In the age of social media stock tips and cryptocurrency FOMO, it’s easy to believe that investing is the first step to financial success. But let’s pump the brakes for a second.
Before you can grow wealth, you need something to grow — and that means saving. You can’t invest money you don’t have. That’s why building a strong financial foundation starts with learning how to save first.
The 75/15/10 Rule: A Simple Money Plan
One popular budgeting framework is the 75/15/10 rule:
- 75% of your income goes to living expenses (housing, food, transportation, etc.)
- 15% goes into savings
- 10% goes toward investments
This formula gives you room to cover your needs, build a safety net, and slowly start building wealth — in that order.
Step 1: Build Your Savings Buffer
Before diving into stocks, ETFs, or real estate, your first financial goal should be to build an emergency fund. This is money you don’t invest — it’s your financial safety net in case of job loss, medical bills, car repairs, or other unexpected life events.
How much should you save? That depends on your comfort level:
- 3 months of living expenses is a good starting point.
- 6 months offers solid protection.
- 12 months gives you maximum peace of mind, especially if your income is irregular or you have dependents.
Until you hit your emergency fund goal, direct all 25% (the 15% savings + 10% investing portions) into your savings account. Once you’ve hit that benchmark, you can start shifting the 10% into actual investments while maintaining the 15% savings rate for future needs or big-ticket goals (like a home down payment or vacation fund).
Why Not Skip Ahead and Invest Right Away?
Some people think they’ll just invest now and dip into that money if an emergency comes up. But this strategy is risky:
- Investments aren’t liquid – You may not be able to sell at the right time without taking a loss.
- Markets fluctuate – Your portfolio might be down when you need the cash most.
- Emergencies don’t wait – If you need quick cash and it’s all tied up in the market, you’re stuck.
Start Small, Stay Consistent
Getting started can feel overwhelming, but it doesn’t have to be complicated. Start by tracking your expenses and adjusting your spending so you can hit that 15% savings target consistently. Even if you can’t save or invest the full percentages right away, getting into the habit matters more than the amount. You can always scale up over time.
Final Thoughts
Investing is a powerful wealth-building tool — but it’s not the first step. A smart financial journey starts with saving, because without a cushion, every investment comes with extra risk.
Build your emergency fund first. Use the 75/15/10 rule as your roadmap. Then, once you’re financially secure, you’ll be ready to invest with confidence — and stay invested for the long term.
