How much of my salary should I invest each month?

It’s one of the first and most important questions in anyone’s financial life: “How much of my paycheck should I actually be investing?”

You’ll hear a dozen different answers. Financial gurus on social media might yell, “You have to invest 50% of your income to get rich!” while your friends say they’re “just trying to get by.”

The truth is, there is no single, magic number that works for everyone. The right amount for you depends on your income, your debts, your age, and your personal goals.

But don’t let that vague answer stop you. While the perfect number is personal, there are proven, time-tested rules and strategies that can guide you from “I have no idea where to start” to “I have a confident plan for my future.”

This is the definitive guide to finding the right number for you.

What Is the “Magic Number”? What the Experts Recommend

If you’re just looking for a quick, simple answer, most financial planners will give you a single number: 15%.

The 15% rule is the standard advice for a reason. Most experts agree that investing 15% of your gross (pre-tax) income every year, starting from your mid-20s, will allow you to build a nest egg that can comfortably replace your income in retirement.

Why 15% of gross income? Because it sets a higher, more effective bar.

• If your salary is $60,000 a year, 15% is $9,000.
• That breaks down to $750 per month.

For someone just paying off student loans and high rent, $750 a month can sound impossible. And that’s okay. Very few people start at 15%.

The 15% is a goal. It’s the “gold standard” to aim for. The more important question is, how do you build a budget that gets you there?

The 50/30/20 Budget: A Simple Framework to Find Your Number

If you’re a beginner, the 50/30/20 rule is the most popular and effective budgeting framework on the planet. It’s not a strict rule, but a guide to see where your money should be going.

It works by dividing your take-home pay (after-tax income) into three buckets:

• 50% for Needs: This bucket covers all your true survival expenses. These are the bills you must pay.
  • Housing (Rent or Mortgage)
  • Utilities (Electric, Water, Heat)
  • Groceries
  • Transportation (Car payment, gas, public transit)
  • Insurance (Health, auto, renters)
  • Minimum debt payments
• 30% for Wants: This is your “fun” money. It’s the stuff that makes life enjoyable but isn’t essential for survival.
  • Dining out and bars
  • Entertainment (Movies, concerts, streaming services)
  • Hobbies and shopping
  • Vacations
• 20% for Savings & Investing: This is the magic bucket. This is the portion of your income dedicated to building your financial future. This 20% is not just for investing. It’s meant to be used for:
  1. Building an Emergency Fund
  2. Aggressive Debt Repayment (above the minimums)
  3. Investing for Retirement (401(k), IRA)
  4. Saving for other big goals (like a house down payment)

For a beginner, the 50/30/20 rule provides a clear answer: Your investing goal is to one day allocate 20% of your take-home pay to savings and wealth-building.

The “Stair-Step” Method: How to Start Investing If You Have $0

Let’s be realistic. You just read “15%” and “20%” and you laughed. You’re living paycheck-to-paycheck, and there is nothing left over.

This is where most people get discouraged and give up. Don’t.

The secret is to not start at 20%. The secret is to start. You can use the “Stair-Step” method.

1. Step 1: Start with 1%. Just one percent. If your take-home pay is $3,500 a month, 1% is $35. That’s a few coffees or one delivery order. You can do this. The most important step is moving from 0% to any percent.
2. Step 2: Automate It. Immediately set up an automatic transfer from your paycheck or checking account to your investment account for that $35. This is called “paying yourself first.” You must make it automatic, so you never have to decide to invest. The money is just gone before you can spend it.
3. Step 3: Increase It with Every Raise. This is the magic trick. Next year, you get a 3% raise. Before you ever see that new, bigger paycheck, log in to your investment account and increase your contribution by 1-2%. You’ll never even miss the money because it never hit your bank account. You’re “investing the raise” before you get used to spending it.
4. Step 4: Repeat. If you do this every year, you’ll go from 1% to 10% or 15% over a decade without ever feeling a painful budget cut.

Your First Priority: The “Free Money” You Can’t Ignore

Before you even think about 15% or 20%, there is a minimum amount everyone with a 401(k) should be investing.

This is your employer match.

A 401(k) match is a benefit where your company gives you free money as a reward for saving for your own retirement. The most common match is “100% match on the first 5%.”

Here’s what that means in simple terms:

• If you invest 5% of your salary into your 401(k), your company will put in another 5%… for FREE.
• You just got a 100% risk-free return on your money.

If you don’t invest enough to get your full employer match, you are literally throwing away part of your salary.

Therefore, your absolute minimum investment, no matter what, should be enough to get the full 401(k) match. This is the single best investment in all of finance.

The Big Debate: Should I Pay Off Debt or Invest?

This is a critical question. It feels wrong to invest when you have a $20,000 student loan or a $5,000 credit card balance.

The answer depends on the type of debt you have. You need to “triage” your debt by its interest rate (APR).

1. High-Interest “Toxic” Debt (8% APR or higher)

• Examples: Credit cards (avg. 20-29% APR), personal loans, car loans with bad rates.
• The Answer: PAY THIS OFF. Aggressively.
• Why: No investment in the stock market can guarantee you a 25% return. But paying off a credit card with a 25% APR is a guaranteed, tax-free 25% return. It’s the best financial move you can make. Your “investment” here is in debt freedom.
• The Strategy: Invest only up to your 401(k) match (to get the free money), then throw every single extra dollar at this toxic debt until it’s gone.

2. Low-Interest “Good” Debt (6% APR or lower)

• Examples: Most student loans (3-6% APR), mortgages (3-7% APR).
• The Answer: Pay the minimum and invest the rest.
• Why: This is a simple math problem. The stock market has a long-term historical average return of 8-10% per year. Why would you aggressively pay off a 4% student loan when that same money could be earning a potential 8-10% in an S&P 500 index fund? You are “profiting” the difference.

3. The “Gray Area” (6-8% APR)

• Examples: Some car loans or student loans.
• The Answer: This is a personal choice. Paying it off gives you a guaranteed 6-8% return and priceless peace of mind. Investing gives you a potential (but not guaranteed) higher return. There is no wrong answer here.

The Critical Step Almost Everyone Skips: Your Emergency Fund

You should not invest a single dollar (beyond your 401(k) match) until you have a safety net.

An emergency fund is a pile of cash—not stocks, not crypto, not bonds—sitting in a separate, high-yield savings account (HYSA).

• How much? 3 to 6 months’ worth of your essential living expenses.
• Why? If you invest every spare dollar and your car’s transmission blows up, what do you do? You’re forced to either go into credit card debt (see “Toxic Debt” above) or sell your investments at a loss to pay the bill.
• Your emergency fund is the firewall that protects your investments and your financial life from… well, life.

A Clear Order of Operations for Your Money

Here is a simple, 5-step roadmap for where to put your money, in order.

1. Step 1: Save a “starter” emergency fund of $1,000. This is your buffer against small disasters.
2. Step 2: Contribute to your 401(k) only up to the full employer match. (e.g., 5% of your salary).
3. Step 3: Pay off all high-interest toxic debt (credit cards, etc.).
4. Step 4: Go back to your emergency fund and build it up to a full 3-6 months of living expenses.
5. Step 5: You are now debt-free and secure. This is when you start investing your full 15% (or 20%) goal. You will use this money to:
   • Max out a Roth IRA.
   • Go back and max out your 401(k).
   • Invest in a taxable brokerage account.

Why Does 15% Even Matter? The Power of Starting Early

Let’s illustrate why these percentages are so life-changing. The magic isn’t just the money; it’s the time that money has to grow. This is compound interest—your money’s earnings start making their own earnings.

Let’s look at three people, all earning $60,000 per year, with an 8% average annual return.

• “Minimalist Mike”: He invests 5% of his salary ($3,000/year) starting at age 25. He invests for 40 years.
• “Standard Sarah”: She follows the 15% rule and invests 15% of her salary ($9,000/year) starting at age 25. She also invests for 40 years.
• “Late-Start Larry”: He waits and only starts investing at age 35. He also invests 15% ($9,000/year), but he only has 30 years to invest.

What happens at age 65?

• Minimalist Mike (5%): He invested $120,000 of his own money. It grew to $820,950.
• Late-Start Larry (15%, 30 yrs): He invested $270,000 of his own money. It grew to $1,087,300.
• Standard Sarah (15%, 40 yrs): She invested $360,000 of her own money. It grew to $2,462,850.

The Lessons:

1. Percentage Matters: Sarah invested 3x more than Mike and ended up with 3x the money.
2. Time Matters More: Sarah and Larry invested the same amount per year. But by starting just 10 years earlier, Sarah ended up with over double Larry’s final amount. That extra 10 years was worth $1.3 million.

The Best Percentage Is the One You Start

Don’t be intimidated by 15% or 20%. The perfect number is a myth.

The best percentage to invest is the one you can start with today and stick with consistently.

• Your minimum is your 401(k) match.
• Your goal is 15-20%.
• Your method is to start with 1%, automate it, and increase it every time you get a raise.

The person who invests $100 a month for 40 years will be dramatically wealthier than the person who waits 20 years for the “perfect” time to invest $1,000 a month.

The best time to start was yesterday. The second-best time is right now.