How Much Should You Save Each Month? The Framework for Every Income
The 20% rule is a starting point. Here is how to find YOUR number based on goals and timeline.
The baseline: save 20% of gross income. On a $60,000 salary, that is $12,000/year or $1,000/month. This covers emergency fund, retirement, and short-term goals combined. But 20% is a floor, not a ceiling — and the right number depends on your goals and timeline.
By Goal
Emergency fund (3-6 months expenses): save $300-500/month until you hit $10,000-20,000. Retirement (15% of income recommended by Fidelity): $750/month on a $60,000 salary. Down payment ($40,000 in 3 years): $1,111/month on top of retirement. Paying off debt aggressively: redirect the savings percentage toward debt. The math gets uncomfortable quickly — which is why prioritization matters.
The Priority Order
1. $1,000 minimum emergency fund. 2. Employer 401(k) match (free money). 3. High-interest debt payoff (above 7% APR). 4. Full emergency fund (3-6 months). 5. Max Roth IRA ($7,000). 6. Max 401(k) ($23,500). 7. All other goals (house, car, vacation). Follow this order and you will never make a suboptimal savings decision.