Q: Is there a “rule of thumb” for how much each person should save?
A: Living within one’s means continues to be an important, but under-appreciated component of achieving financial security. However, two scenarios illustrate the personal nature of savings choices:
1) James spends lots of money on travel and entertainment. His father was a workaholic who never took time to really enjoy what he had earned.
2) Olivia never feels she saves enough, despite the fact she is a millionaire. She grew up in a family that constantly struggled to make ends meet – at one point, her family was homeless.
An individual’s back story needs to be an integral part of each person’s financial strategy. Every decision we make involves both money and values. Rather than using a “rule of thumb” it is essential to understand these connections when making decisions about saving and investing.