They say money can’t buy happiness, but it’s not unusual to find most people daydreaming about earning a bigger wage. With the cost of living rising and many people wondering about how they’re going to afford their bills, you may be wondering about how much money you need to earn and save to live a comfortable lifestyle.

A recent survey found that over half of Americans (51%) have less than three months’ worth of savings in case of an emergency. It’s difficult for many households to deal with unexpected events such as the COVID-19 pandemic if they haven’t put aside money each month. However, there are ways that you can budget that will allow you to prepare for various scenarios, no matter your income.

In this guide, we’ll walk you through how much of your income you should aim to set aside based on your earnings and financial responsibilities so that you can live comfortably in the short and long term.

How much money is enough?

Your living situation impacts how much money you spend, which is why there’s no clear answer as to how much money everyone needs. However, an academic study that was conducted by Bath, Bath Spa and Exeter universities in the UK found that 86% of countries think that they could achieve their dream lifestyle with $10 million (£8 million) or less.

The same study found that the majority of Americans feel that they need at least $100 million to have life satisfaction, with 31.7% of Americans in the study reporting that they would want at least $100 billion.

Although these figures sound large, they are relatively moderate considering that they are representative of a person’s ideal wealth across their lifetime. Your financial situation will also change over time, which means that you may find that you need more money at some points in your life but can cut back on spending at others.

How much money do I need to live comfortably?

The amount that Americans need to live comfortably varies across the country, based on factors such as the average salary and living costs. A 2021 study analyzed data to find out how much individuals living in the 25 largest metropolitan areas need to earn and save to lead their ideal life and have financial freedom. The survey used the 50/30/20 rule, which allocates 50% of after-tax income for basic living expenses, 30% for spending money, and 20% for savings or debts.

Individuals living in the San Francisco-Oakland-Berkeley, CA metro area need an estimated $74,282 after tax, which makes it the most expensive metro area to live in the US. $37,141 of this would go on basic living expenses, $22,285 on discretionary spending and $14,856 for savings and any debts.

While this rule doesn’t work for everyone, it is a good guideline to estimate how you can divide your salary each year to calculate how much you can afford to spend and how much you should put away in savings.

The table below shows the five largest metropolitan areas in the US where people need to earn the highest salary in order to live comfortably. The figures are based on the MIT Living Wage Calculator and the 50/30/20 rule.

Metro AreaNeeds (50%)Wants (30%)Savings/Debts (20%)Annual salary
San Francisco-Oakland-Berkeley, CA$37,141$22,285$14,856$74,282
Boston-Cambridge-Newton, MA-NH$34,315$20,589$13,726$68,630
Seattle-Tacoma-Bellevue, WA$33,217$19,930$13,287$66,434
New York-Newark-Jersey City, NY-NJ-PA$33,107$19,864$13,243$66,214
Washington-Arlington-Alexandria, DC-VA-MD-WV$32,834$19,700$13,134$65,668

How much of my wages should I save?

While it can vary from person to person, the best way to determine how much money you should save each month is to think about your savings goals. This includes the short-term (within a year and a decade) as well as the long-term (your retirement). You may want to go on vacation abroad within the next 12 months, which means that you’ll need to put aside enough for the flights, accommodation and spending money. Downsizing may also be part of your retirement plan, which will impact how much money you have to work with when you finish work.

It’s a good idea to put aside enough so that you can repair your car if needs be or buy yourself a new dishwasher if your current one is nearing the end of its life. It can also be helpful to have a pot of money that can keep you afloat if you are between jobs or if you’re planning to make a down payment on a house within the decade.

One of the best ways to calculate how much you need to save for an emergency fund is to work out how much you spend each month. If you lose your job, the likelihood is that you will cut back on luxuries such as meals out or streaming services, which means that you can deduct these extra expenses. Divide your total monthly spending in half, which will hopefully cover the bare necessities. If you save this amount each month, you should have a six-figure pot of savings within the next 12 months.

Another good way to calculate how much you should save is to make a list of major expenses that you expect within the next decade. This could include events such as weddings, vacations and home repairs. Calculate your estimated spending on each and write the combined figure down. Divide this figure by the number of remaining months that you have to work out how much you will need to set aside each month to meet your target.

You may work out a figure that is too much for you to set aside each month. In this case, you have several choices. You could re-evaluate your savings goals and decide that there are some expenses that you will have to do without. You could alternatively lengthen the timeline so that you have extra time to save in order to reach your target. Another option is to reduce your current expenditure so that you aren’t spending as much each month, thus increasing your savings. The final option, which isn’t available to everyone, is to find another job that pays a higher salary or to get a second job.

Some people may opt for a combination of the four options so that you don’t have to make any major changes. For example, you could get a phone with a cheaper monthly contract, take a vacation more locally and pick up a babysitting job in the evenings to earn a bit of extra cash.

As mentioned in the section above, a good rule of thumb is to follow the 50/30/20 rule, which means that 20% of your monthly wage should be put into savings. However, the remaining 20% of your wage after bills and discretionary spending may also need to go towards paying off your debts, which could decrease the amount that goes into your savings pot.

How much money should I save to buy a house?

The real estate market varies across the country, but a good place to start is saving at least 25% of a property’s sale price to cover a down payment, moving fees and other expenses. If the house that you want to buy costs $400,000, for example, it would be a good idea to set aside $100,000 to cover the various costs that come with buying a house.

While 25% is an ideal savings pot when you are looking to buy a house, this is too steep for many hopeful buyers. In 2021, the average first-time buyer only had 7% of the property price to put as a downpayment. This was 10% less than the average amount that repeat buyers put down.

It’s recommended that you save at least 10-20% for the overall costs that are associated with purchasing a house. Although 5-10% as a down payment is okay, paying a higher percentage will reduce your mortgage repayments which can help with your financial situation in the long run.

How much money should students have?

Going to college can be an incredibly expensive venture, which is why it’s a good idea to work out a budget as early as possible. Tuition costs should be printed on the college websites and brochures, but it can be difficult to calculate how much you are expected to spend on living costs and discretionary spending.

Many students factor in costs such as textbooks and accommodation when they calculate the initial cost of going to college, whilst others include these figures when they are working out monthly spending costs. However, the following expenses factor into most students’ calculations when they are considering how much they will need to spend each month and, therefore, how much they should save in a college fund:

  • Clothing
  • Entertainment (e.g. going clubbing and to the cinema)
  • Food (including groceries, takeaways and eating out)
  • Travel allowance (including gas and travelling home)
  • Cell phone contract
  • Extracurricular activities (including societies and gym membership)
  • School supplies (including notebooks and printing costs)

These expenses will vary from student to student. For example, you will spend more money on traveling to and from home if you go to college further away. You may be eligible for some bursaries and scholarships that can help cover these costs, which can be factored into how much you have in your college fund.

As a ballpark figure, it can be helpful to give yourself an allowance of $200 per month, although this could be higher or lower depending on how much you budget and save. You can always adjust your spending if you find that you are spending too much or if you can be more flexible with your allowance.

How much should I save for my retirement?

The current life expectancy of Americans is 77 years, which means that an individual could be looking to survive on savings and investments for over 15 years if they want early retirement.

The best chance you have to retire early is to start saving as soon as possible. You will need to have enough money to maintain your current lifestyle, as well as deal with unexpected expenses. The exact amount will depend on how much income you make, which means that someone of roughly the same age may be putting away more or less than you for their retirement fund.

As a guideline, it’s a good idea to put away around 15% of your salary. Your employer should also be making contributions to your pension, which will mean that your retirement pot will include more than you have personally put in. However, the later you start contributing to your pension, the more you will have to set aside each month. 15% is fine if you start saving when you are 25 years old, but you should ideally increase this to 18% if you start saving at 30 years old or 23% if you start saving when you are 35 years old.

You can adapt how much of your income you save based on how large your employer’s contributions are. For example, if your employer contributes 5% each year, you could consider setting aside 10% of your income so that you are saving 15% of your income altogether.

If you don’t think that you are able to save enough for your pension each month, you may want to consider delaying your retirement. Alternatively, you could semi-retire so that you can cut down on your hours without losing the entirety of your income.


The amount of money that you need will depend on your financial responsibilities and luxury spending. A healthy six-figure salary provides a comfortable lifestyle for most people, but you can also live on a five-figure salary if you budget carefully. The 50/30/20 rule is a good guideline to follow as it helps you to divide your salary into three different groups: your bills, discretionary spending and the amount that should go towards debts or into savings.

Your own financial realities and goals can help you to determine whether you are budgeting correctly or whether you need to cut back on certain expenses to help you contribute more to your savings. It’s also important to factor in your wants in addition to your needs. You should be able to allocate yourself a portion of funds to treat yourself every now and then so that you can maintain your emotional well-being.

It’s a good idea to consult financial advisors if you are unsure how you can manage your financial situation. They should be able to help you create a budgeting plan based on your income and outgoing expenses.

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