Saving Money Using the 80/20 Rule

Do you feel like your money disappears as soon as you get it?  Bills to pay, presents to buy, kids who want everything at every store.  There’s never a penny left for you.  That’s about to change.  Follow my 80/20 rule for saving money, and you’ll always have money to spend on you.

Start saving money by using the 80/20 rule. You'll build up an emergency fund and be able to treat yourself.

Where Did All My Money Go?

Before I had kids, I spent money without a thought.  I purchased food, clothing, and anything else I wanted on a whim.  I still had a savings account and a checking account as my emergency funds. Then, my children were born, and I took some time off from teaching to stay home with them.  The money I had saved in the bank quickly disappeared as I purchased diapers, formula, and other baby items.  I realized I needed to find ways to save money.

Since I spent most of my money at the grocery store and CVS, I focused on finding ways to save money there.  I could no longer go to these stores and pay full price for everything.  I started using the weekly circulars to plan my shopping trips.  Grocery lists became vital to every shopping trip.  I didn’t buy anything that wasn’t on my list, and I started to save money.  Find out how I make my grocery lists, and how they save me money each week.

Making a grocery list is a step to saving money.

Next, I started using coupons to save even more money.  Layering savings by finding deals and coupons for the same items led to hundreds of dollars of savings.  Find out how coupons can save you lots of money.

Even though I had found ways to save money, I still didn’t have extra money to spend on myself.  I went more than 6 months without buying a single item that wasn’t a necessity.  The money in my savings account was still decreasing but not nearly as quickly.

When I finally went back to work, I was so excited to get my first paycheck.  I wanted to run to the store and buy everything I wanted.  However, I knew I needed to build up my bank accounts, too.  That’s when I developed my 80/20 rule for saving money.

 

How the 80/20 Rule for Saving Money Works

Any time you get money, through a paycheck, by saving it when you shop, or as a bonus or tax refund, take 80% of that money and put it in savings.  That could mean putting it in the bank, investing it, or, if you’re like my mom, putting it somewhere special in your house.  She used to have an envelope of money under the carpet, and you’d walk over it on your way down the steps.

The 80% includes all the money you need to pay bills.  If you’re like my husband and you put everything on your credit card, you can just put it in your checking account.  However, if you’re like me, and you prefer to pay for groceries and other necessities with cash, you’ll need to keep some on hand.

Start saving money by using the 80/20 rule. You'll build up an emergency fund and be able to treat yourself to something nice.

The other 20% is for you to spend as you please.  Maybe there’s a new outfit you really want or you’re saving up for a trip.  Just put the money aside until you’ve saved enough to make your purchase.  I personally like to split the 20% and use 10% for items for me and 10% for fun activities for my family.  We use the money to go out to eat, go on day trips, and even saved up for a Disney trip this way.  (I contributed my 10% for a while to make this happen, but it was totally worth it!)

 

Why I Love Saving This Way

I love using the 80/20 rule for saving money because I always know exactly where my money is going.  If I get a $1,000 check, I know $800 of it is going into my bank accounts.  That way I’m able to continue building up my emergency fund again, and I have money to pay the bills.  Then, I use the other $200 for fun.  This way, I never feel deprived, and even if I want a higher priced item, I will eventually be able to get it.  I just have to save a little longer.

How do you save money?  Do you have a system like the 80/20 rule?

 

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11 thoughts on “Saving Money Using the 80/20 Rule

  1. Hi, Tara, Everyone wants to save money, thanks for your 8020 rule of saving money. Your idea is good, with this type of saving we know how much money we can spend on some expensive item or we can delay the buying of that item.

  2. The 80/20 rule sounds like a really good idea Tara you’ve covered the necessary expenses and you actually get to spoil yourself and the ones you love, which makes it so worthwhile

  3. This is a really great idea! I’ve heard of this rule before, though I’ve never actually tried it. It might be perfect for hubby and I right now since our income has changed. I’ll see if we can give it a go! 🙂

  4. I have never heard of this but it makes total sense and a really lovely way to control finances. With still options for some nice treats as well – love it x

  5. That a good rule. Sadly, It took my husband and I 15 years a marriage to start saving. We don’t save that much, with 4 kids and all, but we finally save, and it feels good.

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