7 ways to know if you’re saving enough money


How much money is really enough

Of course most of us would always love to have more money — but when it comes to savings in general, how do you know if you’re saving enough each month? And for specific goals, how can you be sure that you’re adequately preparing to reach those goals?

Since every individual’s situation is different, there is no one-size-fits all answer. But if you want to make sure you’re on the right track, there are some general guidelines that can help you determine whether you’re really saving enough each month to reach your long-term goals.

7 ways to know if you are saving enough money

1. You know what your goals are

If you want to reach your long-term financial goals, you first have to identify what they are and then have an idea of how much money you’ll need to reach them.

You need to give each of your big goals an estimated price tag, that way you can be sure you’re putting enough money away each month for each specific goal. Making a mental note is not enough. If you don’t have a specific plan, you will very easily reach the point when you’re ready to make a big purchase and you won’t be financially prepared.

Let’s say you want to buy a $250,000 house in five years. The cost of a down payment will depend on type of loan you get, but typically you will need between 5% and 20% of the home’s sale price in cash for a down payment. And the higher the down payment, the lower your mortgage rate will be.

If you plan to put 20% down, you’ll need $50,000 in cash. So to reach that goal in five years, you should be saving roughly $850 a month.

Bottom line: figure out exactly what your goals are and price them out — by month or paycheck — to ensure you’re saving enough. Doing it over time makes reaching a number like $50,000 a lot easier than it may sound — and the earlier you start planning, the easier it’ll be.

Read more: 4 ways to trick yourself into saving more money

2. Your savings are automatic

One of the best ways to keep your savings on track is to make it automatic. If you don’t automate your savings, you’re much more likely to reach the end of the month and realize you’ve spent what you had planned to save.


So once you figure out how much you can save each month, set up your paycheck’s direct deposit to automatically send that money into savings. That way the cash is saved before you have a chance to spend it.

If the money sits in your checking account all month, borrowing from yourself and your savings becomes way too easy. Regardless of how disciplined you think you are — even giving yourself that option can very easily throw your goals off track.

3. You keep short-term savings separate

Seeing one big number next to your savings account can be exciting, but if you have several goals, keeping all that money together in one big chunk is a bad idea — for several reasons.

Not only does it become much more tempting to borrow from your savings ‘just this once,’ but it also makes it more difficult to track each goal.

So if you have a few big short-term goals, set up separate savings accounts. Once you know how much you should be saving each month for each goal, set up an automatic direct deposit from your paycheck to have each specific amount sent directly to each account.

Then you can easily track your progress on each goal and make sure your biggest priorities are on the right track.

Read more: Over 40 with no retirement savings? Take these 6 steps

4. You have more than just a savings account

Savings accounts are a great place to keep money for short-term goals — anything you want to accomplish in about five years or less. You may not make any money on those savings, but you don’t risk losing it either — and that’s crucial when it comes to adequately preparing for short-term goals. Plus, the money is easily accessible and you won’t pay any fees or penalties when it comes time to withdraw it.

For other types of savings, your money is better off elsewhere. 

Retirement savings: The earlier you save for retirement, the more time your money has to grow — and putting that cash in the right type of retirement account allows you to save a whole lot more over time. 


If you have a 401(k) at work, start saving money through automatic withdrawals each time you get paid. If your employer offers an employer match, that is essentially free money, so try to contribute enough to get that match.

See more on different types of retirement accounts and what’s best for you.

College savings: 529 plan is the best way to save for your or your kid’s college education. 529 plans — aka college-savings plans — allow you, a relative or a friend to put money aside as an investment for a child’s college education. The money grows tax free and is spent tax free for eligible college expenses such as tuition, books and fees. Here’s more on how these plans work and how to get started.

Long-term savings: This is money you won’t need for at least five years or more — whether it’s for a big purchase like a house or just extra savings. While you want to keep money for short-term goals in a super safe place, this is extra cash you can invest, which will allow it to grow over time. Here are some ways to get started.

5. You track your savings

How much do you have saved for each goal? Are you on track to reach each one in the desired time frame? Which ones are you behind on?

If you can’t answer these questions, then you aren’t tracking your savings closely enough — which also means you may not be saving enough.

Depending on your age and goals, certain types of savings should be monitored more closely than others. They are all important to keep track of, but if you’re trying to buy a house within a certain period of time, you’ll want to make sure you are hitting your monthly savings goals every single month. Otherwise, it can be easy to fall behind — and playing catch-up is not fun — sometimes, it’s not even possible.

Here’s a list of apps and strategies to start tracking your savings.

6. You don’t waste extra money

While Clark recommends adjusting your withholding so you don’t get a tax refund (since it’s essentially an interest-free loan to the government), a lot of people rely on getting that extra sum of cash each year for various reasons.

If you’re one of them, what do you do with that money? What do you do with any extra cash that comes your way — maybe in the form of a bonus at work or a gift?


If you’re trying to save, that money should go directly into savings. This doesn’t mean you shouldn’t reward yourself — in fact, you should spend on yourself when you have some extra cash.

But when you’re saving for big goals, you always want to keep the bigger picture in mind — and stashing away any extra sums of cash can help you reach those goals quicker!

7.  You frequently increase your monthly savings

Once you get into the habit of saving and have everything on auto-pilot, it’s important to regularly revisit your monthly budget and savings.

Maybe you start making more money or you just get used to that extra cash not being there — reevaluating your savings every few months will not only allow you to keep everything on track, but it will also help you identify even more money that you could be saving.

Read more: How much a one-time 1% increase in savings will pay off in retirement

When you start saving more money, or start from zero, you’ll notice the change in your monthly income — and you’ll have to make some adjustments. But after a while, those changes become the norm, and once you begin to see the progress you’re making toward your goals, you’ll likely be motivated to save even more.

So make sure to take a step back every couple of months and identify any extra money or income that could go toward helping you reach your goals!

Read more: To create, track and maintain a budget

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