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Simply defined, disposable income is the amount of money you have available to spend or save after your income taxes have been deducted. You may also hear this sum of money called disposable earnings or disposable personal income (or DPI).

Disposable income is carefully watched by economists because it is a valuable indicator of the economy’s health. It’s also the basis of your own personal budget, since it represents the money you can use for spending, saving, or investing as you see fit.

What Is Disposable Income?

Disposable income is money you have left over from your earnings after taxes and any other mandatory charges are deducted.

This money (which may also be referred to as expendable income) can then be spent or saved as you wish. You will likely use it for your basic living expenses, or the needs in your daily life, such as housing, utilities, food, transportation, healthcare, and minimum debt payments.

You may also spend that money on the wants in life, such as dining out, entertainment, travel, and non-vital purchases, such as a cool new watch or mountain bike.

Your disposable income can also be allocated towards your goals, such as saving for your child’s college education, the down payment on a house, and/or retirement.

Why Disposable Income Is Important

There are different types of income, and disposable income is usually defined as the amount of money you keep after federal, state, and local taxes and other mandatory deductions are subtracted from gross earnings. Consider these details:

•  Mandatory deductions include Social Security, state income tax, federal income tax, and state disability insurance.

•  Voluntary deductions, such as health benefit deductions, 401(k) contributions, deductions for other employer-sponsored benefits, as well as any assignments of support (such as child support) are excluded from the calculation. These costs are considered part of your disposable earnings.

•  Disposable income is an important number not just for consumers, but also the nation as a whole. The average disposable income of the country is used by analysts to measure consumer spending, payment ability, probable future savings, and the overall health of a nation’s economy.

•  International economists use national measures of disposable income to compare economies of different countries.

On an individual level, your disposable income is also a key economic indicator because this is the actual amount of money you have to spend or save.

For example, if your salary is $60,000, you don’t actually have $60,000 to spend over the course of the year. Federal, state, and possibly other local taxes will be deducted, as will Social Security and Medicare taxes.

What is left over is what you would have to spend on everything else in your life, such as housing, transportation, food, health insurance, other necessities, as well as nonessentials.

Recommended: Money Management Guide

Disposable Income vs. Discretionary Income

Although they’re often confused with one another, disposable income is completely different from discretionary income.

While disposable income is your income minus only taxes, discretionary income takes into account the costs of both taxes and other essential expenses. Essential expenses include rent or mortgage payments, utilities, groceries, insurance, clothing, and other “musts.”

Discretionary income is what you can have leftover after the essentials are subtracted. This is what you can spend on nonessential, or discretionary, items.

Some costs that fall under the discretionary category are dining out, vacations, recreation, and luxury items like jewelry. Although internet service and your cell phone may seem like necessities, these expenses are considered discretionary expenses.

Similarities

Both disposable and discretionary income are a way of looking at income after taxes.

However, discretionary income goes a step further and deducts essential expenses, such as housing and healthcare.

Differences

As you might expect, discretionary income is always less than disposable income. When you subtract your basic living expenses from disposable income, the amount that remains is your discretionary income — what you have left to spend on wants or save for the future.

Calculating Disposable Income

Disposable income refers to the amount of earnings left over after mandatory federal, state, and local deductions. But disposable income is not necessarily the same as your take-home pay.

Deductions from your paycheck may include additional items such as health insurance, retirement plan contributions, and health savings accounts. These deductions are voluntary, not mandatory.

To calculate your disposable earnings, you can simply subtract federal, state and local taxes; Medicare; and Social Security from your gross earnings. Be sure to include any passive income streams, such as rental income, or side hustle earnings (more on that in a moment), when doing the math for your gross income. The resulting amount is your disposable income.

Some of the finer points to note:

•   Keep in mind that taxes deducted from your paycheck are an estimate. If you have a history of getting a large refund or having a large amount of taxes due, it may be worth reviewing your withholdings through your employer.

This could help you adjust the withholdings so it is closer to the actual expected tax that will be calculated when you file. You can then plan accordingly.

•   Even if you’re a contractor or freelancer, or if you made additional income from side gigs along with your salary, you can still calculate your disposable income.

This requires subtracting your quarterly tax payments and any additional taxes you will owe from your overall income. You can then determine your monthly after-tax income.

Setting aside money to pay taxes can also help you budget with your disposable income.

Disposable Income Budgeting

Calculating your disposable income is a key first step in preparing a budget. You need to know how much you have to spend in order to plan your monthly spending and saving.

A personal budget puts you in control of your disposable income and helps you make financial decisions. It forces you to take a closer look at how you’re spending your money.

Here are a few ideas that could be helpful when developing a budget based on disposable income.

Tracking Spending

Disposable income is what’s coming into your account every month. It’s a good idea to also determine what is going out each month.

To do this, you can gather up bank and credit card statements, as well as receipts, from the past three months or so, and then list all of your monthly spending (both essential and discretionary/nonessential).

To make this list more accurate, you may want to actually track your spending for a month. You can do this with a phone app (your bank’s app may include this function), by carrying a small notebook and jotting down everything you buy, or by saving all of your receipts and logging it later.

This can be an eye-opening exercise. Many of us have no idea how much we’re spending on the little things, like morning coffees, and how much they can add up to at the end of the month.

Once you see your spending laid out in black and white, you may find some easy ways to cut back, such as getting rid of subscriptions and streaming services that you rarely use, brewing coffee at home, cooking more and getting less take-out, or getting rid of a pricey gym membership and working out at home.

Setting Goals And Spending Targets

Tracking income and spending can provide a great starting point for setting financial goals and spending targets.

•  Goals are things that a person aims for in the short- or long-term — like paying off student loans or buying a new car.

•  Spending targets are how much you want to spend each month in general categories in order to have money left over to put towards your savings goals.

Since essential spending often can’t be adjusted, spending targets are typically for discretionary income.

One option for budgeting disposable income is the 50/30/20 plan. This suggests spending about 50% on necessities, 30% on discretionary items, and then putting aside 20% for savings and other long-term goals.

Use the 50/30/20 budget calculator below to see how your budget would fall into those three categories.

These percentages are general guidelines, however, and can be adjusted as needed based on individual circumstances. For example, if you live in a competitive housing area, rent may take up a large portion of your expenses, and you may have to bump up necessity spending to 60% and decrease fun money to 20% instead.

Or, if you are saving for something in the near term, like a car or a wedding, you may want to temporarily bump up the savings category, and pull back unnecessary spending for a few months.

3 Uses for Your Disposable Income

Once you have calculated your disposable income, you can consider the ways you might divide it up:

Basic Living Expenses

Some of your disposable income will go towards necessities, such as:

•  Housing

•  Utilities

•  Food

•  Healthcare

•  Transportation

•  Insurance

•  Minimum debt payments

Discretionary Spending

Next, there are the wants in life. These are things that are not vital for survival but can certainly make things more enjoyable:

•  Eating out

•  Entertainment, such as streaming platforms, movies, concerts, and books

•  Clothing that isn’t essential

•  Electronics, like the latest mobile phone

•  Travel

•  Gifts

Saving and Investing

In addition to the spending outlined above, you will likely want to save money or invest it for your short-term and/or long-term goals. These may include:

•  Your emergency fund

•  The down payment for a house

•  A college fund for children

•  Money to start your own business

•  A new car

•  Retirement

Recommended: Emergency Fund Calculator

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The Takeaway

Disposable income is a key concept in budgeting, as it refers to the income that’s left over after you pay taxes. Knowing how much disposable income you have is the foundation for putting together a simple budget that allows for necessary expenses, having fun, while also saving for the future. Finding the right banking partner is another important element of planning for tomorrow.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What does disposable income mean?

Disposable income (also known as disposable earnings) is the money you have left after taxes and other mandatory deductions are taken out of your income. Essentially, it’s the money you have at your disposal to spend, save, or invest.

What is an example of disposable income?

Disposable income is the amount of money you have left after taxes and other mandatory deductions are taken out. As an example, let’s say Sarah earns $4,000 a month in gross income. After $1,000 is deducted in federal, state, and payroll taxes (including Social Security and Medicare), Sarah is left with $3,000.

This $3,000 is Sarah’s disposable income — the amount she has available to spend on essential and discretionary expenses, as well as put towards savings.

What is the difference between disposable income and discretionary income?

Disposable income refers to earnings minus taxes and mandatory deductions, such as Social Security and Medicare. Discretionary income is a subset of disposable income. It is the money left once you have paid for essentials, such as housing, utilities, food, and healthcare. The money that is left can be used for nonessential spending and for saving.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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SOBNK-Q325-060

If you want to build financial security and hit your long-term savings goals, it’s probably a wise move to put a portion of each paycheck into a savings account.

Most people agree that saving is important, but it can be challenging to know how much to stash away. Some people save 10% of their take-home pay, others three or four times that amount. Still others deposit a round number (be it $50, $500, or $5,000), into their savings account on a regular basis.

How much you should save depends upon a variety of factors, including your personal style and financial aspirations. In this guide, you’ll learn how to determine how much to save, plus hear smart advice on how to prioritize and reach your goals.

What Percent of Your Income Should You Save?

There isn’t a set percentage of how much of your annual income you should save. Much will depend on your particular circumstances. For example, your income, your cost of living, your expenses, and your debt level will all matter. A person who earns $75K per year, lives in an expensive city, has student loans to pay off, and is supporting a family of four will likely find it more difficult to save money than someone who is earning $125K, lives in a less pricey location, has zero loans to pay down, and is single with no dependents.

That said, you are likely to hear that 20% is a good number to aim for in terms of the percentage of your income to be saved. If that proves too high, then 10% is a good figure to use as a goal.

Pros and Cons of Saving a Fixed Percentage of Your Income

Sure, saving money is important. But what about saving a percentage vs. a specific dollar amount?

There are pluses and minuses to saving a fixed percentage of your income. This approach may or may not work for everyone. Consider the upsides first:

•   It’s consistent. You know that every paycheck, the percentage you’ve indicated will be heading into savings, helping you reach your financial goals. Even if your earnings vary, your savings will be aligned.

•   It protects you against lifestyle creep. If, say, you are saving $500 per pay period and then get a raise, you might just spend all of that additional cash you are earning. Called lifestyle creep, that means your expenses rise, gobbling up your enhanced income.

When, however, you set a percentage to go into savings from your checking account or other source, you know that the amount will automatically adjust with any income fluctuations. For instance, if your pay varies depending on your hours or goals achieved, you will always be allocating the same ratio of your money to savings, whether you earn more or less.

But there are potential downsides to consider too.

•   It may feel more challenging to know how much you’re socking away when you determine a percentage of income to save. Again, if you allocate $500 a month to savings rather than a percentage, it’s easy to calculate where you stand at any moment during the year.

•   The way a percentage automatically adjusts to income changes may not suit you. For example, if you are saving 20% of your salary and then get a $10K raise, the amount funneled into savings will rise correspondingly. But what if you wanted to earmark that money to pay down your credit card debt more quickly? You will have to take steps to adjust where your money goes.

The 50/30/20 Rule

If you’re wondering, “What percent of my income should I save?” the 20% figure is likely to crop up often. One reason: the 50/30/20 budgeting rule, which was made popular by Sen. Elizabeth Warren and her daughter, Amelia Warren Tyagi, in a book they co-wrote. It suggests savers should allocate their money as follows:

•   50% of their after-tax paychecks toward essentials like housing, food, healthcare, and minimum debt payments.

•   30% toward discretionary spending

•   20% toward savings

So, someone who takes home $3,000 every two weeks (or $78k per year) might put $1,200 a month into savings. They would have $15,600 at the end of the year.

That’s just a guideline for getting started, though, so don’t panic if putting 20% into savings seems impossible right now. You can start at 10% or bump it up to 30% or more.

Recommended: 50/30/20 Calculator

It All Starts With a Budget

Making a budget may sound boring or even arduous, but it doesn’t have to be either. And sticking to a realistic spending plan can make or break a savings plan.

By prioritizing monthly expenses — from keeping a roof over your head to gassing up the car to indulging in a gelato or good sushi every Friday — you may be able to avoid impulse spending and hold on to more of your hard-earned dollars.

You can track your spending manually with a notebook or spreadsheets, or keep the data in the palm of your hand with a money-tracking app, where you can see your expenses, savings, and earnings all in one place whenever you want to take a peek.

4 Different Types of Savings

Once you determine what percentage you’ll be able to save from your salary, you may want to break down that amount even further, into separate designated “buckets” or sub-accounts for different goals, which could include things like:

1. Emergency Fund

An emergency fund has the potential to turn life’s potholes into speed bumps.

It’s money you can use to pay for unexpected expenses, such as medical bills, home repairs, and fender benders. And your emergency fund might serve as a lifeline if you lose your job and don’t have another source of income.

A good rule of thumb is to save at least three months’ salary, but you don’t have to come up with those dollars all at once.

You could start by saving a small amount each month — and you can always add to the fund when you get a raise, bonus, tax refund, or other money windfall. (You also should be prepared to replenish the fund if you have to use all or part of it at any point.)

The money in your emergency fund could go into a savings account at your local branch bank, or you might want to check out the benefits of an online bank account which might offer no account fees and a solid interest rate.

2. Short-Term Goals

Most of us have goals we hope to fund in the next few months or couple of years. This could be anything from throwing your significant other a memorable birthday party to booking that vacation to Positano to affording a new car. You can start your own short-term fund at your financial institution. You can label the account “holiday spending” or earmark it for any other short-term goal: “Fall Wardrobe,” “Beach Vacation,” or maybe a “New Laptop.”

You may want to automate your savings and have money whisked from your checking as soon as your paycheck hits.

3. Long-Term Goals

Setting aside money for a long-term goal — a down payment on a house, a honeymoon in Bali, a year in Paris with your bestie — can feel like a slow slog. But you may improve your chances for success if you set up an account for the money and designate a consistent amount to slip in there from every paycheck.

Depending on your timeline, you may want to check into a certificate of deposit (CD), or you could stick with that same high-interest savings account, which you can build with automatic deposits and link to other accounts with a tracking app. These are secure ways to save towards future goals.

4. Retirement Savings

Another aspect of how much of your annual income you should save involves preparing for retirement. If you have a 401(k) investment savings account available through your employer, you’re likely already building wealth for retirement with automatic contributions every payday. And if your employer offers any type of matching contribution, you have an opportunity to grow your money even faster.

Beyond that, it’s up to you how big of a slice of your savings pie you want to put toward retirement at any time.

If you’re just starting out, and especially if you have some debts to pay off, saving for retirement may seem like the least of your worries. But the earlier you start putting money away, the faster it can grow. Time is the investor’s true friend; it allows you to ride the ups and downs of the market without panicking as you work toward your goals. (Remember, investments aren’t insured, so you need to be aware of the risk involved.)

If you don’t have an employer-sponsored plan — or even if you do, but you want more investment options or maybe more help than you’ve been getting — you can open your own traditional or Roth IRA outside of work. When considering which type of retirement account to open, IRA or 401(k), you might want to keep an eye on what fees might be associated with each plan.

It’s important to note that employer-sponsored plans allow investors to contribute more annually than an IRA would (basic limit in 2025: $23,500 for a 401(k) for those under age 50 vs. $7,000 for an IRA). And if the employer offers a matching contribution, that’s essentially free money you wouldn’t get from an IRA.

Deciding on Your Goals

Goals are a good thing: They can provide motivation for saving. But they can’t just hang out there; they probably need some prioritizing. That doesn’t mean that you are picking just one to focus on. More likely, you are going to decide how to divvy up that percentage of your income that goes into savings.

Say you are committed to saving 20% of your income. You may want to determine percentages for:

•   Retirement

•   Your child’s college education

•   A down payment on a house

One person might split that as 10%, 5%, and 5%. Another might instead do 8%, 2% and 10%. It depends on your particular goals, how else you might finance them (perhaps you expect your child to take out student loans), and the urgency of each.

Setting a Timeline

Some goals will be easy to plot on a timeline. For example, if your wedding is in a year and you’re saving $6,000 for your honeymoon, you’ll need to save $500 a month.

Others goals will likely need more finessing. (The amount you might need for retirement, for example, can be tough to pin down.) Could you drive your old car for another year or two, thereby saving money daily, if it meant getting a house sooner? Should you work another year before taking time off to be a stay-at-home parent? Only you can make those choices.

Deciding how much money you’ll need when you’ll need it, and how long it will take to save it may seem daunting as you start toward each new goal. But it also can help you stay motivated to note when you’re making headway. And you might even find new ways to cut expenses as you go.

Pay Off Debt

The average American had almost $8,000 in high-interest credit card debt as of the end of 2022. In addition, many people are also shouldering other debts, such as car loans and student loans.

If you’re a part of those statistics, paying off those debts could be the most important part of your saving plan.

•   Any debt on which you’re paying interest can feel painful. But if you’ve missed some credit card payments and you’re paying the default rate (almost 30% in mid-2025), you’re likely putting an awful lot of money toward your past instead of toward your future.

•   High-interest debt can drag you down, so it’s important to ditch it as quickly as possible. A personal debt reduction plan, like the debt avalanche, debt snowball, or the hybrid debt fireball, can help you pay off high-interest debt in a way that can build momentum and keep you motivated.

Here’s how the debt fireball method works:

1.    Categorize your debts as either “good” or “bad.” (“Good” debts are generally lower-interest and involve things that have potential to increase your net worth, like student loans or a mortgage. “Bad” debt is usually considered to be higher-interest and incurred for a depreciating asset, like car loans and credit card debt.)

2.    List your “bad” debts from smallest to largest based on their outstanding balances.

3.    Make the minimum monthly payment on all outstanding debts, then funnel any excess funds to the smallest of your “bad” debts.

4.    When that balance is paid in full, go on to the next smallest on the bad-debt list. Blaze through those balances until all your “bad” debt is repaid.

5.    When that’s done, keep paying off your debt on the normal schedule while also putting more into various savings strategies that will help get you to your goals.

Remaining Flexible

Consistency can be a key to successful saving. Otherwise, it’s just too darn easy to let yourself off the hook from paycheck to paycheck, month to month, and year to year. But that doesn’t mean your savings plan has to feel like a forced march.

Flexibility is also important. A savings plan that seems smart and doable today may feel like torture six months from now. Or you might get a raise and decide you could be socking away much more.

Life changes. So it makes sense to tighten and lighten your budget — and the savings aspect you build into that budget — as necessary. If you’re tracking your expenses regularly, you may be better able to gauge how you’re doing and make any course corrections that much more quickly.

Anything Saved Is Better Than Nothing

It can feel discouraging when you get started on a long-term savings plan. Say you want to accumulate $60,000 for a down payment on a house. Perhaps saving 20% of your paycheck is impossible right now. And putting a couple of hundred dollars as a start can feel as if you will never reach your goal.

But over time, that little bit of money regularly contributed will indeed grow and propel you ever closer to your goal. Getting in the habit of contributing frequently can be a goal in and of itself, even if the amount is not as high as you’d like.

You may have also had this experience with shorter-term goals, such as building an emergency fund. Even if you only start by contributing $20, you will eventually reach your aim with steady saving.

The Takeaway

If you’re ready to start on the path to achieving a savings goal, look for a financial partner that minimizes fees and maximizes interest, to help your money work harder.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Is it good to save 50% of your income?

It’s a wise move to save a portion of your paycheck, and 20% is an often-quoted figure to aim for. Fifty percent may be too high for many people, but if you can afford to save half of your take-home pay, you may get to your savings goals that much more quickly.

Is 20% of your income enough to save?

Many financial experts recommend saving 20% of your income or more if you can. The 20% figure is part of the popular 50/30/20 budget rule. However, some people may want to save more if possible, especially if they have a couple of major long-term goals they are saving for, such as buying a home, saving for their children’s education, and affording an early retirement.

What is the 60/20/20 rule?

The 60/20/20 rule is similar to the 50/30/20 budget guideline. In this case, it means that a person allocates 60% of their take-home pay to necessities, 20% to discretionary spending, and 20% to savings.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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Making it in life, in a financial sense, isn’t a matter of winning the lottery or saving pennies like a miser. Rather, like many goals, it can depend on developing good daily habits.

If you make small, incremental shifts in how you manage your money, you could grow your net worth significantly. These moves can be as simple as reviewing and trimming your recurring bills or bumping up your savings contributions a notch.

While you may not see your savings double overnight, you can get on a path to growing your wealth. Here are some ideas that can help put you on the road to a better financial life.

1. Reviewing Monthly Expenses

One of the simplest ways to improve your financial health is to take a closer look at how much is going in and coming out of your bank accounts each month and to then drill down into exactly where your money is going.

Make a list of how much you’re currently spending monthly on essential and nonessential items. You may want to list your nonessential expenses in order of priority, and then look for places where you could potentially pair back, or in some cases, completely eliminate the expense.

This might involve canceling inactive memberships and unused subscriptions, and/or re-evaluating your cell, cable and car insurance plans (do you have more bells and whistles than you need? Could you get a better deal elsewhere?). Or, you might decide to cook more (and get takeout less often) or make fewer trips to the mall.

Another way to knock down recurring bills is to do a little haggling. Sometimes all it takes is a phone call to get a provider to give you a better deal or to lower your rate. If you see a promotion going on from a competitor, for instance, you can always ask your company if they can apply that rate to your account.

2. Trying a 30-Day Spending Freeze

One quick way to change your spending habits is to put yourself on a one-month spending freeze, during which you stop spending money on anything that isn’t a must. When the 30-day freeze is over, you may realize that you didn’t miss some of the things you usually spend money on and find it easy to pare back.

If a full spending freeze seems too challenging, you might pick a single category (such as clothing or shoes) or a specific store to stay away from for 30 days.

To help stay motivated, keep track of the money you didn’t spend during your freeze and then put it to use paying down debt, starting an emergency fund, or saving for a downpayment on a home or other short-term financial goal.

3. Automating Every Bill

Automating your finances not only makes your life easier, it can also help boost your financial wellness.
Setting up automatic withdrawals from your bank account to pay all of your bills helps ensure those bills get paid on time. And, when it comes to improving your financial life, paying bills on time can have a pretty significant impact.

For one reason, it helps you avoid paying interest and late payment fees. It could also help you maintain good credit. That’s because a significant portion of your credit score is based on payment history. In fact, it’s weighted more than any other factor.

It could also help maintain your credit score. That’s because a significant portion of your credit score is based on payment history. In fact, it’s weighted more than any other factor.

Having a good credit score is important because it can help you qualify for the best interest rates on credit cards and loans, including a home mortgage.

4. Putting an Extra 1% Towards Retirement

Even if you think you can always plan for retirement later, the sooner you start, the easier it will be to reach your savings goal.

If you’re not yet maxing out your 401(k) contribution at work (which takes money out of your paycheck before taxes), you may want to increase it by just 1%.

You likely won’t notice the difference in your paycheck. But given the power of compound returns (when you earn returns not only on your initial investment but also on any accumulated returns), that small increase can net more significant gains over time. You might also set up a timeline for when you want to bump it up another percentage point after you’ve gotten used to the 1%.

You may want to set up a timeline for when you want to bump it up another percentage point after you’ve gotten used to the 1%.

If you don’t have a 401(k) at work, you may want to look into opening an individual retirement account (IRA), keeping in mind that there are limits on how much you can put into retirement savings each year.

5. Paying in Cash

What is it about plastic that can make your brain think you’re not really spending money?

One way to curb unnecessary or mindless spending is to leave your credit cards at home and only carry the amount of cash you have budgeted to spend that day, or week. When you can literally see your money going somewhere, you may find yourself becoming much more intentional in the way you spend it.

It can also be more difficult to get into debt when using cash, which could, in turn, pay off later by helping you avoid high-interest credit card payments.

Recommended: The Envelope Budgeting Method: What You Need to Know

6. Creating Multiple Income Streams

You may not be able to snap your fingers and get a raise at work, but it might be possible to increase your income in other ways. A low-cost side hustle could be the answer.

For example, is there a way to turn one of your hobbies, skills, or interests into some extra funds? Maybe a favorite local business could use some help managing their social media account or designing or writing copy for their website. Babysitting a neighbor’s kids, cleaning houses, walking dogs, or running errands for an older person are also options.

Or, you might consider taking up a gig with flexible hours, such as driving for a rideshare company, delivering food, helping people with small tasks, or personal shopping through one of the many on-demand service apps.

7. Saying “No” to Monthly Fees

Unless you’re looking very closely at your bank statements each month, you might not even be aware of the fees your bank may be charging every month for your checking or savings accounts.

These could include service fees, maintenance fees, ATM fees (if you go outside their network), minimum balance fees, overdraft/non-sufficient funds fees, and transaction fees. Over time, those little dinks can make a major dent in your account.

“If you see that your bank is hitting you with one or more monthly fees, you may be able to cut your monthly spending by switching to a less expensive bank, or going with an online-only financial institution, which tend to offer low or no fees,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi

8. Making Savings Automatic

To start a savings routine, consider opening up a high-yield savings account, and then setting up automatic, monthly transfers from your checking account into this account. By having a set amount automatically transferred every month, you won’t have to think about (or remember to manually make) this transaction — it’ll just happen.

It’s perfectly okay to start small. Even small deposits of $20 or so will add up. Before long you may have enough for an emergency fund (i.e., three to six months’ worth of living expenses just-in-case), a down payment, or another savings goal.

9. Knocking Down Debt

Having too much debt can hurt your chances of achieving financial security. That’s because when you’re spending a lot of money on interest each month, it can be harder to pay all of your other expenses on time, not to mention grow your savings.

Getting rid of debt can have long-range consequences as well. If you can lower your credit utilization ratio, which shows the amount of available credit you are currently using, it could help you establish or maintain strong credit. And that, in turn, could make it easier to qualify for lower-interest loans and credit cards in the future.

While knocking down debt may seem like a mountain to climb, choosing a simple debt reduction strategy may help.

•   The avalanche method: Put extra cash toward the debt with the highest interest rate, while paying the minimum on all the rest. When the most expensive debt is paid off, put that extra cash to

•   The snowball method: Put extra cash toward the debt with the smallest balance, while paying the minimum on all the rest. When the smallest debt is paid off, put that extra cash toward the account with the next-smallest balance and so on, until you are done.

If you can qualify for a lower interest rate, another option might be to take out a personal loan that consolidates all those high-interest debts into one more manageable payment.

The Takeaway

Making it financially doesn’t necessarily mean bringing in a huge paycheck or coming into a windfall (although those things don’t hurt).

Financial wellness is more about being able to live within your means while saving. Making a few incremental changes, such as putting just 1% more of your paycheck into your 401(k) or siphoning off an extra $100 into a savings account each month, can slowly but surely help you build your net worth.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What is the 50-30-20 rule of money?

The 50-30-20 rule is a budgeting method that splits your income into three parts: 50% for necessities (such as rent and groceries), 30% for nonessential expenses (like dining out and entertainment), and 20% for savings and paying off debts. This approach helps you maintain a balanced budget, ensuring you cover your basic needs, enjoy your life, and save for the future.

What is the 70/20/10 money rule?

The 70/20/10 rule is a budgeting strategy that allocates your income as follows: 70% for monthly bills and daily spending, 20% for savings and investments, and 10% for additional debt payments or charitable donations. This approach helps you manage your finances responsibly, build wealth, and contribute to causes you care about, fostering a well-rounded financial life.

What is the 10-5-3 rule in finance?

The 10-5-3 rule in finance is a guideline for estimating returns on different types of investments. It suggests that stocks may average a 10% annual return, bonds around 5%, and cash or savings accounts about 3%. This rule helps investors set realistic expectations and plan their financial goals accordingly, though actual returns can vary based on market conditions and individual investment choices.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

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See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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