April 10, 2024

How Much Income Should I Save Each Month?

Follow the 50/20/30 savings calculator. Automate your savings to stay on track.

Everybody knows the importance of saving. But the difficult question is How Much Income Should I Save Each Month? How can someone start building their own savings plan formula?

There’s no universal rule. No rock-solid number applies to everyone.

Income varies a lot. Some folks are dealing with heavy debt. Some people have dependents they need to plan for. Others are working for their own independence.

But there is a road-tested formula—it is the simplest and the best way to save money, ensuring that saving is a priority but still balanced with the rest of your life. 

How much should I save every month?

According to the 50/20/30 savings formula, you should aim to save 20% of your monthly income.

Start with a monthly budget

Start with a well-balanced savings formula. Make a plan that reflects your financial situation—a simple money-saving plan that accounts for your real-life living expenses and includes your financial goals. 

Pulling a number out of thin air doesn't reflect your annual income or ambition. Following your neighbor's financial advice or using a coworker's savings target cannot measure what works for you.

Look at the big picture before you can save in a way that works for you. Make a simple monthly budget, using your monthly income after taxes. 

Follow the 50/20/30 budget

The 50/20/30 savings formula( often termed as savings calculator) is a common rule of thumb and a straightforward way to budget every month. Here’s the breakdown of the 50/20/30 formula. 

  • 50% on needs
  • 20% on savings
  • 30% on wants 

The 50/20/30 formula prioritizes your essential needs and treats saving like your other monthly payments. 

Tweak the percentages if necessary - but be mindful of the balance. 

Rent, utilities, health care, car payments and public transportation costs are essential. Credit card payments belong in the "needs" column too. You need to pay them or face difficult consequences. 

Or don't fuss with "needs" or "wants" yet. Just try the math for the savings formula. Figure 20% of your monthly income and multiply by 12. That's how much you can reasonably save over the 12 months in a year. 

Let's say your monthly income is $3,000. According to the 50/20/30 formula:

  • 50% of your income, or $1,500, should be allocated to needs. This includes expenses like rent, utilities, healthcare, car payments, and essential transportation costs.
  • 20% of your income, or $600, should be allocated to savings. This could include contributions to a savings account, retirement fund, or investments.
  • 30% of your income, or $900, should be allocated to wants. These are non-essential expenses such as dining out, entertainment, or luxury purchases.

Look at that! You just made your first savings plan! Use the rule of budgeting on your income.

Set up a savings account

Now see if your bank offers a high-yield savings account and set up automatic transfers from your checking account. 

Your monthly savings will increase in a savings account with a competitive interest rate. And the sooner you start saving, the more interest you'll earn. 

Start an emergency fund

With your 20% savings plan in place, your first priority should be an emergency fund—a personal safety net you can use for unexpected expenses, like major medical bills, auto repairs, or missed paychecks in case of a job loss. 

Some people call it a "rainy day fund," but whatever you call it, make it your first savings goal. 

Most banks allow you to set up funds within your savings account. Check your bank account and see what they can do.

Goals are important. They help focus our efforts and remind us what we're sacrificing for. A goal can provide extra motivation if 20% every month starts to feel tight. Labeling it "emergency fund" emphasizes the urgency too. 

Most experts recommend building an emergency fund with enough to cover three months' worth of your monthly budget - including needs, wants and savings.

That might sound like a lot and get a little overwhelming. But you don’t have to build your emergency savings all at once. 

You can build the fund slowly, with regular, small portions of your 20% savings plan. 

Save with goals

You've seen how goals work when you label them "emergency." Now try setting goals for other priorities. 

Set up separate funds dedicated to different milestones, like tuition or a trip or a gift for someone special. 

For example, if you want to buy a new car next year, calculate the purchase price and divide it by 12 so you know how much to put aside every month. 

Think about long-term goals, like a down payment on a home, and fun short-term goals, like an outfit you've always wanted. 

Many employers offer retirement accounts, like IRAs and other retirement savings formulas, that you contribute to automatically every month. In some cases, an employer also matches your contributions. 

Some goals are best matched with special funds that offer tax advantages, like Roth IRAs for education costs. 

Work on your credit card debt

The sooner you pay off your credit cards, the more you can save toward all your goals. 

Try to prioritize your credit cards, paying off first the ones with the highest interest charges. All the money spent on credit card interest could grow and earn you interest in a high-yield savings account. 

Here's an example to illustrate:

Let's say you have two credit cards:

Card A has a balance of $2,000 with an interest rate of 18%

Card B has a balance of $1,500 with an interest rate of 12%

Using the debt avalanche method, you would prioritize paying off Card A first because it has the higher interest rate. By allocating extra payments towards Card A while making minimum payments on Card B, you'll pay off Card A more quickly and ultimately pay less interest overall.

Once Card A is paid off, you can then focus on paying off Card B. By systematically tackling your credit card debt in this manner, you'll save money on interest and free up more funds for savings and other financial goals.


In conclusion, determining the ideal amount of income for a savings plan formula is a personalized endeavor, reliant on individual circumstances and financial goals. While there's no one-size-fits-all solution, adhering to a straightforward savings formula can establish a solid foundation for financial stability. Embracing the 50/20/30 budgeting rule, which allocates percentages of income to needs, savings, and wants respectively, offers a balanced approach to managing finances.

Use Bright to save more

Maximize your savings with Bright. With a personalized Bright Plan, you can effortlessly set your savings goals and pace. Bright analyzes your financial data and spending patterns, automatically transferring funds to a Bright Savings account throughout the month based on your affordability. It adapts to changes in your income, habits, and goals, ensuring consistent progress towards your savings targets without the need for manual calculations.

Furthermore, Bright Credit can help you repay high-interest credit card debt by tailoring payments to your goals and financial situation and minimizing interest charges. Or if you're struggling with a low credit score due to missed payments, Bright Builder can help you rebuild your credit and improve your financial standing.

To get started, simply download the Bright app from the App Store or Google Play, connect your accounts, set your goals, and let your personalized Bright Plan take care of the rest, automating your savings and debt repayment for a brighter financial future.

Recommended Readings:

How to get a Student Credit Card?

How long Does Debt Consolidation Take?

Jayashree Merwade
SVP - Services & Support
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