Allocating money to bills and savings

Piggy Banks on a scale - shutterstock_124822543

Q: What per­cent­age of my pay should I put into my sav­ings and my check­ing to get me off to a good start? I want to buy a car (a used car since I make about 2 grand a month) but I want to have enough going into my check­ing account so I can pay bills and have enough to do what­ever I want. I’m not going to touch my savings.

Sone­say, Quan­tico, Virginia

A: I’m guess­ing it prob­a­bly wouldn’t be too help­ful if I just said, as much as you can…right???  All kid­ding aside though, that’s gen­er­ally how you should try to han­dle your money.  If you can, spend less of it and save more of it.

Here’s a sim­ple approach I’ve seen work well for peo­ple just get­ting started.  Con­sider divid­ing up your pay­check into 3 accounts:

  1. An account for fixed expenses like util­i­ties, cell phones, rent, and car payments
  2. An account for savings
  3. An account for fun

Start by adding up all of your fixed expenses and set aside enough each month to cover them.  Then take what’s left over and decide how much of it to allo­cate to sav­ings and how much to allo­cate to fun (or non-essential expenses).  Stick­ing with the theme of sav­ing more and spend­ing less, you’ll usu­ally want to be sav­ing at least 10% of your check (or more if you can).

As for the type of account to save into, it depends on what you have avail­able and how much you can save.  Ini­tially you should focus your sav­ings on build­ing up an emer­gency fund.  Once that’s under­way and estab­lished to a cer­tain degree, it often makes sense to redi­rect some of your sav­ings to longer-term goals like retire­ment.  Unfor­tu­nately, I’d need to know more about your sit­u­a­tion to give you a more con­crete response to what you should do.

Thanks so much for your ques­tion.  I hope this helps and I wish you all the best!



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Scott Halliwell and JJ Montanaro are CERTIFIED FINANCIAL PLANNER™ practitioners with USAA Financial Planning Services, one of the USAA family of companies. Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and Certified Financial Planner™ in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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