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From luxurious holidays to fancy cars, we all want to live our lives to the fullest while we’re young, but our lifestyles shouldn’t come at the cost of retirement.

Our financial safety nets can also help us prepare for emergencies and other short-term goals, but how much is enough?

How Much Should the Average Person Save?

If saving money is on your mind, you’re not alone. According to a Northwestern Mutual survey, only 10% of Americans are confident that they’ll have enough money for retirement.

While the amount of money you should save each month depends on your short and long-term goals (more on that later), most financial experts will suggest saving 20% of your income. For example, if you make $120,000 per year, you should save $24,000 by the end of the year.

Financial experts also recommend saving up to 6 months\\\’ worth of income just for necessities. For example, $60,000 is half of $120,000 (6 months), but if 50% of $60,000 goes to all of your essentials, you would need to save $30,000, which is $6,000 more than the 20% savings rule.

The majority of financial experts recommend having at least $1 million in savings before retirement, but that amount may rise to $3 million or more depending on lifestyle and location.

How Should the Average Person Allocate Their Savings?

When it comes to savings, there are three timelines to consider: less than a year, less than 10 years, and a lifetime. Here’s how you should save each month based on these categories.

Income Protection InsuranceIt’s common to overlook the benefits of insurance because it’s seen as expensive, especially while we’re young. But, how much is income protection insurance? While costs vary depending on your premiums and insurer, the short answer is “less than what it would cost not to have it.”

Income protection insurance can ensure you’re paid 70-80% of your income should you fall ill and can’t work or become temporarily or permanently disabled. That means you can use your insurance payout instead of your personal savings to support yourself while you recover.

Retirement (401 (k) and Investments)If you have an employer that matches your retirement contributions, you’ll only have to put away 5-7% of your income towards retirement. If you don’t, saving 10-15% of your income is ideal. Put the bulk of your money for retirement in a 401 (k) because you’ll allocate interest over time.

Then, open up a short-term high-interest savings account that builds up a retirement safety net separate from your 401 (k). We also recommend investing some of your income into securities, like stocks, bonds, and dividends, so you’ll have other investments that grow as you work.

Taxes (For Self-Employed Contractors)Independent contractors have to pay self-employment taxes, which come out of their income. Your tax bracket will depend on the amount you make per year, but you should keep 25-30% of your income for taxes as a rule. You can lower your tax burden by using tax deductions.

EmergenciesAs stated, you should create an emergency fund that can cover 6 months\\\’ worth of necessities, which range depending on your lifestyle. Your emergency fund won’t include luxuries like a premium internet package, as it’s recommended you downgrade while you’re unemployed.

Everything ElseYour “everything else” savings account can include major expenses you expect to pay for, like vacations, home repairs, weddings, and more. These expenses may not be a necessary expense right now (replacing the gutters on your house) or ever (throwing a giant wedding).

Either way, most of these expenses will have an upcoming deadline, so they may seem vital at the moment. To make sure you don’t under or overestimate these saving goals, calculate how much you need to cut from your spending habits or whether you need to extend the timeline.