A good save rate depends on individual circumstances, but a commonly recommended guideline is to save 20% of your monthly income.
The question of "What is a good save rate?" is a common one, and the answer often depends on individual circumstances, financial goals, and time horizon. However, a well-known budgeting rule provides a solid starting point.
The 50/30/20 Rule
The 50/30/20 rule offers a simple framework for managing your finances. According to Bankrate, it suggests allocating your monthly income as follows:
- 50% for Essentials: This covers needs like housing, groceries, transportation, and utilities.
- 30% for Wants: This includes discretionary spending such as dining out, entertainment, and hobbies.
- 20% for Savings: This portion is dedicated to savings, investments, and debt repayment.
Therefore, according to this rule, a good save rate is 20% of your monthly income. This helps build a financial safety net and work toward long-term goals.
