A simple rule for saving & spending

This budgeting guideline can help you feel more in control of your money and make faster progress toward your goals.

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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%

This is a safety net in case you have an unexpected expense that doesn't qualify as an emergency.
  • 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.
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