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How Much Should You Save Each Month?

The first step in achieving a goal is setting one.

April 19, 2022 | Madison Foster

Closeup of man in suit sitting behind desk holding glowing lightbulb and filling piggy bank with coins

We all know how important it is to save, but for many it’s easier said than done. So how much should you really be saving each month to hit your financial goals? There’s of course not a magic number, but the short answer is: It depends. Let’s dive in and I’ll explain.

A widely accepted and encouraged principle of saving is the 50/30/20 rule. This rule, popularized by Sen. Elizabeth Warren, says that you should divide up your after-tax income as follows: 50% for essentials like food and shelter; 30% for wants like that fancy lawnmower or pair of shoes you’ve been eyeing; and 20% for savings. The important thing to note here is that this rule is merely a guideline. Your percentage breakdown may need to be adjusted based on your personal situation.

50/30/20

For instance, if your net income is higher than average and you can already live well within your means, it would be a great idea to put a significantly higher amount towards some sort of savings. On the other hand, if you are currently living paycheck-to-paycheck, 20% may not be possible for you right now. The key takeaway is that doing something is always better than doing nothing, and that applies to saving as well. Putting 20% of your income back is a great goal to work towards, but it’s not something that every person can do right away.

Another factor to consider are your long- and short-term goals. If you are setting aside a specific amount for a beach vacation, you may need to save extra for a while so that you have the funds available when you need them. If you plan to work until you physically can’t anymore and retiring early isn’t a goal, you may have a little more wiggle room in your fun money-to-savings ratio, particularly if you established a retirement account at a young age and contribute to it regularly.

A final tip that can help you reach your savings goals is to increase the amount you’re saving each time you earn a pay raise. Think about it: You lived on what you were making prior to the wage increase, so why not put that extra dough into a 401(k) or high yield savings account and have it work for you in the background? Adding 1-2% to your savings annually could get you to that 20% goal faster than you think.

Whatever you decide to save, and however you decide to do it, keep going! It just may change your financial future.


OMB and its affiliates do not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decision.

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