Let’s be real—talking about money can feel awkward, especially when you’re trying to figure out how much of your paycheck should actually go toward savings. You’ve probably heard the phrase “pay yourself first” thrown around, but what does that even mean when you’re living paycheck to paycheck? Or maybe you’re doing okay financially but wondering if you’re saving the right amount. The truth is, there’s no one-size-fits-all answer, but there are some solid guidelines that can help you figure out what makes sense for your situation.
The percentage of your income you should save depends on a bunch of factors—your age, your goals, your current debt situation, and honestly, just where you are in life right now. Some people can comfortably save 20% of their income, while others need to start with 5% and work their way up. Both are valid. The important thing is understanding the framework so you can make a decision that actually works for your life.
The 50/30/20 Budgeting Framework
If you’re looking for a straightforward way to think about savings, the 50/30/20 rule is a great starting point. Here’s how it breaks down: 50% of your after-tax income goes to needs (housing, food, utilities, insurance), 30% goes to wants (entertainment, dining out, hobbies), and 20% goes to savings and debt repayment.
Now, I know what you’re thinking—20% sounds like a lot, especially if you’re currently saving nothing or very little. The beautiful thing about this framework is that it’s flexible. It’s a target to work toward, not a rule that’ll make you feel guilty if you’re not there yet. Some people naturally land closer to 15%, and others might push toward 25% once they get their budget tightened up.
The reason financial advisors love this framework is because it’s balanced. You’re not depriving yourself of joy (that 30% is important!), but you’re also prioritizing your future self. It’s about creating a sustainable system you can actually stick with, not a restrictive diet mentality around money.
When you’re thinking about your age and savings goals, this framework becomes even more useful because you can adjust the percentages based on where you are in your financial journey. A 25-year-old might aim for 25% savings, while a 45-year-old might need to push toward 30% to catch up on retirement.
Age-Based Savings Guidelines
Your age matters more than you might think when it comes to savings targets. Financial experts have developed some general benchmarks based on life stages, and they’re actually pretty helpful for figuring out if you’re on track.
In your 20s: Aim for at least 10-15% of your gross income. This is your decade for building habits and taking advantage of compound interest. Even if you can only manage 10%, you’re setting yourself up for massive growth by retirement. Time is literally your superpower right now.
In your 30s: Push toward 15-20% if possible. You might have more income by now, and this is when you want to really ramp up retirement contributions if you haven’t already. This is also a good time to revisit your savings calculation to make sure you’re on pace for your goals.
In your 40s: Aim for 20-25% of gross income. This is your catch-up decade. If you didn’t save aggressively in your 20s and 30s, you’ve got a window right now to make it up before retirement gets too close. Your earning potential is usually at its peak, so lean into it.
In your 50s and beyond: Try to hit 25-30% or more if you can. You’re in the home stretch, and these years count big-time for your retirement security. The good news? You can make catch-up contributions to retirement accounts, which is basically the IRS saying “we get it, you need a boost.”
These aren’t hard rules—they’re guidelines based on what tends to work for people who retire comfortably. If you’re behind, don’t panic. You can absolutely catch up, but it might mean adjusting your lifestyle now or working a bit longer. The key is knowing where you stand so you can make intentional choices.
How to Calculate Your Savings Target
Okay, let’s get practical. Here’s how to figure out what percentage actually makes sense for your specific situation:
- Start with your take-home pay. This is what you actually see in your bank account after taxes, not your gross salary. Go look at your last few paychecks and find the actual deposit amount.
- List your essential expenses. Housing, utilities, insurance, food, transportation to work, minimum debt payments. These are your non-negotiables. Add them all up and divide by your take-home pay. This is your “needs” percentage.
- Look at your discretionary spending. Restaurants, entertainment, subscriptions, shopping. Be honest here—this is where we often underestimate. This is your “wants” percentage.
- Whatever’s left is your current savings rate. If it’s less than 20%, that’s okay. You’re just figuring out where the gap is.
- Now work backward from your goals. Do you want to retire at 65? Own a home in 5 years? Have 6 months of expenses saved? Figure out what that requires and work with a savings calculator to see what percentage gets you there.
This exercise usually reveals where your money is actually going, which is honestly the most important part. You can’t change what you don’t measure.
Starting Small and Building Up
Here’s something nobody talks about enough: if you’re currently saving 2% and your target is 20%, jumping straight there will probably fail. You’ll feel deprived, you’ll resent your budget, and you’ll abandon it within three months.
Instead, try the incremental approach. Increase your savings rate by 1% every month or every quarter. You probably won’t even notice a 1% difference in your paycheck, but over a year, you’ve just added 12 percentage points to your savings rate. That’s huge.
Here’s how it works practically: if you make $3,000 per month after taxes, 1% is only $30. Can you find $30 in your budget? Probably. Skip one coffee run, order takeout one fewer time, reduce a subscription. A month later, increase it to 2% ($60). Then 3%. By the end of a year, you might be saving $300-400 per month without it feeling like you’re sacrificing everything.
Another strategy: save your raises. When you get a 3% raise at work, put that entire 3% toward savings instead of letting it inflate your lifestyle. You won’t miss the money because you never had it in your budget to begin with.
The psychological win of this approach is huge. You’re making progress without feeling like you’re punishing yourself, which means you’ll actually stick with it.
Emergency Funds and Savings Priorities
Before we talk about aggressively saving for retirement or investment goals, let’s address the foundation: your emergency fund. This is non-negotiable, and it should be your first savings priority after you get your basic budget under control.
An emergency fund is basically your financial shock absorber. Car breaks down? Medical bill you didn’t expect? Job loss? That’s what this fund is for, so you don’t have to go into debt or derail your other financial goals.
Start with $1,000 as your initial target. This covers most small emergencies and shouldn’t take too long to build. Once you’ve got that, aim for 3-6 months of essential expenses in a separate savings account (not your checking account—you want it slightly out of reach so you’re not tempted).
How much is 3-6 months of expenses? Add up your necessities (housing, food, utilities, insurance, minimum debt payments) and multiply by 3 or 6. If your essentials are $2,000 per month, your target emergency fund is $6,000-12,000.
I know that sounds like a lot, but here’s the thing: once you have this, everything else becomes easier. You’re not stressed about unexpected costs, and you can actually focus on building wealth according to your age and timeline.
Common Obstacles and How to Overcome Them
“I want to save more, but I’m barely getting by.” This is the most common thing I hear, and it’s usually true. If you’re in this situation, you’ve got two levers: increase income or decrease expenses. Both are hard, but both are possible.
For decreasing expenses, start with tracking where your money actually goes for a full month. Most people are shocked. You find subscriptions you forgot about, meals you don’t remember buying, small purchases that add up. Often, you can find 5-10% just by cutting the obvious waste.
For increasing income, think about side hustles, asking for a raise, or switching jobs. I know that’s easier said than done, but even an extra $200-300 per month from a side gig could completely change your savings trajectory.
“I don’t know where to put my savings.” This is a great problem to have! Start with a high-yield savings account for your emergency fund—you’ll get better interest than a regular savings account. For retirement, if your employer offers a 401(k) match, contribute enough to get the full match. That’s free money. After that, consider a Roth IRA or traditional IRA for additional retirement savings.
“I keep failing at saving.” The issue here is usually that your savings goal isn’t connected to something you actually care about. Saving 20% for some abstract “future” doesn’t work. But saving for a house, a sabbatical, or early retirement? That’s motivating. Get specific about what you’re saving for, and suddenly it becomes real.
“I feel guilty about not saving enough.” Stop. Seriously. You’re thinking about your finances, you’re reading this article, you’re trying to figure it out. That’s already putting you ahead of most people. Progress over perfection is the name of the game.
FAQ
What percentage of income should I save if I have high-interest debt?
If you’re carrying credit card debt or other high-interest debt, prioritize that over aggressive savings. Your interest payments are killing your wealth building. Aim to save enough to cover emergencies (that $1,000-2,000), then throw everything else at the debt. Once that’s gone, redirect those payments to savings. You’ll catch up faster than you think.
Is the 50/30/20 rule realistic for people with low incomes?
Not always, and that’s okay. If you’re spending 70% on needs because housing is expensive or you have dependents, the percentages shift. The framework is a goal, not a judgment. Do the best you can, and remember that every dollar saved is progress.
Should I prioritize retirement savings or paying off my mortgage early?
Generally, if your employer offers a 401(k) match, get that first—it’s guaranteed free money. After that, it depends on your mortgage interest rate and your risk tolerance. A financial advisor can help you run the numbers, but there’s rarely a “wrong” choice if you’re doing either one.
How much should I be saving if I’m self-employed?
Self-employed folks should aim for the same percentages, but remember you’re paying both sides of Social Security taxes. Factor that into your “needs” category. You also need to save for taxes quarterly, so don’t forget that when calculating how much you actually have available to save.
What if I can’t save anything right now?
First, make sure you’re not in crisis mode that requires professional help—if you are, reach out to a nonprofit credit counselor. If you’re just struggling, focus on the incremental approach. Even saving $10 per week is $520 per year. Start there, and increase it as your situation improves. You’re not failing; you’re surviving, and that matters.
