In lieu of doing a mathematical calculation of the amount of savings required to fund specific financial goals, a good rule of thumb is to save 10% of your gross income annually (e.g., $5,000 if you earn $50,000). You can do this on your own or through your employer-provided savings plans, such as 401(k)s, or both.
If you have calculated what you need to save for future financial goals, then you should be saving at least as much as you need in order to reach your goals. If the amount required to save exceeds your available income, the goal may need to be scaled back or the time frame to save extended.
Begin by looking at how much money you need to save, when you need the money, and where you plan to keep it (e.g., money market mutual fund for short-term goals and stock index fund for long-term goals). By making some simple assumptions, you can determine a needed saving amount out of every paycheck.
A goal-setting worksheet to help you determine the amount of savings required to fund future financial goals can be downloaded from http://njaes.rutgers.edu/money/pdfs/goalsettingworksheet.pdf.
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