How Much of My Paycheck Should I Save?

Did you know that a recent study found that 125 million U.S. adults are currently living paycheck-to-paycheck? To put this into perspective, over half of the adults in the United States are one-missed paycheck away from financial disaster.

Saving money from each paycheck is a great solution for those facing this uncertainty.

But how much of my paycheck should I save?

Before asking yourself how much you should be saving, start by defining what you are saving for.

Saving For Emergencies

If you’ve found yourself living paycheck-to-paycheck, then you know the stress of the next large bill or the unexpected financial emergency.

In fact, when money is the root cause of stress in your life, then every little financial hiccup becomes a financial disaster.

You need to start saving to create a buffer between you and the next financial emergency. The amount of money you need to save when it comes to preparing for financial emergencies will vary from person to person, but a good rule of thumb is three-to-six months’ worth of emergency expenses.

The Emergency Fund

You probably just read three to six months’ worth of emergency expenses and thought to yourself:

I am living paycheck-to-paycheck, how can I afford to save three-to-six months’ worth of emergency expenses?

Let’s not worry about that three-to-six months’ worth of emergency expenses right now. Instead, let’s focus on saving $1,000 as quickly as possible.

Need some help saving $1,000 as quickly as possible? Here are a few ideas to jumpstart your savings goal:

• Scrape your budget - Look through your monthly budget and find the wants versus the needs. It’s okay to push pause on some of the wants in life to fulfill a need. In this case, you may want to go to a nice dinner, but you need to build your $1,000 emergency fund first.
• Sell something - You can always go back and buy that one thing again, but right now the number one priority is to get to $1,000 as quickly as possible. Go through your belongings and if you want them but don’t need them, then it’s time to sell them.
• Pick up a side job - The good news is there is work out there for you to generate extra income. Maybe that is becoming a rideshare driver, delivering pizzas, or getting a part-time job somewhere. Remember, this isn’t a career change, this is just a way to generate extra income.

The truth for many of us is that it feels like saving money is impossible. However, once you quickly hit that $1,000, then saving up to $2,000 seems possible.

And once you save $2,000, then $4,000 doesn’t seem out of reach. After you’ve saved $4,000 - $5,000, the belief you cannot save money evaporates and you develop a habit of saving.

Now, after you’ve hit your goal of saving for that emergency fund it’s time to start saving for something else — something much more enjoyable.

Related content:

How to Set Up an Emergency Savings  

I Would Rather Have an Exact Amount to Save from My Paycheck

If you are looking for a black and white answer to the question of how much you should be saving from your paycheck, then you may like the 50/30/20 budget.

The 50/30/20 budgeting system divides your paycheck into three different categories:

While this is a very simple and straightforward way of budgeting, it may not work for everyone. For example, someone who is living paycheck-to-paycheck and deeply in debt can’t afford to spend 30% of their paycheck on their wants in life.

Also, 20% savings may feel like a great number, but what if you’re struggling to save any money at all, how is it possible to start saving 20%?

The flip side of that is to ask how does all the savings fit into 20%? For example, if 15% is going into retirement, then that only leaves 5% leftover to save for all the other things you still need to save for.