How Much of My Paycheck Should I Save?

Updated on April 9, 2024

Wondering how much of your paycheck you should be saving? While it varies from person to person, you should aim to save around 20% of your paycheck. This article will guide you through how to plan your savings percentage and how you can achieve it.

Savings Planning

Personal finance and savings are no longer only for married couples. Anyone and everyone should practice savings. There are multiple benefits to it. But the main thing many people fail to realize is they should make plans for their paychecks.

It’s important to know how much of your paycheck you should be saving and spending. As you’ll see later, 50/30/20 is one of the best methods you can use to plan for your paycheck.

For saving, there are timelines you need to consider.

Less Than a Year

If your savings time frame is less than a year, then it’s called a short-term savings plan. You might be saving for a holiday vacation, paying off your taxes/debt, buying something specific, or something along that line. When you’re saving on a shorter time frame, you can afford a higher savings rate depending on your financial situation.

Less Than 10 Years

When you’re planning savings for more than one year up to 10 years, then you’re saving for the long term. The reasons are surely more expensive than if you’re saving for only one year. This might be because you want to repair your car, cover an insurance deductible, or pay off your home mortgage. When the time frame is long, you might have to bring down your saving rates to accommodate daily expenses.


If you’re thinking about lifelong savings, then you need to adopt a different percentage. The majority of people save lifelong to plan for their retirement.

To decide how much of your paycheck you should be saving, you need to determine the time frame. This will help you decide what percentage you should be saving.

What to Save For

You might already know why you’re saving. But if you’re a money-conscious person who wants to save, but you don’t know what to save for, here are few options.


Planning for your retirement is as important as living your life safely. After retirement, your source of income will shrink or come to a standstill. So, if you do not plan for retirement, you’ll run out of funds. Retirement is also the most common reason that people opt for monthly savings. A 401(k) plan is the best example of saving for retirement.

But besides that, you can save money in certificates of deposit offered by many banks and credit unions. These offer a steady interest rate premium if you agree to keep a lump-sum amount in the bank for a specific amount of time.

If you want to take more risk, you can invest in mutual funds or bond investments, which also tend to offer higher returns than certificates of deposit.

But whatever method you choose, you should save long term for your retirement.


Life is full of uncertainties. The best you can do is be prepared for it, at least financially. That’s another reason that people tend to save every month. Life insurance, or health insurance specifically, is the perfect example. You pay a premium every month to your insurer, and they pay for your medical expenses — a win-win for both.

Similarly, you can also save a certain portion of your paycheck and put the money into an emergency fund. A savings account can also act as an emergency fund. You receive interest for simply keeping money in the account. A high-yield savings account is also an option.

You can then worry less about scenarios like medical expenses that your health insurer doesn’t cover, a major car fix, or when you suddenly lose your job.

Everything Else

Different people have different needs. Therefore, they save per month to meet their demands. Also, this varies based on the time frame. Certain people opt for short-term savings, while others for long-term.

If your savings goal falls in this category, you need to be more detailed about your savings plan.

How Much to Save Every Month

Now comes the main question. How much of your paycheck should you ideally be saving per month? To zero in on this percentage, you need to look at a few more things.

Your Savings Goal

The first thing you need to do is specify your savings goal — why you’re saving a portion of your paycheck in the first place. This should be specific and something you’re willing to commit to. If you haven’t a goal yet, sit down and think deeply about it. But you can always start the process with a few dollars every month.

Current Spending and Savings Habits

Next, you need to look at your spending habits. If they don’t align with your savings goal, you need to cut down on your current spending. If you’re already saving, you need to see how much more money you should save to meet your goals. 


The final thing to look at is the timeline. Does your savings goal require a longer commitment? Then you may have to be more strict with your spending habits for a longer period of time.

50/30/20 Rule

The 50/30/20 rule is perhaps the most common method followed in personal finance. This rule states that you should spend 50% of your paycheck on essentials, 30% on discretionary spending, and 20% on savings. This is irrespective of how much you’re earning. The rule was devised by no other than Sen. Elizabeth Warren (D-MA), who is also a bankruptcy professor.

If you’re a high earner, you may have higher necessities. You may be living in a costlier home, driving a fancy car, or having regular meals at a premium restaurant. Then your monthly bills are likely to be higher. But you should take every measure to be within the 30% range.

Why 20%?

If you’re concerned about savings, you might be wondering, “why 20%?” Why not 30% or 35%? Well, the reason behind this magical percentage number, as explained by Warren, is that most people find it easy to save 20% of their paycheck, no matter their current earnings or financial situation. It’s your decision whether you decide to put it in your piggy bank, savings account, or anywhere else. But it’s wiser to stay away from options like bonds or mutual funds since they carry a moderate level of risk.


From time to time, you should always review your spending and savings habits. If possible, you should cut down on your spending and increase your savings or investing percentage. Various apps make it easier for you to keep track of these. At the end of the day, your savings will never go wasted and will help you in difficult times.

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Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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