What Is the Golden Rule of Saving Money?

Close up of man holding pink piggybank while woman putting coin in it.
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A golden rule is nothing more than a guiding principle that, if followed, can hopefully lead you to success. When it comes to financial matters, you can find many golden rules online for everything from budgeting to investing, including saving money.

So what’s the golden rule of saving money? What other money rules can help you build savings? Read this guide to common money rules to find what works with your budget and improve your savings habits.

What Is the Golden Rule of Saving Money?

The golden rule of saving money is “save before you spend,” also known as “pay yourself first.” Another common money-saving rule is “save for the unexpected.” In other words, build an emergency fund. Using these rules to prioritize saving money can help you create a safety net and work towards other financial goals.

However, these rules lack guidelines on how much you should save. That’s where budgeting rules and emergency fund guidelines can help.

If you really want to prioritize savings, learn the budgeting and emergency fund guidelines outlined below and follow a few simple money rules.

What Are the Three Rules of Money?

Three rules of money that can ensure a healthy savings account balance are:

  1. Save before you spend.
  2. Save a specific percentage of your income.
  3. Save for the unexpected.

Budgeting Rules That Can Help You Save Money

Budgeting rules designate a percentage of your after-tax income to specific budget categories, primarily expenses, discretionary spending and saving. Following these rules can help you live within your means while saving for the future.

Make Your Money Work for You

If your budget isn’t based on percentages, switching to one of the following common budget percentages may help you get more money into savings each month.

What Is the 70/20/10 Budgeting Rule?

With the 70/20/10 rule, you divide your after-tax income based on the following percentages:

  • 70%: Expenses and discretionary spending
  • 20%: Savings
  • 10%: Additional debt payments or charitable contributions

The 20% allocated to savings includes long and short-term savings goals, including emergency savings and investments. The 70/20/10 method might be a good option for you if you have debt to pay off, like student loans or a mortgage.

What Is the 50/30/20 Budgeting Rule?

The 50/30/20 plan also allocates 20% of the budget to savings. The remaining 80% goes to “needs” and “wants.” The specific 50/30/20 breakdown is as follows:

Unlike the 70/20/10 rule, the 50/30/20 rule doesn’t have a “debt repayment” category.

What Is the 50/40/10 Budgeting Rule?

If you really want to prioritize savings, you can modify the 50/30/20 rule and allocate less to discretionary spending and more to savings. A breakdown of the 50/40/10 budgeting rule would be:

  • 50%: Necessities
  • 40%: Savings
  • 10%: Discretionary spending

If limiting your spending to 10% of your income feels too restrictive, simply cut back to the 50/30/20 rule.

Choosing the Best Budgeting Rule for Your Finances

If you search online for budgeting rules, the most common result is the 50/30/20 rule. But is 50/30/20 a good budgeting rule to follow? That depends on your specific financial situation.

For instance, if you’re not carrying a lot of debt, the 50/30/20 rule might work well for you. However, suppose you’re trying to pay off a lot of high-interest debt. In that case, the 70/20/10 rule, which allocates 10% of the budget specifically for debt repayment, may suit your finances better. If you want to prioritize savings, the 50/40/10 or 50/30/20 rule can help you reach your savings goals faster.

Make Your Money Work for You

Don’t be discouraged if your income simply isn’t enough to save 20% and still pay your expenses. Any of these rules can be adjusted to fit your budget. Even if you can only save 10% right now — or 5% or even just 1% — getting started is the important thing.

3-6-9 Rule of Emergency Savings

Saving an emergency fund with three to six months of expenses to cover unexpected bills or loss of income is typically recommended, but some experts recommend saving even more. So how substantial should your emergency fund be?

Use the following 3-6-9 emergency savings guideline to determine a safe amount for your financial circumstances:

  • Three months is sufficient if you don’t have dependents or a mortgage and have a steady paycheck.
  • Six months is ideal if you have a mortgage, dependents or your household relies on two salaries.
  • Nine months is recommended if you have variable or unreliable income.

Final Take

By following the golden rule of money to “save before you spend,” you can consistently save and ensure you always have money to fall back on. The easiest way to pay yourself first is to set up automatic transfers from checking into savings or have a percentage of each paycheck direct deposited into savings.

If you’re paying yourself first and still struggling to reach your savings goals, such as building an emergency fund, try using a budgeting rule or a money-saving challenge.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.


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