Here’s how much of your income you should invest as a ‘good start’—and how much is considered ‘excellent’

Financial advisors will tell you that you need a plan for every dollar you earn in income.

But certain expenses are easier to budget for than others. You likely know how much you need to put toward rent and utilities each month, for instance.

Things get a little trickier when it comes to less pressing needs, such as saving for retirement. How much you’re willing or able to save depends on a number of factors unique to you, such as your income, debt level and personal goals.

If you just want to get the ball rolling, though, “you’re looking at 10% of gross pay as a good rule of thumb,” Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth, said during the recent CNBC Make It: Your Money virtual event.

For people earning a $50,000 annual salary, stashing $5,000 a year “is a good start,” he added.

“Obviously more is better,” Boneparth told moderator Frank Holland. “Getting into that 20% to 30% category is deemed really good to excellent. Going beyond that, those are our super-savers and super-investors.”

Boneparth knows that socking money away in your retirement account may not be on the top of your fiscal to-do list. After all, you may have a significant amount of high-interest-rate debt — a drag on your finances that should likely take priority over investing.

You may also need to build an emergency fund, which will insulate other aspects of your finances from unexpected expenses. “What good is investing your money if you have to [sell] those investments because something pops up? That’s why a cash reserve is more important,” Boneparth said.

And naturally, you, along with everyone else, would like to save as much as you can — but there’s a life to be lived here, too. What makes personal finance difficult, said Boneparth, is “finding the balance between comfort and lifestyle expense and your ability to consistently save or invest.”

For some savers, finding room in the budget to invest for the long term could mean skipping out on near-term comforts. The reason it’s worth it, financial experts will tell you, is that money you invest now theoretically grows at a compounding rate over time.

That means stashing away a relatively modest amount now can really pay off later on — especially if you’re able to start investing early.

Say a 22-year-old earning a $50,000 salary manages to follow Boneparth’s advice and invests $5,000 a year into her retirement account. Assuming she earns a relatively modest 7% annualized return and sticks with the same annual contribution, she’d have more than $1.5 million in her account by the time she retires at age 67, according to Make It’s compounding interest calculator.

And even if you can’t quite make 10% happen right now, every little contribution helps. In the same example, an investor contributing $200 per month would end up with about $734,000 by age 67.   

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