When someone asks “how much money should I save each month?“, I usually throw them a curveball reply:


“What are your goals?”


It’s a tough, serious question to ask yourself but that is where you have to start from. 


The amount of money that you should save (your savings rate) can only be uniquely defined by you and only yourself because only you know what your goals and what your main priorities are. 


Keep this in mind and in this simple step-by-step guide, I’ll help you figure out how much you need to save each month. 🙂




Step 1:  Really. What are your goals?


There are three timelines (for your goals) you need to consider:


Less than 1 year

  Your short term savings can be used to to vacation in Monte-Carlo, buy holidays gifts for you and your loved ones or pay your taxes.


Less than 1 decade

  You may use this money to stay afloat when you’re between jobs or maybe even start your own side hustle. You may also use this this money to make a down payment on a home, or fix your dishwasher or perhaps get a new car.



  Retirement is the ultimate long-term savings goal.



Grab a whiteboard or a piece of paper and write down each timeline and your goals for each underneath it. (You can always come back and edit it if you change your mind on a goal).

Here’s mine for example:


how much money should I save




Step 2:  Deep into the Horizon.


Once you’ve wrote down your goals (again it doesn’t have to be perfect!) let’s go back to the original question: How much should you save? 

This is where we break each goal down and work from bottom-up on our goals list.

We first start with our lifetime goal which is usually, and most crucially:


1. Retirement.

When you’re saving for your retirement, the rule of thumb or standard that many financial experts set is to save 10% of your income for retirement.

Sounds scary doesn’t it? Don’t worry: your employer match, if you have one, counts. So if you save 5% of your income and your boss matches another 5%, you’ve managed to successfully achieve a 10% savings rate.

Now the 5% of your income doesn’t sound as scary as the 10% before does it? 🙂

If you’re not employed or if you are a business owner or if you’re still young (20-something year old) then stick to the 10% savings rate each month.

The next thing you need to do before you jump onto the next goal up our list is not a goal as per say but a priority that we need to take care of which helps us if something goes wrong when we try to execute our plan. 

Let’s get that handled quickly:



2. Our Emergency Fund.

Before you jump into figuring out how much to save for your other goals, you should establish an “emergency fund” that can cover 3-9 months of your living expenses.

“But wait, how can I save such a large sum in such a short time?”

First, calculate your monthly cost-of-living. 

Think of it like this, assume that if you lose your job, you’ll have to sacrifice your luxuries like your Netflix Subscription or your pedicures. How much do you need to survive? 

Once you have the amount, divide that number in half. Can you save this monthly? If so, you can build a six-month emergency fund within the next year. If you can’t, try to save as much as you can even if it as little as it may be. 

Every dollar counts!



3. Everything else.

Finally! Let’s finish off the rest of our list.

As we go through our each of our goals up our list, write your ideal savings target and deadline for each. 

Here’s an updated example of what I did with my list:

how much money should I save



Then divide the number of months remaining to see how much you should save. Let’s take for example you want to pay cash for a $10,000 car in five years? Then you’ll need $167 per month. 

Go through each out your goals and find out by dividing its savings target with the number of months remaining and write it.




Step 3: Wax On. Wax Off.


Take some time to go through your list of goals and think off any other expenses within the next decade that you might want to add.

For instance, you might want to throw a wedding, or replace your gutters (Handy Tip: list them as broad categories like “home repairs” , “holidays”, “wedding”)

And then go through it again and figure out its ideal savings target and deadline. Lastly, divide the savings target with the number of months remaining and update your list.

Rinse and repeat. You’ll discover that there are just some goals that you can’t save for on your list. If that happens you have four options:

  Re-imagine your goals.

  Lengthen your timeline.

  Cut your current spending.

  Earn more.


Most people go for a combination of all four of those options. Let’s say the $10,000 car that we talked about earlier  seems to make your other important goals less achievable, so what you might want to do is buy a $7,000 car, which will only require $116 per month. You’d cut your $50 cable bill and maybe pick up a babysitting gig one night per month as voila! 

You’re on track to pay cash for your next car.


Did you want a simpler answer No problem. Here’s a final rule of thumb: at least 20% of your income should go towards your savings. Of course more is fine, but less than 20% is not advised. 



TL;DR. At Least 20% of Your Income Should Go Towards Savings.

Meanwhile, 50% (maximum) should go towards necessities, while 30% goes towards discretionary items. This is called the 50/30/20 rule of thumb, and it’s a very popular, quick and simple advice.


Just go through everything above. You’ll thank yourself when you’re boarding that flight to Monte Carlo.




Share this guide with another human being today and help them find out how much money they should save up each month. Trust me, they’ll really appreciate it. 🙂