If you’re among the privileged who earn a sizable salary, you definitely have a good amount of spare money left at the end of each month, a sum that you usually accrue to your savings account. However, you’ve recently come to think about investing some of it in order to multiply it, but now the following question arises: how much, exactly, should you invest?
Well, there is no consensus on this, since it depends on a variety of factors, from your income to your age. In the following, we’ll try to break this issue down into its constituent parts.
The Golden Rule of 50/30/20
58% of the adult U.S. population has invested in stocks this year alone – that is a huge figure, we’ll give it that, but it’s an unsurprising one considering the current economic climate. In light of ever-growing inflation, people are turning to investments for long-term gains and are choosing the things that they invest in more carefully than ever.
The “50/30/20 rule” has for a long time been the go-to budgeting plan for those who are able to save money on a regular basis. This rule encourages one to divide their (post-tax, mind you) income like this: 50% should be reserved for must-haves (food, gas, bills, rent), 20% should go toward savings, and lastly, the remaining 30% goes to non-essentials such as clothing, subscriptions, eating out at restaurants, etc. Ideally, the rule should be 50/20/30 instead if you want to prioritize savings.
However, this plan does not work out for everybody in the same way because – remember – the amount you’ll have available for investment is inherently dependent on how much you make a year. There are calculators out there that can give you an exact answer.
The Age Consideration
Apart from your income, your age profile dictates how much you can invest and what you can invest in. Older people cannot afford the same risks as the younger ones do, because they have families and retirement plans to attend to, so they mainly invest in traditional assets, whereas the young generation has more of a preference for alternative investments.
Being young offers you a lot more leeway and that is why almost half of Gen Z has invested in 2022. It’s a truism that younger people don’t make a lot of money, but their fearlessness seems to be bypassing that.
Financial experts recommend that were you to consider doing it, you should invest a minimum of 15% of your post-tax money, with no consensus whatsoever concerning the maximum percentage. As a rule of thumb, you should follow the 50/30/20 plan and make as many adjustments to it as you see fit until you’ve reached the most feasible enterprise.
Whether you plan to invest in cryptocurrency or on Forex (FXList has an extensive list of brokers, in case you’re interested), you need to make sure that your investment is a sound one and this can be accomplished only by making in-depth research of the market.