How Much Should You Save or Invest?
Saving money should almost always come before investing money.
One of the most common approaches is to invest everything after the emergency fund.
Using this approach, you first save 20% of your income per month to build up an emergency fund. This fund should consist of 6 months of your income. As your income rises, or you spend from the fund, you will have to top it back up to the 6 month limit.
Whenever the fund is at 6 months of your income, the 20% you’d normally save is instead used to invest. You will still need to pick the assets intelligently of course, and secure a good rate of return (speak to me!).
In this way, you can be assured that emergencies will not disrupt your investment – if something goes wrong, such as retrenchment, you can tap your emergency fund instead of taking money from your retirement portfolio.
One of the most common approaches is to invest everything after the emergency fund.
Using this approach, you first save 20% of your income per month to build up an emergency fund. This fund should consist of 6 months of your income. As your income rises, or you spend from the fund, you will have to top it back up to the 6 month limit.
Whenever the fund is at 6 months of your income, the 20% you’d normally save is instead used to invest. You will still need to pick the assets intelligently of course, and secure a good rate of return (speak to me!).
In this way, you can be assured that emergencies will not disrupt your investment – if something goes wrong, such as retrenchment, you can tap your emergency fund instead of taking money from your retirement portfolio.
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