Playing the Percentages

Most experts say if you're in your 20s, you should be saving at least 10 percent or more of your income, especially if you're single [source: Spiegelman]. The earlier you start, the more time your investments have to grow [source: Lankford]. If you start saving when you are older, you will need to set aside more of your income, because your investments will have less time to mature. Plus, the older you get, the more bills you have.

So what's the bottom line? Financial experts at Charles Schwab estimate you will likely spend 80 percent of your pre-retirement, pre-tax income to live on for at least 30 years of retirement [source: Spiegelman]. If you have zip, zero, nada, in your retirement account and are in your 20s, you should be saving between 10 and 15 percent of your yearly income. If you're in your 30s, you should be saving between 15 and 25 percent. If you're in your early 40s, you should be squirreling away between 25 and 35 percent [source: Spiegelman].

What does this all add up to? If you're in your mid-20s and have the discipline to save at least 12 percent of your income each year, then you won't have to increase that percentage as you get older [source: Spiegelman]. If you're 25, have no savings, and make $40,000 a year, you should be socking between $4,000 and $6,000 away annually. If you're 35 and make $50,000, you should be saving between $10,500 and $17,500 a year.

Don't get discouraged. No matter how much your paycheck is, if you want to save money, you can. That's the conclusion of economists Steven Venti and David Wise. The two found a wide disparity in how much people at the same income levels saved. Astonishingly, the pair found that those in the lowest income groups saved more than those in the middle -- as much as $100,000 more [source: Mulrean]. So what can you do to save more of your income? Here are some tips you can follow to get started:

  • Create a budget. It's one of the best ways to save money, and forces you to not overspend. A budget is a planning device that gives you a clear idea where your money goes on a daily basis. When you draw up your budget, make sure you include your savings [source: Kiplinger].
  • Watch your spending. The average person spends about $1,725 a year on buying and maintaining clothes [source: Bureau of Labor Statistics]. You can save a few bucks by simply skipping the latest fashions. And if you smoke, perhaps it's time you quit. Not only is it healthier, but your discretionary income won't go up in flames.
  • Stay at home more. Staying in can save oodles of cash. Each person in the United States pays more than $5,000 on entertainment and eating out [source: Bureau of Labor Statistics]. That's a lot of cash devoted to having a good time.
  • Create a short-term savings account. Unexpected expenses pop up. Create a special savings account devoted solely to emergencies, so you don't have to wipe out your savings to cover them. And make sure you can easily transfer money between the savings account and your checking account [source: Jenkins].
  • Max out your 401(k) contributions. Put as much money into your 401(k) as possible, especially if your employer matches.