For example, if you bring home $2,800 per month (after taxes), you can set aside $280 per month under the 10% savings rule. After a year, you would have saved $3,360. The 10% rule is not a rule in itself. It`s simply an idea that people use, where you save 10% of everything you earn for your various financial goals. For example, in the direction of your emergency fund, saving for retirement or investing. This is a common rule of thumb when it comes to saving. We didn`t have a fixed percentage, I would say we were probably close to that 10%. The only exception was when we received a seven-figure inheritance, we invested almost 100% of it because we were already at the point where we had absolutely everything we wanted. In retirement, we spend less than half of our passive income for the same reason, we are satisfied with our current expenses. For example, the average median personal income in the United States at the end of 2020 was about $36,000 per year. That equates to about $3,000 a month. According to the 10% rule, that would mean saving $300 each month.

Senator Elizabeth Warren popularized the so-called „50/20/30 budget rule” (sometimes referred to as „50-30-20”) in her book All Your Worth: The Ultimate Lifetime Money Plan. The basic rule is to divide the after-tax income and allocate it to expenses: 50% for needs, 30% for wishes and 20% for savings. Here, we briefly present this easy-to-understand budgeting plan. If you exceed these percentages in one category, you reduce your spending in the other areas. For example, if you spend 75% of your income at the cost of living, you will reduce the amount you invest in your savings by 5%. If you want to invest more money in your savings, you need to reduce your cost of living and/or reduce your debt. The 10% rule is a concept I discuss in my book „The Equation of Financial Freedom.” If you want to learn more about financial freedom, get your copy here. I interpreted this positively by saying, „I absolutely want you to spend money on what you love. But don`t spend money on those other things that won`t give you much pleasure while depriving you of your future financial security.

„Finally I looked at the blog. The 10% rule is excellent and my wife and I are looking forward to implementing it as we are now completing the residency in June. The 10% savings rule is a guideline that suggests setting aside 10% of your gross income for retirement or unexpected expenses. If you have no idea how much to save, you get a starting point, but it`s not a one-size-fits-all rule. Honestly, I expect a bunch of people to call my head because I spent my money that way. However, many of these people enjoy traveling (hopefully while hacking with credit cards) and spending money on expensive experiences that just don`t give me much fun. That`s what gives them pleasure. If your employer doubles 401(k) funds to a certain percentage of your income, count these matching funds in your gross income when calculating how much you want to save.

For example, if you earn $36,000 a year and your employer reaches up to 3%, that`s $1,080 more you receive from your employer each year, so your gross income is $37,080 for the purposes of the 10% savings rule. If you need to make it a 15% rule to feel better, that`s fine too. The fact is that the vast majority of your wealth goes into the right things. In the end, only you can answer this question. The 10% rule could be exactly what you can do. Not everyone can save 10% right now and that`s okay! But many people can save more than 10%. However, it may not be enough to simply save 10%, depending on your short-, medium- and long-term goals. Ideally, your savings percentage should be based on how quickly you want to reach your goal and how much you would realistically need. I spend a lot of time discussing how more money doesn`t make us happy, the power of satisfaction, and how experiences tend to bring more joy than „things” like cars.

Determining how much to save under the 10% savings rule is about as simple as an equation. It`s even easier if you get a fixed salary. In this case, your regular paychecks are all the same, which means you only need to calculate the amount once. If you are paid by the hour, your gross salary may vary from paycheque to paycheque. Not sure where to start? Need ideas for new ways to save money. Check out these tips. I also recommend doing it with strokes of luck (like a work bonus, tax refund, or inheritance). If you spend a little money, it`s easier to save the rest because you don`t feel disadvantaged.