The Saving Curve

How to Maximize Your Savings Rate

You should be saving 20% of your gross paycheck every month. That would leave you roughly two half months of saved income per year. Financial stability begins with building savings. You should have at least three to six months of income saved in the bank period as a starting goal. This is what I will call The Don’t Touch Fund (DTF).

You will never make withdrawals out of this fund, only for extreme emergencies, and they would have to constitute genuine emergencies. Any amount taken out of this fund must be replenished. This fund should be roughly 10,000 to 15,000 dollars, at minimum. It should be stored in any accessible money market savings account.

After you have completed the Don’t Touch Fund, you can consider investments, depending upon your tolerance of risk, to ensure that your savings aren’t diminished by inflation. This amount should be deposited in a mutual fund or stock trading account, preferably one with no fees. There are plenty of places you can deposit it. The main purpose of this is to allow for the law of compound interest to take over.

Compound interest is your friend. It allows money to build on top of money. And then you basically have to ignore and pretend this money doesn’t exist. For all purposes, it doesn’t. You will never spend it. You will never take it out of the market, and…