50 / 15 / 5

Here's how much of your money you should aim to spend on three key things.

Essential expenses: 50%

These are things you can't get by without, like housing, food, transportation, and health care.

How to get there

• Turn the thermostat down a bit in the winter and up in the summer.
• Check your health insurance options, and make sure you aren't paying for more coverage than you need.
• Consider driving a more affordable car.
• When gas prices are low, put the savings into an emergency fund.
• Save on food. Stock up on groceries when they're on sale: decide on limits for eating out.
• Check in on streaming and other subscriptions from time to time, and cancel any you don't use.

Retirement savings: 15%

This target includes any money your employer contributes.

• Increase your savings gradually until you reach your goal. Even saving 1% more can make a big difference.
• If you get a bonus, save some of it for retirement.
• Save at least enough to take full advantage of any employer match.

Short-term savings: 5%

• What is this money for? Unexpected budget-busters like a wedding invitation or a car repair.
• Isn't that an emergency fund? You should also have the equivalent of 3-6 months of expenses in an emergency fund, but that is for true emergencies like a job loss or health crisis. Build your emergency fund first and your short-term savings second.
• Don't be tempted to spend: Have this money automatically transferred into a savings account.