Woman hand calculating money on saving account

How Much Should I Save Each Month?

Filife team

    Saving is one of the most basic yet overlooked areas of personal finance. People often fail to embrace the importance of saving one’s money especially today where everything can be bought through just a click of a button or a touch of a screen. 

    Senseless buying that eventually leads to overspending which will definitely lead to a badly budgeted month. So how much should I save every month? Most experts recommend saving 20% of your income every month. 

    According to the 50-30-20 rule, a saving system made popular by Senator Elizabeth Warren, 50% of your income after taxes should be set aside for your monthly necessities, 30% will be your limiter for things that you can actually afford, and that you should save as much as 20% of your salary after taxes as a savings goal set aside in your bank account and other forms of investment every month.

    What is the 50-30-20 rule?

    Senator Elizabeth Warren, being an expert in bankruptcy law, created the 50-30-20 budget system before she even became a politician, as a guide for Americans to be financially prepared for emergencies or just plainly as a system that will help people set aside money, saving up, and budget their monthly income.

    In 2019, nearly 70% of Americans only have less than $1,000 stashed away for emergency, life, and retirement savings combined.

    The 50-30-20 rule is a very simple budget system that suggests to allocate parts of your income three-way.

    Basically, the 50-30-20 rule encourages individuals to be adept in their financial capabilities and be able to save and diligently pay their debts at the same time.

    Here’s how it works:

    50% for Living Expenses and Essentials

    Allocate 50% of your after-tax income per month to necessities such as rent and housing, utilities, food, insurance, tuition and small loan payments. Anything that you need, including credit card bills should be well within your 50%.

    30% for Flexibility in Spending

    The 50-30-20 rule limits your spending habits and requires you to spend only 30% of your after-tax income for your ‘wants’ and other non-essential expenditure. Anything that you will put here is optional expenditure. However, how sad would life be without those ‘unnecessary’ things? That is why the 30% is still included in your budget every month, but again, they should be optional.

    20% for Saving and Financial Goals

    Start saving 20% of your after-tax income per month for your personal savings account, emergency funds, retirement account, as well as your investments such as mutual funds or IRA contributions. The 20% can also include your debt repayments as they will ultimately reduce parts of the 50% needs area.

    How to Start a 50-30-20 Budget?

    Seeing how simple and forgiving this 50-30-20 budget system is, maybe you would like to try it and see for yourself if it really works. Well you are in luck, it looks simple because it is really that simple. Let me show you how it’s done:

    Know your After-tax Income

    First, you should know how to calculate your after-tax income. It’s your gross pay less any wage taxes such as withheld income tax, disability taxes, state taxes, federal income tax, social security taxes, and medicare tax withholding. You may include your 401 k to your after tax income, after all it’s a retirement account. You may want to check with your employer to know exactly how much to deduct from your gross pay.

    Also, here’s a handy after-tax calculator: https://salaryaftertax.com/us/salary-calculator

    Limit your Necessities to 50% of your After-tax Income

    List all of your necessary expenditures including housing expenses such as rent or house repair, food expense, transportation expense, and insurance. List also those expenses where you’re legally bound by a contract to pay such as child support, phone bills, and other essentials. Think of this list as your ‘must-haves’. If your needs exceed 50% of your after-tax income, only allow it temporarily and take steps to further lessen your necessity expenditure.

    Limit your wants to 30%

    Up next is the hard part. List your wants and limit them to only be covered by 30% of your after-tax income. These things should be optional, like that shirt you saw at the mall, the car upgrade you saw online, the movie you want to see badly. Even eating out up to the smallest detail like getting that full meal rather than a simple sandwich should be considered as a ‘want’.

    Allocate 20% on Savings

    20% on savings. This part of your personal finance feeds your long term goals rather than short-term wants. Allocate 20% of your after-tax income to savings and investments of your choice. Like we’ve said earlier, don’t forget to include your debt repayments on this part of the budget as it will ease your 50% ‘must-haves’ expense in the long run. The need to save is as important as your ‘wants’.

    Here’s a chart of how it should look like:

    50-30-20 Rules

    Example of the 50-30-20 plan:

    According to the United States Census Bureau in 2018 the median household income was at $63,179 which translates to around $5,260 per month. For this example, let’s just get right to dividing it since taxes differentiate across the United States so it’s up to you to compute your after-tax income.

    Now let’s use that as a base salary for our 50-30-20 plan example:


    How much money for 50%? If you are earning $5,260 per month, all your ‘must-haves’ must be well within $2,630. Your rent, groceries, transportation and other necessary bills as well as contract-driven payments should be under this allocated budget.

    How much money for 30%? A favorable amount of $1,578 should cap all your ‘wants’ expenditures for the current month. It doesn’t really suggest you should use all of those but just in case you aren’t able to spend all of it, you should include it in your savings allocations.

    Finally, how much money for 20%? $1,052 should be directly spent on your personal savings goal account, emergency funds savings goal account, retirement funds savings goal, and your current investments. Internalize the need to save.

    Ideal Savings by Age

    First, you have to understand that a saving is income not spent. But if you don’t spend the money, where do you put them?

    Here are three types of savings goals that you need to get started right now; Personal Savings, Emergency Fund Savings, and Retirement Savings.

    Emergency Fund Savings and Retirement Savings are both off-limits. You don’t spend them unless it’s an emergency or until your retirement. But what about your personal savings?

    How much saving should I have?

    You must have the want to save before you think of the amount of money to save.

    The amount of your personal savings of course will depend on your preference BUT think of it still as your safety net. This is where you would get large sums of money to spend on your dream vacation, a new car, that home makeover you’ve been planning, and of course, the comfort of knowing that you would not run out of cash tomorrow.

    People should save as much money as they can on their bank account.

    Average Savings by Age

    Since personal savings are well personal, here’s a list of average personal finance savings by age:

    35 below$9,600
    35 to 44$25,000
    45 to 54$40,900
    55 to 64$57,200
    65 to 74$67,700
    75 and older$51,400

    Ideal Emergency Fund Savings

    At least 55% of Americans experienced a financial shock such as a sudden loss of a job, a drop in income, a long term hospitalization, a major car or house repair, or even a loss of a partner, spouse or family.

    These financial setbacks left them struggling and caused hardships in making ends meet.

    Financial disasters that could have been easily avoided by a developed emergency fund savings.

    Like other saving, you should have them placed in accounts with return rates, but unlike other savings, emergency funds should always be accessible. So high-yield financial products that will likely hinder you from withdrawing your funds anytime are to be avoided.

    Emergency funds should also be considered as a necessity. It’s not actually looking forward to an emergency but rather being prepared just in case. Ideal emergency funds should at least contain 3 to 6 months’ worth of your expenditure.

    Here is an emergency fund average personal finance savings by age:

    30$14,115 to $28,230
    40$17,799 to $35,599
    50$18,846 to $37,693
    60$16,554 to $33,108
    70$14,067 to $28,134
    80$10,794 to $21,588

    Ideal Retirement Savings

    Stack of coins and jar with savings

    According to a study by The Pew Charitable Trusts, 1 in 5 Americans say they are not planning to retire. Others say they anticipate doing something else like working a different job.

    How much should I save for retirement?

    The Social Security retirement benefit in 2020 was around $1,514 per month which translates to an annual benefit of $18,170. Social security benefit after all was designed to be supplemental rather than a source of income so you better not be relying on solely your social security for your retirement if you want a lavish, comfortable, retirement life. How much saved for retirement is the question we should ask ourselves.

    Your ideal retirement savings is based on your annual salary.  How much saving to retire? According to T. Rowe Price, in your 30s, you would want to have saved about one year of your income.

    Here’s a table using the annual median personal income listed by the U.S. Census Bureau in 2018, $33,706:

    AGEMoney You Should Have SavedTotal
    30Your income x 1/2$16,853
    35Your income x 1$33,706
    40Your income x 2$67,412
    45Your income x 3$101,118
    50Your income x 5$168,530
    55Your income x 7$235,942
    60Your income x 9$303,354
    65Your income x 11$370,766

    Where to Save Your Money?

    Now that you know how to budget your after-tax income, where should you put your savings? You need to want to save. There are tons of financial products out there that offer great rates of return and will solely depend on your preference and ability to provide requirements.

    Savings Account

    These accounts are financial accounts that offer (often low) interest-bearing depository accounts. These bank accounts offer security and reliability as long as you deal with government-accredited financial institutions. These bank accounts are good for emergency fund deposits and short-term financial savings goals since most savings account are oftentimes highly accessible.

    High-Yield Savings Account

    High-yield savings accounts are a fairly new category of savings. Since more and more people became lenient of saving, these type of savings product paved the way for your savings to earn more while parked at a financial institutions with the same risk as a normal savings product: 0, the interest rates of high-yield savings accounts are about 20 to 25 times higher than that of a normal savings product. These financial institutions often have very few to no other financial products so you would have to take your other banking needs elsewhere. But with online money transfers, everything’s within reach with just a tap of a button.

    Certificate Deposits

    Certificate deposits on the other hand are financial products offered by banks and credit unions that require consumers to pay a lump sum which will be untouched for a certain period predetermined by the financial institution along with penalty fees for early withdrawal in exchange for an interest rate premium. They have locked rates which will help you determine how much your deposited lump sum will earn and is fairly easy to open, it’s similar to opening any other standard bank deposit account.

    Money Market Funds

    Money market funds are investment funds that invest in liquid assets. Money market funds are sponsored by investment fund companies which give no guarantee of principal therefore making it riskier than risk-free. It’s fairly the same as a mutual fund.

    Treasury Bonds, Notes, and Bills

    These three are all government-issued with fixed periodic return of investment throughout the life of the financial instrument. All three are based on the stature of the United States government thus, investors can count on its safety but not so much on profit. The COVID-19 pandemic brought record-low yields in 2020.


    Bonds are tradable assets which represent indebtedness of a borrower, usually a company or a government, to an investor. A debt security that obliges debtholders to be paid the principal sum with interests at a later date, or commonly known as the maturity date. Interest rates are paid differently but usually paid annually, semiannually, or even monthly.

    How to Save More Money?

    Now that you are well aware of how to budget your income, which savings to focus on and where to actually put your hard-earned savings, how do you save more money?

    Spend what’s left after Saving

    Yes, you heard that right, spend what’s left after saving. Spending gives us the feeling of fulfillment and reward. Limiting that feeling will end up as a nuisance and you wouldn’t want that whenever you’re saving. Saving will often feel very constricted, as it should, that is why balancing your finances with your savings upfront will get you some leftover money to spend making it feel like savings’ a little less restricting.

    Seek Discounts, Coupons

    Here’s one move you often skip. Getting that discount and coupon. Oftentimes perceived as playful marketing ploys, discounts and coupons really does what it is named after. Getting that extra discount would not just not hurt your expenditure, it will help you save-up! Make it a habit to ask for discounts and coupons whenever possible.

    Throw Loose Change in a Jar

    Loose changes are massively underappreciated. These loose changes found on the floor of your apartment, on the street, on your unwashed favorite jeans and other unholy places make a big difference when collected. It wouldn’t hurt to try.

    Save on Utility Costs

    Invest in energy-efficient electronics and light bulbs. Get a programmable thermostat. Unplug your electronics. Contact your utility company and know more about how to save on your monthly utility costs. Every penny saved helps.

    Make Meals at Home

    Making your meals at home. This one’s a double-edged life hack. Making meals at home not only helps you save up on your hard-earned dollars, it’s a lot healthier than eating out. Sure, it may take some practice but a youtube video or two makes all the difference. It will also help you budget your money come grocery time. You get lean, clean, healthy, and wealthy all at the same time. Go get that meal-plan you’ve been dying to try and you’re well on your way to that hard-earned abs.

    Cut Out Subscriptions

    Subscriptions are basically money-traps. Especially those that lock you in a certain time period. They always seem affordable and worth it at first but after three months, do you still enjoy them? Or do you consume these senseless entertainment wonders solely because you already paid for them? Ask yourself, do you really need to get that sports update subscription?


    So how much money should you save each month? Hopefully you’ll be able to answer that now and start saving. After all, saving money all depends on your wants, needs, and preferences, especially with all the money saving techniques and money earning products offered by different financial institutions. It’s all up to you to budget, work-around, and fulfill each and every financial goal you mark.