How much money should you have left after bills?

Yes, we want to be financially secure, but when should we tap out of the nest egg that we've been saving for our future? There are many factors to consider, including where you live, how big of a nest egg you've been amassing, and how much of it you've already spent. 

A lot of our monthly income is spent on different things. Electricity, gas, water, phone plans, wifi, a mortgage being the biggest drain on our resources. Some of us are baffled by the idea that we should be putting away a little bit of money left over every month for some rainy days ahead. 

There isn’t a specific guide on how much should be left over every month after settling all your payables. The right answer would be, whatever is best for your current situation.

The information below is not meant to be a set of rules, but it does outline some of the factors that you should put into consideration before making the decision to stop saving.


Different Approaches 

As with everything in life, there are several ways to approach a situation. The following are the most common ways people allocate their money on a monthly basis to achieve their financial goals. 


50/30/20 Rule

This “rule” popularized by Elizabeth Warren sets out the following ways you should be allocating your monthly after-tax income: 

50% should be spent on the necessities, basically, anything that you would not be able to survive or function without. These include food, water, gas, electricity, mortgage payments, insurance, and healthcare. 

Half of your after-tax earnings should be able to cover all your needs. If this isn’t the case, you should take a second look at the lifestyle you are living and maybe cut back on eating out and splurging on shopping sprees. 

30% should be spent on things that you could live without but the existence of which makes life more enjoyable, within reason of course. This includes Netflix, HBO, Youtube, Spotify subscriptions as well as dining out, tickets to events you enjoy, and high-speed internet for your gaming needs. 

This portion of your savings could also be allocated to upgrades in your life that you have been thinking about. Eating at that fancier restaurant, exchanging your car for a better model, or trying out another subscription because your favorite show is on there and nowhere else. 

All of these fall into the category of “wants”. It is up to you to decide on what falls into it. 

20% of your earnings should be put into savings. The importance of having a safety net cannot be emphasized enough. Emergencies of any kind can come up any time and having money to get you through it will take a load off of your shoulders. 

You should have at least three months of emergency savings on hand in case you lose your job or an unforeseen event occurs. After that, focus on retirement and meeting other financial goals down the road.


Create a Simple Spending Plan

A spending plan is a method of allocating your income to different expenses. Whether it is a want or a need, the amounts will be dictated by you. This allows you to plan ahead and manage your finances properly. 

Here are the steps to creating a spending plan that is actually achievable: 

  1. Decide on a timeframe. Since most of the income is given out on a monthly basis, most people opt to plan things out that way too but it isn’t necessary. You can abide by any time frame that you want to. 
  2. List all your income sources. Knowing and understanding where and how much money you make will give you a clearer picture to base the plan on. 
  3. Anticipate your expenses.  Now that you know how much you’ll have, you’ll also know how much you can spend. 
  4. Evaluate your plan. Go over your plan multiple times to see if it's the best course of action for you to determine how much money will be left after paying all your bills. 
  5. Leverage Lenders at good rates in some situations. Sometimes it makes sense to leverage debt to improve your financial situation. For example if there is an attractive real estate rehab deal that you want to take advantage of. The tip here is to become financially astute, know what type of finance makes sense for you. In the example above a hard money lender could be the best option. But each case is different, so you must invest in your financial education.

For people who don’t want to be really nitty-gritty about the amount that should be saved, a simple spending plan can be used to achieve financial goals without the constraint of set percentages. 

Staying within any budget is a challenge for many people. Many people have a misconception that you have to be rich to save money. This is not true. All you have to do is have a constraint. 

The amount of money you have available to spend is limited by how much you earn and how much of that you can save. The limits are yourself. How much money you have is limited by your ability to save, and how much you are willing to save is limited by your desire to spend. 

If you think that it's ridiculous that a tax return is burned by excessive spending, you are missing the point. You can't "buy happiness", but you can buy something that gives you a happiness boost, and that something can be anything. 

It’s hard to determine how much you should be spending and saving on a month-to-month basis. Having a specific bottom line amount of how much should be left after all the bills are paid is not realistic. 

Everyone is in different situations in life. While this approach may have worked for you, it might not work for other people. Determining that amount is entirely up to you and what you need. These approaches are merely guides on how you can achieve that.