How Much Should You Save Each Month? A Simple Formula

Figuring out how much to save each month can feel like a moving target. Rent, bills, and unexpected expenses always seem to get in the way. Yet, having a clear savings goal makes everything simpler. Instead of guessing, you can rely on a formula that works for almost anyone—no complicated spreadsheets required.

Start With the 50/30/20 Rule

A good starting point is the 50/30/20 rule, a classic budgeting guideline:

• 50% Needs: Housing, groceries, utilities, and transportation

• 30% Wants: Dining out, entertainment, shopping, and travel

• 20% Savings: Emergency fund, retirement accounts, and debt repayment beyond the minimums

If you earn $4,000 after taxes each month, this rule suggests saving $800. If your needs are lower or you want to save aggressively, you can adjust the percentages.

The Simple Savings Formula

For a more flexible approach, use this formula:

Monthly Savings = (Net Monthly Income) × (Savings Percentage)

Decide your savings percentage based on your goals:

• Beginner Savers: 10%

• Comfortable Savings Pace: 15–20%

• Aggressive Goals (early retirement, house down payment): 25–30%+

For example, if your after-tax income is $3,500 and you aim to save 15%:

$3,500 × 0.15 = $525/month

That’s your monthly target. Even if some months fall short, using a clear number keeps you accountable.

Automate to Make Saving Easier

Saving becomes much simpler when you remove the guesswork. Set up automatic transfers to a high-interest savings account or investment account right after payday. This is the “pay yourself first” approach, which helps your money grow without constant effort.

Adjust for Life Changes

Your ideal savings amount isn’t fixed forever. Expect to adjust your formula if:

• You get a raise or bonus (increase your savings percentage)

• You take on new debt or expenses (temporarily scale back)

• You hit a milestone, like finishing your emergency fund (shift focus to investing)

The key is to start now, even if it’s a small amount. Consistency builds financial momentum.