Saving vs. Investing – Which Is Better & How To Find A Balance

In the beginning, there was no question about saving vs. investing, I couldn’t do either. This was around 2010.

The more I got frustrated with my situation, my desire to learn more about personal finance grew. I started putting more time and work into reviewing my money situation often and making small changes towards it.

I started to put money towards saving, I still remember how I first did it. I had a white envelope where I would put $20 at a time, and write down the day I did it on the front of the envelope.

Times would be tough and i’d have to pull from there too, a big nono, but where else could I get the money?

Like all things, as I put more focus towards my money, my personal finance muscles grew. I was able to save consistently, and not take money out of it if needed.

First, it was all about saving for my emergency fund. When I passed my 1-month mark (1-month of monthly expenses saved), I kept going.

As I started passing the 2nd and 3rd months in my emergency fund goal, I started to look at my investments. Pretty much nothing.

This is now around 2013, and I was in my mid-20s. The first thing I did to start my investment movement was a ROTH IRA. I was working for myself, so I chose to set up this account first.

Every month, whatever money I had leftover, 75% would still go towards saving, and 25% would go towards investing.

As the years went on, the next thing to happen was predictible income. I was doing better in my work, and was able to have pretty consistent income, which helped me more systematically put away money towards saving & investing.

Nowadays, it’s like a machine. I easily put money away towards my saving and investing goals because it’s been just over a decade since I’ve started building this habit.

I now have multiple savings goals and investment goals, and the money that I have every month gets split and passed on to each goal. It’s beautiful.

I hope that you’re somewhere in this journey, and that this post helps you see my perspective, and get some ideas on what you can do to tweak your saving vs. investment goals.

Remember that you need to log everything down, ideally monthly. Since day 1, I’ve been doing this on my computer, using a spreadsheet. I haven’t changed it since, and you can get my exact spreadsheet for yourself, free.

Examples of saving

It’s helpful to see what different types of savings goals I had over the years, maybe it will give you some ideas.

I’ve saved for:

  • 💵 Emergency fund – Start by saving up 1 month of expenses, and then build up to 1 year over time.
  • 🏡 A new house – Ideally you want to save for the down payment here. The monthly mortgage you pay should account for only 25% or less of your monthly income (a good way to see if you can afford it, or will go house broke).
  • 🚗 A new car – Just putting whatever I could aside towards a new car. Here’s a pro tip. Once we paid off a car, I would take that ~$300 monthly payment and put that in a new saving fund for a future car.
  • 🏝 Vacations – Over time, I can ballpark that each big trip that the family takes is about $4k. I’ll put $100 a month or whatever I can towards this goal.
  • 👶🏽 Baby – When we found out we were expecting, I started a baby saving fund and put money towards hospital fees and normal costs like diapers and clothes.
  • 🏚 Home Repair – If you own a house, you can bet things will break, even if you have a new house. Putting money aside monthly for AC repair and a new microwave meant no stress when it happened.

Example of investing

I had already mentioned that a ROTH IRA was the first investment I have ever started, here are some more that I’ve opened over the years.

  • 💰 Traditional brokerage account – Your typical investment account that you can open anywhere (TD Ameritrade, Fidelity, Etrade, etc.)
  • 👴🏼 ROTH IRA – Just wanted to add this here to complete my list. Any money I put in here, I had the understanding that I wouldn’t touch until retirement.
  • 👨🏻‍⚕️ HSA – Called a health saving account. You can invest money as you’d normally do, the growth isn’t taxed, and you can only use the money from this account towards health expenses (doctor visits, medication, surgery, etc.). Everyone gets old, so I thought it was smart to plan ahead.
  • 💸 SEP IRA – A great option if you work for yourself, this is my equivalent of a 401k.

Let’s create a unique character for this post

Let’s say you’re 28 years old, married, and making $60k a year. Combined with your spouse, you both make $100k (spouse makes $40k).

This bit of detail will be helpful for me to share real-life examples based on that situation.

Also, for this example to keep things clean I won’t take note of taxes.

So you’re 28, and you and your spouse earn $100k (let’s say after taxes) per year. You’ve been married for 3 years, currently rent, and have no kids.

You both have been talking about buying a house soon, you’ve been living in the college side of town, and want to get away to a calmer area in the city.

You both are employed by a large company, where they provide a 401k and match your contributions.

Sounds like a good bit of details right? Let’s move forward.

How much of your income should go towards each

Let’s clean things up, that $100k a year means $8,333 a month is your take home. Well done! Making money is the first step in financial freedom, keeping it is the second.

Let’s look at your currently (made up) monthly expenses:

  • Rent – $1,246/mo (15% of total)
  • Car payments – $647/mo for 2 cars (8% of total)
  • Credit card bills (food, gas, phone bills, car insurance, etc.) – $2,247 this past month (27% this month)
  • Utilities – $279 this past month (3% this month)
  • Current saving – $1,000/mo (12% of total)
  • Current investing – $1,000/mo (12% of total)

Leftover income this month: $1,914

Note: I bundle almost everything possible, like car insurance, into my credit card. The only things that usually can’t be added are utility bills, car payments, and rent/mortgage. In this example, this couple is doing the same.

This month looked great, there was still almost $2k leftover after all expenses to do things. I’m sure I might have missed some details here like healthcare (what if it’s covered by one of their companies 🤔 ), but I just wanted to create a story to go along with.

When you should save more

Doesn’t matter if you’re making $100k as a couple, if you don’t have a decent emergency fund and some other money set aside for other goals, then you need to start saving right away.

I’d advise that you always start your path to personal finance growth by saving money for some months until it becomes routine, and you have some money set aside.

How much should you have set aside? Well the most simple one is to have a minimum of at least 3 months worth of expenses saved in your emergency fund.

The ultimate goal is to get to a 1 year emergency fund, but that can be a goal spread out over a few years. Anything over that and you can consider if investing might be a better way to grow your money.

Again, this is made up, but let’s say this is how our couple is currently standing:

  • Emergency fund – $7,295
  • Future house fund – $4,298
  • Spouse 1 ROTH IRA – $4,294
  • Spouse 2 ROTH IRA – $3,498
  • Traditional brokerage account – $2,298

Current savings are: $11,593

Current investments are: $10,090

Specifically here, we want to look at the emergency fund. From the past example, I combined all the monthly expenses, which equal to $4,419.

This means that this couple has almost 3 months of monthly expenses saved in their emergency fund. Good job!

When you should invest more

When you have enough money saved to cover yourself for a few months if anything should happen, then you’re ready to invest even more. Our couple has just about 3 months saved, this is around the same time that I myself started investing more and saving more modestly.

This couple example had a 50/50 saving and investing allocation, it wouldn’t be bad at all to make this 30/70 to invest more aggressively.

Let me briefly share my personal story. As I said earlier, I started saving in 2013, making it a habit to put a decent bit of money, around 10%, towards savings goals.

Once I started doing that for 6-7 months, I started looking at ways to cut any costs that I had, so I could not only take some of that 10% towards investing, but find a way to make it even higher.

It took some time, but at the end of 2014, I was able to put 20% of our income towards saving/investing. Of that portion, I had 3-4 months of money in the emergency fund, so 60% of that total pot was now going to investing.

From a 1-10, 10 being the highest, I am a solid 4 in risk tolerance. I can’t stand being stressed out, especially with money. I’m okay growing slow, I just can’t take steps backward.

Saying that, I didnt down my savings to something low like 10%, and invest 90%. I felt that 60%, and eventually about 70% in 2015, was a good balance. I was able to keep saving more and more over time, while still making sure that I was investing.

What’s your risk tolerance? It’s really good to reflect and think about what you’d be from 1-10, and keep that number in mind over the years, to see how life changes that.

For me, I feel like I’ve always been a 4, and might stay that way for some time longer. Going through life, having the need to have more money saved in the emergency fund, I take modest risk for modest returns.

For this couple example, they’re fairly young with no children and chose to invest more aggressively, because after talking it over they found that both are a 7 out of 10 in risk tolerance.

In the earlier example the couple was..

  • Saving $1,000 a month
  • Investing $1,000 a month

Now that will be more like..

  • Saving $300 a month
  • Investing $1,700 a month


This post was meant to show the importance of both saving and investing, I would say both should be a required part of your monthly allocation.

The goal here was to create a story (and share my own personal story) on how a couple could review their current standings as far as expenses, savings, and investments, and make adjustments based on how much risk they’d like to take, and have a better financial future.

Comment below and tell me what your current risk tolerance number is, and what percentage of your monthly income goes towards saving and investing.

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