Skip Navigation
Trulia Logo

Trulia Blog

No Financial Safety Net? Try the 10% Trick

Pay yourself first: get in the habit of putting money aside before you pay your bills.

Whether you rent or own a home, having a safety net is an important part of your financial plan. A good rule of thumb is to put away 10% of your salary every month. But getting there is the key — it’s about paying yourself first.

Think of your savings in terms of events, like what you’d need to keep bills current if you take time off from work or move, or if you need to make a deposit on a new rental or buy a home, rather than dollars.

“The sooner you’re in the habit of saving money, the easier it will be as your income grows,” says Kelley Long, certified public accountant in Chicago and member of the National CPA FinLit Commission. “Many people wait to save when they have a higher income, but as your income goes up, so do your lifestyle expenses.”

Socking 10% away at first can seem overwhelming, especially if you’re living paycheck to paycheck. Putting aside any money that’s left over after you pay your bills will help you get out of that financial trap.

“You’ve got to change your perception of what your goals are,” says chartered financial analyst Robert Stammers, director of Investor Education for the CFA Institute. “What most people do, even people with budgets, they spend their money and whatever’s left over is put into savings. If you want to save, the savings has to be the goal.”

Start by putting away 10% the first month you save

“Your budget or your monthly expenses have to fall in the guidelines of your 90% of your income,” says Stammers. “The way you do that is to figure out what exactly are your fixed costs and your necessities.”

As you go through this process, use an app, a spreadsheet, or old-fashioned pen and paper to track your expenses so you know where your money goes. If you’re having trouble living on 90% of your salary, review your spending habits to understand where you can cut back.

Put your credit or debit card statements in a spreadsheet and sort by merchant, says Long. “There will be something in there that you spend a lot of money on, like you might take cabs instead of public transportation or you may eat out more than you expect. You might find something that sticks out to you — that’s where you can pull savings from.”

Even small steps can lead to long-term savings goals

Living off 90% of your salary right away may feel like ripping off a bandage for some, but there are alternatives.

“Don’t start with an all-in number and think that’s what you need to start saving to be successful,” says Long. “Start with 1%, and every month or quarter, add in a percent and ease into it. Eventually, you’ll be saving this big chunk of money and won’t feel a pinch to your lifestyle at all.”

Sometimes, putting only $25 aside every week will get you into the habit of saving. This amount may not seem like a lot, but it adds up over time. Begin to increase the $25 as you tighten your budget, receive unexpected payments like a tax refund, or earn more. Cutting back on small items makes a difference only if you physically transfer that money into your savings account and don’t spend it elsewhere.

As you save the money, Stammers suggests opening an account that’s difficult to get to and not linked to a debit card.

“Put it in an account without easy access to ATMs or where you can’t just go somewhere to get that money,” he says. “Don’t put it in a place where it’s [tempting] to spend.”