The Smart About Money website will be retiring on July 31, 2021. Learn more about this decision.


3: Analyze Your Circumstances

Spending and Saving

Feeling in control of your finances is key to financial well-being. To establish this control, SAM suggests developing habits for spending less than you earn and saving for future spending.

What are Your Spending and Saving Habits?

When it comes to spending and saving, what habits have you formed and what habits do you need to work on?

  1. Do you follow a spending plan?
  2. Do you spend less than you earn in a month?
  3. What percentage of income do you save each month?
  4. What do you do with windfalls (such as a raise, bonus or tax refund)?

Many people who feel financial secure use a spending plan (budget). A spending plan helps you prioritize by sorting out your “I want” expenditures from your “I need” expenditures. By paying attention to what you buy each month, you quickly identify any leftover money, which can increase your retirement savings rate, emergency fund and even your net worth.

dollar billA simple rule of thumb many people use for budgeting is 50/20/30.

  • 50 percent of your take-home pay goes toward fixed expenses (mortgage or rent, utilities or loan payments).
  • 20 percent of your take-home pay goes toward savings for the future.
  • No more than 30 percent goes toward discretionary spending (your wants). Reductions in this kind of spending can be used to bolster your savings.

In reality, many people fall far below this guideline, many Americans report a personal savings rate of 6 percent, well below the 20 percent guideline, according to a study by the Federal Reserve Bank of St. Louis.

How do your saving habits measure up to the 20 percent guideline?


Use SAM’s Budget Wizard tool to help you measure your current monthly spending and savings habits and plan for desired changes.

Course Home