals and expenses. For instance, you can buy a cheaper car, cut down your present spending, buy a cheaper house, and so on. With this step in mind, you can tailor your goals to your financial savings and goals.
Steps For Increasing Your Salary
The steps for increasing your salary are not the same or easy for every career. Things work differently for every profession. Some professions make it easier, and some make it harder. However, certain steps apply to every profession, and below are some of them.
Consult Online Tools
This is one of the easiest ways to know how much you should earn. You can easily find out important information by doing some online research.
You can see the mean annual wage for more than 600 careers on the online database of the U.S. Department of Labour’s Bureau of Labour Statistics. This offers you the best result for the mean annual wage of many occupations at just a click.
In addition to the U.S. Department of Labour’s Bureau of Labour Statistics, you can also find information using PayScale’s “What Am I Worth?” and Glassdoor’s “Know Your Worth.”
These two online tools allow you to type in some information about your job. They give you a result of what you should be earning based on what you fill in. You have to fill in the following information: your occupation, location, and years of experience. Both online tools use salary data from users to provide you with a mean result of what you should make.
Although numbers from these online tools are great as a starting point, they don’t reflect your personal situation. So it is important to consider your situation when looking at the numbers.
Talk To Your Co-Workers And Network
This is an excellent way of getting information aligned with your situation. In this method, you simply ask your colleagues in similar situations how much they earn. This way, you get a more accurate knowledge of what a person is supposed to earn in your situation.
There is pay transparency in many companies and states, so you can discuss salaries in the workplace. Asking a co-worker about their monthly earnings might be awkward. And asking them “how much money should I be making” isn’t better either.
The best way to ask a colleague is to say, “What do you think someone in my position should earn?” Asking this way is better because it allows them to reveal what you want to know without telling you anything personal to them.
Apart from your colleagues, you can also ask people working in similar positions at other companies. Doing this gives you a wide sense of the average pay in the industry for your position.
On average, in the U.S., it is a fact that minorities and women earn less than white men. So you may have to ask several colleagues from different races and genders. When you do this, you can get an unadulterated answer to the question, “How much money should I be making.”
Ask Your Manager
You can try this step after seeking an answer to how much money you should be making from online tools and your colleagues. After doing your research, you will have a salary range to present to your manager or boss.
Negotiations for your salary can be combative, especially when your boss isn’t offering what you want. However, it’s important to have the right type of attitude when negotiating.
Your approach to the negotiation matters tremendously. Approach it as a conversation where both parties are trying to get the best result. Approaching the negotiation this way will help you get a better result. You can try asking your manager how your present salary was determined. This way, you can support your part with how you determined your market value.
Be Realistic
You have to consider the current situation of your workplace and company. Some companies can have fiscal challenges and budget constraints. This can make it difficult to increase your salary. If this is the case, then you can try negotiating for extra job advantages. You can ask for a job title to learn skills that will prepare you for a higher job with bigger pay.
In the end, everything comes down to you. You have to be the one to advocate for your salary and job. The amount of salary you receive is related to your earnings. If you are a person of colour or a woman, then you have to advocate for yourself. Make your employers aware of your value to the company.
What Is A Good Amount Of Money To Make A Year?
According to psychologists from the University of Virginia and Purdue, the ideal amount of money for an individual to make a year is $95,000. This amount is required for an individual to gain life satisfaction, while between $60,000 to $75,000 every year is required for emotional wellness.
The psychologists carried out a study of data from up to 1.7 million people from 164 countries. They compared the earnings of these individuals to their life satisfaction. However, people with children will need more than $95,000.
How Much Money Should I Have Saved At 25?
By the time you are 25 years of age, you should have savings of about 0.5 times the amount of money you spend every year. That means if your yearly expenses are $70,000, your savings should be between $25,000 to $35,000. This way, you can easily save for your short, long, and very-long term financial goals. Achieving this type of saving puts your mind at peace even in times of emergency.
What Net-Worth Is Considered Rich?
Many Americans agree that they must have a net worth of $2.27 million for one to be considered wealthy or rich. This is according to reports from the Modern Wealth Survey in 2019.
This is a little different for cities with huge populations. This is true for cities like New York with the highest number of billionaires globally and San Francisco (which is the number one city with the highest density of billionaires). According to residents of these cities, you have to have a little more to be considered wealthy. In New York, you need to have a net worth of $3.2 million to be considered rich. And in San Francisco, your net worth needs to be $4 million for you to be among the rich.
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