“How much of my income should I save?” How much indeed! The darling citizens of Bitch Nation ask us this question all the damn time. And we love it when you guys ask, because it means we get to give you our favorite answer: “It depends!”
A day may come when we stop harping on about how personal finance is personal. But it is not this day. When we stop giving vague, rambling answers to straightforward questions and instead cut straight through the nuance to the heart of the matter.
This day we
FIGHT continue to drive home the point that an individual’s journey toward financial solvency is a complex and ever-evolving process! For while some people thrive under hard-and-fast money management rules, others decidedly do not. And today we want to reach those who prefer flexible guidelines to rules set in stone.
So instead of answering the question of how much you should save, let’s better define the question. Because I really don’t think you should be asking how much you should save. In fact, I think that’s entirely the wrong question.
Hard-and-fast savings rules
Scour personal finance media for roughly a minute and you’ll find all kinds of hard-and-fast rules for how much you should save, how much you should spend on necessities, how much you should fritter away on entertainment (or fritters… which can be entertaining when done right), and how much you should have in the bank at any age.
I’m so relieved these resources are out there for those who find them helpful. Personally… I don’t! They make me feel confused, off-track, and substandard in some way. Like I’m failing at a game I didn’t sign up to play but my parents are forcing me to try in an attempt to build “character.”
Here are a few of the most popular hard-and-fast savings rules, along with their benefits and downsides.
When I was but a wee baby Bitch, my dad told me that when I grew up, I should plan to save at least 15-20% of my income. Then he spoke in awe of some (childfree, dual-income) friends of the family who managed to save 25% of what they made. According to Papa Piggy, they were doing really well. I should aspire to their levels of thriftiness!
His point was well-intended and well-taken: I should save a portion of my money instead of spending it all on band posters and glittery hair mascara (#millennial). And he was right! Definitely about the hair mascara, not necessarily about the percentage rule.
Some people will find it insanely useful to automatically divert 20% of their paycheck to a savings or brokerage account. Set it, forget it, and live a stress-free life!
But what the hell do you do with the other 80%? Spend it all on those luxury, gold-plated fritters? If you’re saving 20%, does that grant you permission to spend the rest however you like? Or does that mean you must spend the rest and if you don’t… you’re missing something?
Or is it that you save at least 20% of your income, and whatever you don’t end up spending also gets saved? A system that accounts for the full 100% of your money makes a bit more sense. Which leads us to…
The 50/30/20 rule
This method of savings puts a use to the stuff you don’t save: 50% should go to necessities like food, housing, and medical care; 30% should go to discretionary spending like vacations, booze, fritters, and hair mascara; and the last 20% is how much you should save.
Only… what if your rent alone costs 50% of your income? What if you have all the fun you want in a month but it only cost you 15% of your income? What then?
I don’t want to completely knock the 50/30/20 rule of how much you should save. For some people, strict guidelines are really helpful. Senator Elizabeth Warren used to teach this savings rule when she was a bankruptcy professor! And if it’s good enough for our girl Liz, it can’t be all bad.
For those who thrive under rigid guidelines, there’s one more solution to the savings question…
Stick to a budget
Budgeting is the strictest system for balancing spending and savings. When you have a budget, you give every single dollar a job. And your dollars aren’t allowed to trade jobs or work overtime.
For people struggling to keep their spending in check, or who find themselves relying too much on an emergency fund, a budget might be a great idea. People start budgets for the same reason they start New Year’s Resolutions: they need to get their shit together. And a lot of folks thrive under this very straightforward, simple system! Budgets save bread!
But budgets don’t work for everyone. They’re too restrictive for many people. Am I projecting here? Yes. Yes I am. I am “many people.” Which is why you will never find a budgeting how-to on Bitches Get Riches.
My spending needs and savings goals are too fluid from month to month for a budget to feel natural or helpful. I’m a free spirit… budgetarily speaking!
And planning my money out a year in advance requires (let’s be honest) more spoons than I have ever had all at once at any given time in my life.
Asking the wrong question
The problem with all the hard-and-fast savings rules… is they’re not universally applicable. They’re not even individually applicable at all times. How much you should save can and should be a fluid amount based on your current and future circumstances, your life goals and earning potential.
We’ve been over this:
- How to Make Any Financial Decision, No Matter How Tough, with Maximum Swag
- Actually, Fuck Big Goals
- How To Save for Retirement When You Make Less Than $30,000 a Year
Planning on retiring early? Then there’s a definite mathematical answer to how much you should have in the bank and how long you have to put it there. Want to buy a house? Again, there’s math for that to give you an exact sum. Don’t have any particular short- or long-term goal in mind but boy would you sure like the financial breathing room to figure it out? … not so much with the straightforward calculations!
There’s nothing necessarily wrong with the question of how much you should save. It’s that the question is incomplete.
How much of your income you save can (and should!) change throughout your life. The number should adjust based on your circumstances. It should adjust based on your goals. And if it doesn’t… you might be doing it wrong.
THE SECRET IS REAL
Let’s talk about money mindset for a minute, shall we?
When it comes to managing your personal finances, you can think in terms of “active” and “passive” management. (Not like actively or passively managed investment accounts—that’s a different matter.) I mean you can manage your personal finances by taking concrete actions… or leaving things to the will of the Old Ones.
For me personally, it is much easier to think in terms of controlling how much I spend than controlling how much I save. Saving is passive. It’s an absence of action. To save money you just… do nothing to your money. You leave it alone. Let it gather metaphorical dust (the metaphor is for compound interest, y’all). You put it on a shelf and admire it from afar just as you do with that hand-carved and painted wooden duck decoy you inherited from great uncle Ivanhoe.
Not spending money, on the other hand, takes actual effort. It requires you to approach every purchasing decision with will and intention.
Guys… so much of monetary will power is about intention. I don’t care if you spend $7 on a bougie chocolate bar as long as you fully understand the intent behind the purchase. And I don’t care if you don’t save more than $1 every week so long as you understand why you’re spending every other dollar that crosses your palm.
Approach your spending with intentionality and your savings will naturally follow.
Saving something today is better than saving nothing forever
As long as you’re saving something… you’re going to be ok. You’re on the right track. Don’t let anyone make you feel like you’ve failed.
Just start by saving what you can and work your way up to a higher dollar amount or percentage of your income. I promise you’ll get better at saving with time.
The last thing I want is for you to think that if you’re not saving X% of your income right fucking now, or if you haven’t been saving X% since you were 16 years old… that you’re a failure. I don’t want you to feel like there’s no way to catch up, or that you’re so far behind you shouldn’t even bother to try saving. We don’t hold with that defeatist nonsense here at Bitches Get Riches, where money fuck-ups are a way of life.
So if you’re behind on your savings goals… don’t fret, my lamb. As noted economist, string theorist, and humanitarian Dolly Parton once said:
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21 thoughts to “Ask Not How Much You Should Save, Ask How Much You Should Spend”
Yep, I’ve made some pretty dumb money mistakes and don’t make oddles now. Its easy to feel like the FIRE is being snuffed out before I even figured out where the heck the lighter is.
I really don’t understand how one can budget medical expenses. Like when a medical emergency happens, you probably will be willing to through at it everything you got just to not be in pain, not die, etc…. And when it doesn’t, there is really not much medical spending going on. Like 2 months ago I had medical issues. I blew through all of my savings (Around 10k) on medical expenses. Before that, I spent $0 on health care. (Note: I live in a country where healthcare is supposedly “free”).
I’m so sorry that’s happened to you. I also don’t understand the concept of budgeting for medical expenses (beyond regular medication and co-pays/insurance in the U.S.).
Holy crap, I thought for sure you were going to say you’re American.
So sorry you had to go through this. We have a little advice on how to minimize those medical bills, but it’s definitely not a cure-all: https://www.bitchesgetriches.com/how-to-pay-hospital-bills-when-youre-flat-broke/
I thought the Warren 50/30/20 rule was about fixed expenses/variable expenses/savings?
So 30% wasn’t frivolous, just things that you could cut out in the event of a lengthy job-loss. And the 50% could be frivolous if they’re expenses that you have to pay and have a hard time getting out of (ex. yacht payments). And the 50% is a ceiling and the 20% a floor. The idea is to set your spending so you can weather a reasonable catastrophe like a long unemployment spell while still enjoying life up to your means. (So if your parents would love to have you move back and you’re renting month-to-month, that might be a variable rather than a fixed expense.)
IIRC she does talk about situations in which rents are so high and wages so low that you can’t get under 50% fixed expenses.. you can see her future political career in that chapter. (I think that actually figures pretty large in the introduction, though it’s been about a decade since I read the book.)
You’re probably right! Mea culpa to Senator Warren!
Sooo… I use a zero-based budget. And I love it. It made it possible to pay off the interest on my unsubsidized student loans before it capitalized after I graduated, and I also built what is at this point a 4.5 month emergency fund while I was in school! It’s amazing.
Yes, I’ll admit I’m a person who enjoys rules. But I really dislike rigidity! I went back to school after a pretty large break, so I’m an older millennial, and for years I settled for just ineffectually tracking my spending because full-on budgeting spreadsheets made my eyes roll out of my head. In this era of fintech, though, I’d like to suggest that, actually, it’s totally possible to have a flexible budget with not too much effort!
I swear I don’t work for them – I am just one of a horde of admirers – but I really encourage you to look into YNAB (You Need A Budget), a zero-based budgeting app. It has four basic budgeting rules that are the foundation of its budgeting system, and one of them is “roll with the punches” because no month is a “normal” month. The idea is that when you go over in one category, you just move money from another category, but you’re making the choices consciously and deliberately. Their software also tracks those money moves, so if I want to, I can adjust my budgeted amounts in future months based on what I can see I’ve done in the past. Or not. For example, I have a budget category called “budget flex” because I accept that every month will have some extras I don’t see coming. And there are other apps! (I think this is the best one, though, ngl.)
And the rewards are totally worth it. The learning curve was a little steep, and it is a paid subscription (with a free year for students and a free month for everyone else to start), but these days I spent an hour or two on it per paycheck? Maybe? Along with less than ten seconds to manually record my spending every time I make a purchase, but that’s only because I use manual entry and don’t want to connect my accounts. Plus, after I started, random dollars started appearing out of nowhere – I have no idea what I would otherwise have spent them on, so obviously I’m not missing whatever it was! – and I made better decisions because I could see what decisions I was making. Transparency is gold!
I really enjoy your posts, but I do wish you’d consider that there’s more than one way to budget, and rigid, spreadsheet-style “budgeting” isn’t the only option these days!
I know a lot of people who swear by YNAB. If I ever decide to get over my dislike of budgeting and try a more flexible system, I’ll give them a shot!
“Saving is passive. It’s an absence of action. To save money you just… do nothing to your money. You leave it alone.”
This is the secret to my success. Saving has always come “naturally” to me, mostly because I’m just not that interested in shopping and buying things. It helps that I live under a rock and I’m not exposed to too much that I want to buy. I have found the more I am in stores, the more I want to buy. So I try to avoid it as much as possible and just let laziness help me save.
Baby, you’re singing my favorite song!
Whoooo! I really needed this one.
I’m about to turn 25 and I just paid off all my student debt, but even with a full time job and the side-hustle, I’m going to be living with my parents until I can save up to properly furnish an apartment/have an emergency fund (probably another year). I haven’t even begun to start my retirement savings because I want to have a strong foundation accessible to me, but GOD does it feel like I’m “running out of time” to start saving for retirement. It was nice to be reminded that it’s all still forward motion.
Hang in there baby!!!
Honestly, if more people took the info in this article to heart, we’d see a lot fewer disasters with personal finance!
I always hated the 50/30/20 rule. Maybe it worked in a different time, or at certain incomes, but it has a lot of holes if you make less than the average or above $100,000 each year. For example, at $100k your mandatory expenses should be far less than 50% of your income unless you have a very large family or are in one of the highest cost of living areas. However, if your income is on the lower side, you might have to spend more than 50% on necessities and cut back on the discretionary spending. One size does NOT fit all when it comes to budgeting!
Aw, thank you! So glad you agree!
Well, that flips the question on its head. But I think one should pay yourself first.
That’s a solid rule, and it works for a lot of people!
Ratios for spending can be great rules of thumb, but they vary greatly depending on personal circumstances. Our family has experienced this as we’ve moved between the UK, Zambia and now Spain. Costs can differ significantly between geographic locations / and at different stages of life.
You’re so right! We don’t often account for the different costs of living in wildly different geographic regions.
I love your posts and thank you for sharing your knowledge.
You’re quite welcome!