How much should I save from every paycheck?

Save More Tomorrow

piggy bank
Self control is usually the only thing holding people back from saving as much money as they can.

When it comes right down to it, people want to save as much money as they can. The only thing that holds them back is self control. Two economists, the University of Chicago's Richard H. Thaler and UCLA's Shlomo Benartzi have taken the "self" out of self control with their "Save More Tomorrow" plan.

The program works something like this: Whenever an employee gets a pay raise, they should put some of it, or all of it, into their 401(k) account. By timing the contribution to coincide with the pay increase, the employee won't see any less money in their paychecks. That's a big psychological boost -- you won't miss what you haven't seen. While an employee can opt out at any time, they rarely do [source: Thaler and Benartzi]. In fact the plan worked so well at one manufacturing firm, 98 percent stuck with the program through two pay raises, and 80 percent remained through three pay raises [source: Thaler and Benartzi].


Workers who don't have access to a "Save More Tomorrow" plan, or even a 401(k), can use the same approach, although it will take a bit more, um, self control. Not only can you save scheduled pay hikes, but you can also stash away any other income such as tax refunds, bonuses, birthday and holiday money, profits from a tag sale or the proceeds from an inheritance. The key is not to raise your lifestyle with such "added" income. Instead, you're saving money that you never had -- or in many cases, expected -- in the first place [source: Dunleavey].

For more tips on how to budget and save, read on.

Related Articles


  • Bureau of Economic Analysis. "National Economic Accounts." Nov., 2010. (Jan., 2011)
  • Dunleavey, MP. "A no-brainer way to save for retirement." (Jan., 2011).
  • Franklin, Mary Beth. "Super Savers: It's never too early to start saving for retirement." Kiplinger's Personal Finance. July, 2005. (Jan., 2011)
  • Isidore, Christ. The zero-savings problem. Aug., 3, 2005. (Jan., 2011)
  • IRS. "Top 10 Difference Between a Roth IRA and a Designated Roth Account." (Jan., 2011)
  • Jenkins, Richard. "A Similar Way to Save: The 60 percent Solution. (Jan., 2011)
  • Lankford, Kim. "How Much Should You Save?" (Jan., 2011)
  • "How to Create a Budget." July, 2007. (Jan., 2011)
  • Mulrean, Jennifer. The Basics: 7 Radical Ways to Save." (Jan., 2011)
  • Thaler, Richard H., Benartzi, Shlomo. "Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving." Nov., 2000. (Jan., 2011)
  • Spiegelman, Rande. "How Much Should You Save for Retirement? Play the Percentages." Charles Schwab & Co. Mar. 15, 2005. (Jan., 2011)
  • U.S. Department of Labor. "Consumers Expenditures - 2009." Oct, 5, 2010. (Jan., 2011)