50/15/5 Rule of Thumb
Your budget is essentially a spending and saving game plan. The reality is that few people make or follow a detailed budget. Still, you can keep the ball moving down the field by following our simple 50/15/5 rule of thumb.
- Allocate 50% of take-home pay to necessities (housing, medical care, debt payments, transportation, and food).
- Contribute 15% of your pretax income to retirement savings—that includes your contributions and any contribution you may get from your employer.
- Save 5% of take-home pay to a savings account to cover unexpected and one-off expenses like traveling to a wedding or replacing your dishwasher.