How much should I be spending vs. saving? Consider the 50-30-20 rule

All of us want to build up our savings as much as possible. But for most of us, life and everyday expenses tend to get in the way, preventing us from setting as much money aside as we’d like to.

With some financial self-discipline and willpower, though, nearly anyone can start saving and build up funds for an emergency, retirement, college, a big future purchase or investment, or anything else we’d like to be able to comfortably afford without borrowing (or with as little borrowing as possible, anyway) someday.

But just how much should we be saving? Read on for some guidance commonly provided by financial experts regarding how much beginning budgeters and longtime savers alike should be setting aside.

The 50-30-20 rule

A rule of thumb regularly suggested by financial advisors and budgeting experts, the 50-30-20 rule works by segmenting your income into three key categories — living expenses, discretionary spending and savings/investments. And for those who are following the rule, it can make saving relatively simple by forgoing a long list of budgetary line items for dozens of different expenses. Instead, the 50-30-20 rule breaks financial allotments into:

  • Living expenses — 50%: This category represents your household necessities, including essentials such as the rent or mortgage; healthcare; childcare; household repairs and maintenance; groceries; insurance; transportation expenses such as a car payment, bus and train fares, fuel for any family vehicles, etc.; and utilities such as power, water, internet service, phone service, etc.
  • Discretionary spending — 30%: This category includes the things members of your household might want but don’t necessarily need — what might be considered “fun money.” It encompasses non-vital spending such as that devoted to entertainment, vacations, dining out, cable television, online subscriptions, gym memberships, and shopping for things like clothing, hobbies and furniture that go beyond your basic needs.
  • Savings and investments — 20%: This final category covers funds that you put away for the future (often in a savings account or money market account) and devote to meeting your financial goals. It includes any money used to pay down debts, as well as funds allotted to savings. The types of savings covered here can include emergency funds, retirement accounts, educational savings, savings for a significant future purchase such as a home or a vehicle, and investments such as stocks, bonds, mutual funds and certificates of deposit (CDs).

Of course, to get started with implementing the 50-30-20 rule, it’s important to have a firm grasp of your current financial situation, including your income, your debts, your monthly expenses, etc. Creating a household budget can help you develop a better understanding of where you stand on all of these fronts, along with how much you can devote to savings and investments.

Further, financial realities may force you to deviate from following the 50-30-20 rule on occasion, as unexpected expenses such as auto repairs, healthcare bills and home repairs are an unavoidable part of life and will arise from time to time. But by trying to consistently stick to the 50-30-20 rule from month to month, you can set a foundation for saving and make it a habit over time.

Age-based recommendations

While for most of us the 50-30-20 rule can serve as a good guideline for how much to spend vs. how much to save each month, there’s no universal answer to how much every person should set aside. The right tactics can vary greatly depending on personal goals and financial situations. But there are some financial goals and benchmarks that most financial experts agree are good fits for people of varying age groups to shoot for.

Consider this financial road map that offers recommendations on money-related objectives and areas of focus for savers in their 20s, 30s, 40s, 50s and beyond:

  • 20s: Experts recommend that young adults in their 20s focus on building their credit, paying down any debts they may have accumulated, and devoting as much money as possible to savings and investments each month. For those who can’t devote a full 20% of their income to savings and investments in their 20s (as the 50-30-20 rule suggests), smaller amounts can still add up — especially when considering the power that compound interest can contribute to building up retirement savings, for example, over time. Try to shoot for devoting at least 10% of your income to savings and/or investments, if not more.
  • 30s: Financial professionals suggest that people in their 30s should continue to focus on paying down non-mortgage debt, plus try to devote more money to their savings, especially if they aspire to start a new family, buy their own home, make home renovations or improvements soon, etc. Individuals in this group should try to devote at least 15% of their income to savings and/or investments, if not more.
  • 40s: Those in their 40s should continue to increase the share of their income they devote to savings and investments, financial experts say, as well as focus on getting their credit card debts under control. By this time, according to financial professionals, savers should aim to be putting away at least 20% of their income, plus shoot for having their savings balance at a level that’s equal to or greater than their current annual salary.
  • 50s and beyond: By the time you hit your 50s and older, according to financial professionals, you should be aiming to pay off your mortgage and maximize contributions to your retirement account. At this stage in life, financial experts say, a good rule of thumb is to have two times your current annual salary (or more) set aside in savings and investments.

Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, the bank offers in-person service as well as a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans and more, visit

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Your credit report has your credit history for all of your credit accounts as well as any credit inquiries and public record court information such as collections. In addition, the report provides personally identifiable information such as your name, address, and employment.

Be sure to carefully review all three reports to identify any problem areas that you may need to clean up prior to applying for a mortgage. If there is any incorrect information, follow the reporting agency’s rules to correct it or add a notation to the report to explain the situation.

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Learn more about how your credit score impacts your ability to secure a loan.


Couple looking over finances

Primary considerations for setting your housing budget require an assessment of your income, debt and current savings for the down payment on the home. The following are generally recommended guidelines; however, you should meet with an Arthur State Bank lender to get personalized mortgage information.


Couple meeting with lender

The pre-qualification/pre-approval letter is included with any offer you make on a house to inform the seller that you have met with a mortgage lender and you are prepared to make an offer. The letter states that based on certain assumptions, the bank is prepared to lend you up to a specified amount of money for a home mortgage.

When choosing a loan officer, we recommend going local to work with someone who understands your community’s real estate market. This blog on first-time home purchases includes questions to ask your lender that may be helpful when preparing for your meeting.

Helpful Resources:


Realtor shaking hands with a client

When a house is sold, the seller typically pays real estate commission to both the listing agent and the selling agent. It is extremely beneficial for the buyer to use their own real estate agent. Loan officers can often recommend selling agents in the area; ask your officer about realtor referrals when discussing your loan.

A good realtor will know the local market and can help you find an ideal home based on your budget, location and desired features. During your search, understand that you will most likely need to compromise on some items, so it’s important to identify your critical needs versus your wants.


Couple searching online for a home

Additionally, when you start with the house search and work backwards, homes can often go off the market while you’re completing steps 1-4. While browsing homes immediately can be tempting, we recommend following these steps in order so that, once you find your dream home, you’ll be well-positioned to take action immediately.

When you find the home you want and you think you are ready to put an offer on it, you will want to make sure you have all the information you need to make a solid offer.

  • Evaluate the neighborhood.
  • Drive by the house at different times of the day.
  • Examine how other houses in the neighborhood are maintained.
  • Consider any potential traffic or other disruptive noise.
  • Is there ample parking for you and visitors?
  • Read the details in any Homeowner Association agreements (HOA fees and rules).

Make sure to do a preliminary check of house details:

  • Check the water:
  • Does it have good pressure?
  • How long does it take to get the water hot?
  • Is it well water or city water?
  • Turn light switches on and off.
  • Open and close doors and windows to make sure they work properly.
  • Review previous utility bill expenses.
  • Consider the property tax bill.


Family meeting with realtor at new house

When writing an offer contract, be sure to pay attention to all of the details.

Offer Price:

Your agent should do a market analysis that pulls data on recently sold comparable houses. The best comparisons will come from the same neighborhood.

If you are asking for the seller to pay some of the closing costs, remember that this cost plus the sales commission determines the net amount you are offering the seller for the house.

Work with your agent on your negotiation strategy. There are many things to consider, such as how badly you want this particular house, whether it is a buyer’s or seller’s market and an assessment of the seller’s motivation to get the property sold.

There isn’t one best strategy.

Be sure to document in writing everything you want included with the house, such as appliances, etc. Your agent should guide you through the contract step-by-step.


  • Home inspection.
  • Mortgage.
  • Final walk through (24 hours prior to closing).

Proposed closing date. Typically, this is 30-45 days from an accepted offer.

A good-faith deposit is required for the offer. This is typically between 1-10% of the purchase price of the house. The deposit is kept in escrow until closing and the money is applied to the purchase price of the house at closing. If the house does not close due to one of the contingency clauses, the buyer receives their money back. However, if the buyer decides not to close on the property, the seller may get the deposit money.

Attach your pre-approval letter to the offer.


Two people in professional meeting

The clock starts ticking for everything documented in the contract, including mortgage application, inspections and closing date.


Woman advising other woman on mortgage application

You will need to decide which mortgage to select prior to the application.

Plan for the following potential fees:

  • Application fee (many banks and mortgage companies charge an application fee; however, there is not an application fee at Arthur State Bank).
  • Credit check.
  • Appraisal (may be paid at closing).
  • Loan origination fee (paid at closing).

Once you have approval for your loan, make sure you don’t change anything that will impact the status of your mortgage. Banks do a final check on credit and jobs just prior to closing, so now is not the time to change jobs or make another purchase on credit such as a car or furniture.


Home inspector going over findings with home owner

Depending on the size of the house, an inspection can cost on average between $300 to $1000.

Many real estate contracts specify how problems uncovered in the inspection will be resolved, up to a certain dollar amount. Should necessary repairs exceed that amount, the buyer has the option to cancel the contract without penalty and receive their deposit money back. Another option is for the buyer and seller to renegotiate who will pay for additional repairs.


Woman happily holding keys to her new home
  • Homeowner’s insurance is required by the lender prior to closing on the loan.
  • Turn on utilities in your name, effective the closing date.
  • Change your address with the U.S. Postal Service.
  • Make moving arrangements.

Three days prior to closing:

  • You should receive your final Closing Disclosure from the closing agency. The final Closing Disclosure shows a column for the seller and a column for the buyer. All closing charges and credits for both the seller and the buyer are documented in the closing statement.
  • Review the closing statement for accuracy prior to coming to closing.
  • The final amount in the buyer’s column shows you the amount of money you need to pay at closing.

The closing office will provide specific payment instructions. Closing funds have become recent targets for cybercriminals. If you are asked to use a wire transfer, call the office and ask to speak to someone you have been working with to double-check the instructions.

Closing day:

In South Carolina, the closing will usually take place at the attorney’s office. Everyone signing for the mortgage must be present to sign the closing paperwork. Make sure you bring the following:

  • Cashier’s check or proof of payment for wire transfer.
  • Driver’s license.
  • Checkbook, just in case there are any additional items that were not on the closing statement.

Be sure to understand this information:

  • How and when you will pay:
  • Your mortgage.
  • Your property taxes.
  • Your homeowner’s insurance.
  • Any HOA dues.
  • Who to call with any questions.

The best practice is to go through the homebuyer’s roadmap in this sequence. However, if you jumped ahead early in your journey, just circle back to address the steps you missed.

Arthur State Bank’s loan officers are closely tapped into local real estate markets and experts at helping clients get what they need on terms that work for them. We also offer mortgage specials for first-time homebuyers.

To start planning your journey to your dream home, try out our mortgage calculator. If you’re ready to talk to a loan officer, contact Arthur State Bank to request personalized mortgage information today. Don’t forget to ask about our first-time homebuyer offer.