Investment is one of the best and fastest ways of gaining wealth. All over the world, people of different races, colours and genders strive to keep their money in investment portfolio and schemes.
But one major question which arises most often, especially with younger investors is; how much they should invest monthly.
Some people are of the view that they should invest at least 50% of their salaries or monthly earnings while others think 10% is fine. Some other group also believe that 5% to 15% is a fine range.
But what works best? And what should you recommend to anyone or yourself?
In this article, we take a look at how much experts say you should save for investments monthly.
The simple answer is that there’s no fixed amount to invest monthly. However, there is a longer answer which makes lots of sense. Check it out below.
First Things To Consider Before Investing Money
Before you even conceive the idea of investing, you need to, first of all, take care of a few things. These things are listed below:
- Establish your financial goals
According to Investopedia, setting short term, mid-term or long-term financial goals is an important step towards becoming financially secure.
So, the very first thing to do as someone looking to invest money is that you must establish the reasons for which you are looking to start investing. Then, make sure to properly define your reasons and goal.
- Calculate Your Monthly Expenses
According to the US Bureau of Labour Statistics, the average person spends about 33% of their monthly salary on housing alone. So, as an individual, if you are not able to establish your monthly expenses, you may not even be able to identify how much you have left after paying for your home.
So you must be able to calculate your monthly expenses to find out what’s left after your expenses.
Some valuable online resources can help you do this calculation for free. You can use this calculator.
Learn How To Invest
Finally, after establishing your investment goal and establishing your monthly expenses, you can now learn how to invest.
This is simply about choosing the right investment made for you. And understanding how quickly that investment can get you to your desired target.
This usually involves some calculations which include interest rates, monthly contributions and the overall investment value.
There are some investments which offer lower interest rate while others offer higher interest rates. Some also offer compounding interests while others offer simple interests.
You need to establish these and spot the differences between them before you can successfully choose the one which works for you.
Do check out this article on Investment types by Nerdwallet.
If you need some online calculator to help you understand which investment type will get you to your desired goal, you can try the Calculator.me Savings calculator
It offers you a simple user-friendly interface that you can easily use to compute your interest rates and end values.
You can either calculate for compound interests or simple interests. And there are sections to cover calculations for your savings, short-term investments or even long-term investments.
Finally, the big question remains: how much should you invest monthly?
The truth is that your financial goals will have a big role to play in how much you should invest monthly.
After identifying your monthly expenses, you can then do the deductions and find the percentage of your salary left.
While it is not a given, you should invest at least 20% of your salary monthly. However, if your current expenses can’t permit that, you can start with 5% and increase it gradually to achieve the 20% mark shortly.
I hope this article was helpful to you. If you’d like to do some other calculations on how to invest and how much to invest, you can visit Calculator. me. There are many useful resources available there.
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