How Much Should I Save?
How much should you save? It seems like a simple enough question. In this episode of the Stuff About Money podcast, Erik Garcia, CFP®, BFA, and Xavier Angel, CFP®, ChFC, CLTC, break down what you need to consider before answering that question. They explore values, goals, and the various types of savings. If you are working towards financial independence, lean into this episode.
Episode Highlights:
- Erik explains that there is no easy answer to the question: “How much should I save?” (4:40)
- Erik mentions that backwards planning, starting where you want to be and working your way backwards, is a good place to start when determining how much to save. (6:44)
- Erik explains that we must understand what building wealth means to us, in order to determine where to start saving. (12:01)
- Erik shares that making a decision to save or invest means restraining yourself from something today to have more tomorrow. (15:00)
- Xavier and Erik talk about what an “independence account” is, and how it differs from an emergency fund account. (18:40)
- Xavier explains that the percentage we put into our savings is a personal decision and usually goes into three different types of accounts: emergency fund accounts, retirement accounts, and independence accounts. (23:37)
- Xavier talks about his client who has started saving small and is working his way up to save more. (26:22)
- Erik talks about a saving hack he got from his friend, where save a large percentage of the increase in your salary every time you get a raise. (29:17)
- Erik explains why everyone needs to meet with a financial planner at least once in their life. (31:59)
Key Quotes:
- “Whenever you make a decision to save or invest, you are consciously denying yourself something today to have more tomorrow.” – Erik Garcia
- “That third account is going to be my independence account. And that’s the account that’s going to give me flexibility. And as far as what we put in there, what we save into that particular account is based on what your goals are.” Xavier Angel
- When I talk to somebody, whether they become a client, or not, I always tell them that everyone needs to meet with a financial planner at least once in their life. – Erik Garcia
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