Dividing Up Your Paycheck: Saving and Investing Enough?

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Do you know where all your money is going? I’ll be the first to admit that before I fell headlong into personal finance, I had no idea where my money went each month. I paid my bills each month, and I always tried to tuck some into savings. If you asked me what specifically I was spending money on, I’d have given you a blank stare.

When you have a deluge of bills, expenses and entertainment each month, it’s easy to feel like a servant to your money. It’s easy to forget that money is a tool that you should be in charge of, not the other way around.

There’s a little secret to putting the power back into your hands: dividing up your paycheck. By making active decisions with your money and controlling the flow of it, you put yourself in charge. Your money will stop slipping through your hands when you decide exactly how you’ll be spending every penny.

What Does Dividing Up Your Money Mean?

If money is a tool that you use, what is the purpose of that tool? I mean, what are you using your money for?

That’s the first question to answer as you go about getting a handle on your finances. What are you trying to do with your money?

Maybe you want to start investing or pay off debt. Maybe you want to travel or save for a down payment on a house. The goal is your decision to make. But you have to make one.

When I first started getting serious about learning about money, all of my paycheck went to supporting my lifestyle. I was a low income earner, but I also had no clear goal for my money. I wanted to have money, but I didn’t know the first thing about what to do with it. Money wasn’t something I used; it was more something that happened to me twice a month. My relationship with money was confused and uninformed, and it was causing my life to stagnate.

My breakthrough came when I decided to pay off my student loan debt. Crystallizing that goal gave me clarity and control over my money. Instead of letting my extra cash disappear at Target or happy hours, I knew I needed to redirect it to my debt.

Dividing up your paycheck means that you start deliberately putting money toward financial goals and responsibilities that you have. You’ve got to pay rent and put food on the table after all!

Where to Start

Step One: Goals

As I mentioned above, my breakthrough came when I got clear on what my biggest financial goal was. So that’s where I recommend you start. Ask yourself what your short- and long-term financial goals are.

Now, dividing up your paycheck isn’t just about goals. Make sure to know what your living expenses are. For example, you need to allocate money to rent, food, transportation and health insurance each month.

This process is pretty crucial to success. Humans are much more motivated to do things when we understand what we’re working toward and how far away the finish line is. Since we can’t walk away from our day-to-day lives as we pursue a goal, understanding what our daily life costs also helps us when it comes to chopping up that paycheck.

Step Two: Budget

After you set your goals and your life expenses, come up with a number to attach to them. If you want to pay off your debt, you need to know how much debt you have in total. If it costs you $1,500 a month to pay all your bills, you know you need to keep that much on hand to live.

You can put all these numbers into your budget.

Step Three: Helpful Tools

Find tools to help you achieve your goals and hit those numbers. This is the action step!

Once you have hard numbers to work with, it’s all about dividing up your paycheck to service each of those numbers.

If you have a stable monthly income, this part should be painless. Take each big-picture goal and expense you have and divide it by 12. That’s the amount you need each month to save or use for monthly expenses.

Then take your monthly income and divide it among the expenses. $700 for rent, $150 for insurance, $100 for investing, etc.

There are tools to help you with this step. For example, Betterment is a robo advisor that you can use to start investing. And if you're an iOS user, with Unifimoney you can have all of your finances in one place, including your cash and investing accounts.

*Editorial Note: This offer is no longer available. Please visit the Unifimoney website for current terms.


Let’s say that you want to start allocating $100 a month to investing. Betterment allows for automatic deposits, so you can set it up to have $100 invested automatically.

Automatic deposits are a handy tool to use to divide up your paycheck in general. Your bank probably offers it, so you can use it to build up your emergency fund as well. I used autopayments when I was paying off my student loan debt, and it was great. I scored a 0.25% interest rate reduction, and the burden of manually making payments each month was lifted.

I also recommend getting several different savings accounts to help you divide up your paycheck. You can have one for travel, one for an emergency fund, one for your pet and one for your car maintenance. With different accounts allocated toward different things, it’s easier to save in general. You can see how much you’ve got saved for a specific goal and how much farther there is to go.

Irregular Income

Now, for those with irregular income, things are slightly different. You’ll follow the same path, but you need to be more flexible about hitting goals. Fluctuating income is a tricky beast.

Always start with the essentials. Spend on the things that you need to live on. From there, allocate money toward things like savings buffers, so that in slow months you don’t need to go into debt.

If you find that you are consistently not hitting your goals, look into how you can earn more money.

Dividing your paycheck is a smart way to take back control of your spending and start moving toward big picture goals you have. Money is something that you control, not the other way around. By having clear action-oriented goals and a thorough understanding of what you use money for, you’ll find it easy to divide up your paycheck.

Kara Perez

Kara Perez is a freelance personal finance writer. She is the founder of bravelygo.co, a company that connects women and money. Kara lives in Austin, TX and believes in the power of budgeting and peanut butter.

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  1. It’s nice to see someone stepping away from the cookie-cutter savings plan & into the real world. I’m debt free but mortgage & curious to your thoughts on paying off mortgage early vs saving/investing more with the extra money each month.

    1. I think it depends on your priorities as well as your interest rate. I personally am all about getting out of all debt asap. But if your interest rate is low, you would likely get a better return through investing than throwing all your extra money to the mortgage. It’s all about balance!

  2. Thanks for this write up. Personally, I would invest 30%, save 30% and spend 30%. The remaining 10% is for my tithes. It’s a simple formula but it works!

  3. It varies month to month. But basically I save everything that isn’t spent on my bills for that month. I don’t have a set amount. I’m also not one to spend money on things, just because so I don’t really utilize a budget. It fluctuates a lot month to month depending on if I’m booking travel, or have a wedding, or traveling for work so I don’t have to pay for food.

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