How Much Should You Save Per Month?

One popular guideline, the 50/30/20 budget, proposes spending 50% of your monthly take-home pay on necessities, 30% on wants, and 20% on savings and debt repayment.

For example, if you make $4,000 after taxes each month, that works out to $800 for savings and paying off debt.

“Savings” is a broad term. So what exactly does it cover? According to the 50/30/20 rule, the savings category consists of an emergency fund, retirement, and other long-term savings goals, such as paying for a home or your child’s college education.

Remember, the entire 20% isn’t devoted to savings. Reserve some of that for paying off credit cards and other high-interest debt, if you have it.

Figure out what’s realistic for you

The 20% rule is a good general guide, but it isn’t the right fit for everyone. Some people can save above that rate, while others merely struggle to make ends meet.

“Some people pay their rent and they have nothing left. So how are they possibly going to save 20%?” says Tara Unverzagt, a certified financial therapist and certified financial planner in Torrance, California. “You need to look at your situation to see what is reasonable and what’s not reasonable.”

You can use a budget planner to compare your estimated monthly spending and saving totals with the recommended 50/30/20 budget figures. Don’t feel ashamed if you’re saving below the suggested rate or nothing at all. There may be ways to save, make or even stop spending money that can help you increase your savings contributions. For example, canceling a rarely used gym membership could free up around $40 or $50 every month.

Your income, expenses, and goals should ultimately determine how much you’re able to save each month. “If the goal is to retire at 40, you need to save a heck of a lot more than people who are shooting for 65 because you have 25 fewer years for that money to compound,” says Tess Zigo, a CFP in Palm Harbor, Florida.

Start with something

If saving roughly 20% of your monthly paycheck isn’t within reach, you may feel discouraged about saving altogether. Try not to get hung up on a specific number. As Unverzagt puts it, “any savings is good savings.”

Unverzagt says, to start with a manageable amount, such as $10 per week or paycheck. Setting aside $10 each week adds up to $520 a year. That’s a solid amount for a starter emergency fund.

Ideally, you’ll save toward multiple financial goals at once. But if you can’t, it’s OK to prioritize. For example, focus on building a basic emergency fund first, then on saving enough to get the employer match on your 401(k)  — if you have one. After that, you can move on to increase retirement contributions or establish a full emergency fund of three to six months’ worth of living expenses.

Can you save too much?

Having a lot of money saved seems like a good problem to have. But it can have disadvantages. For example, if saving gives you anxiety or causes you to take on debt, you may want to dial back.

“There could be a lot of downsides, right? You’re working more than you need to, so you’re giving up time with your family. You’re not spending that time and that money on things that are important to you today,” Zigo says. “You can’t take the money to the grave, so what is the end goal here?”

Keep your values in perspective. Saving for the future shouldn’t come at the expense of your present-day needs and those of your household.