That’s right—it turns out that tracking your spending, and striving to spend less than you earn each month, isn’t the only way to start saving more money. It’s not even the best way! That said, understanding this budgeting rule of thumb will help you save more money faster than ever before because you’ll be able to cut down on impulse purchases and gain better control over your spending habits overall. Here’s how it works. What is the rule of thumb? When it comes to budgeting, there is one rule of thumb that can help you save more money than you ever thought possible: the 50/30/20 rule. Here’s how it works: 50% of your income should go towards your essential expenses, like housing, food, transportation, and healthcare. 30% of your income can be spent on non-essential but still important expenses, like entertainment, dining out, and travel. 20% of your income should be saved or invested. If you follow this rule, your savings will grow over time, and before long, you will have enough to cover emergencies or other large purchases. Additionally, if you stick with this rule when spending any bonus checks or windfalls from relatives, then soon those few hundred dollars won't matter anymore because they'll add up quickly! Lastly, if you find yourself nearing retirement age and require cash flow for day-to-day living expenses, a Roth IRA offers tax-free earnings for life once it's been funded for at least 5 years. ALSO READ: How do insurance companies make money? budgeting rule of thumb What is a recommended percentage for savings? There is no one-size-fits-all answer to this question, as the ideal savings percentage will vary depending on your circumstances. However, a good rule of thumb is to save at least 10% of your income. Some experts recommend saving 20%. The key is to adjust the amount you set aside for savings based on how much money you earn and what expenses you have. For example, if you are single with little debt and don't have any dependents, it might be appropriate for you to aim for a higher percentage of your income to fund retirement or other long-term goals. If you're married with children who need daycare and healthcare coverage, then it might make more sense for you to increase your monthly budget accordingly so that more money can go towards necessities like housing and food. Common budgeting mistakes One of the most common budgeting mistakes is not allocating enough money to cover unexpected expenses. This can quickly lead to debt and financial instability. The rule of thumb is to set aside at least 10% of your income to cover these types of costs. This may seem like a lot, but it will help you avoid financial disaster down the road. It is important to be flexible when setting up your budget so that it accommodates unexpected expenses. It’s also important to have a plan in place in case you do run into trouble with cash flow. Put together an emergency fund so that if an emergency arises, you don’t have to resort to taking out another loan or credit card. ALSO READ: How to Effectively Budget as a Business budgeting rule of thumb Tips to help you save more \tDetermine what you need and want. \tFind ways to save on your regular expenses. \tInvest in yourself by taking courses and learning new skills. \tMake a budget and stick to it. \tAutomate your savings so you don't have to think about it. \tLive below your means so you can save more money each month. \tInvest your money so it can grow over time. Ways to stick with your savings plan \tStart by evaluating your spending habits and income. \tDetermine what you can realistically save each month. \tBuild an emergency fund that will cover three to six months of living expenses. \tAutomate your savings so you don't have to think about it. \tInvest in a mix of stocks and bonds. \tReview your progress regularly and make adjustments as needed. \tFinally, stay disciplined and committed to your plan. Tools that make it easier to save \tThe right budgeting tool can make all the difference when it comes to saving money. There are a lot of great options out there, so do some research and find one that fits your needs. \tOnce you have a budget in place, stick to it as closely as possible. It can be tempting to overspend when you have extra money, but remember that every little bit counts. \tOne of the best ways to save money is to set aside a specific amount each month in a savings account. This way, you’ll have less temptation to spend it on non-essentials. \tAnother great way to save is to take advantage of discounts and coupons whenever possible. For example, use this handy link for Groupon Coupons to get deals at many popular restaurants near you. \tWhen shopping online, use cashback sites like Ebates to get rebates at stores like Macy's or JCPenney's. Plus, Ebates offers free shipping from many popular retailers too! \tIf you don't have much room left in your budget after paying bills and meeting other financial obligations each month, consider cutting back on unnecessary expenses such as eating out or purchasing new clothes or gadgets. Just keep those expensive indulgences for special occasions only! Final Thoughts on Saving Money. The budgeting rule of thumb that has helped me save more money than I ever thought possible is to make sure that I track my spending. This means creating a budget and sticking to it. There are several ways to do this, but the most effective, in my opinion, has been to use a budgeting app. This allows me to see where my money is going and makes it easy for me to adjust my spending if necessary. ALSO READ: How Much Should You Save From Your Paycheck? I also make sure to have separate savings account for my emergency fund. This way, I know that the money is there if I need it and I'm not tempted to spend it on something else. Finally, I make sure to automate my savings so that I don't have to think about it each month.