Ever look at your paycheck and wonder how you’re supposed to save, invest for retirement and cover essentials — all at the same time? There’s no one-size-fits-all formula but the best approach is usually the one that feels realistic enough to actually stick with.
For CFP Cary Carbonaro, a managing advisor at Ashton Thomas Private Wealth, balancing savings, spending and investing often comes down to what she calls the “1/3 rule.” She explains that after covering your bills, what’s left over — your discretionary income — can be divided into “a third, a third and a third” for saving, spending and investing.
While it’s not a hard-and-fast rule, Carbonaro says this approach helps people create structure without feeling restricted and ensures no priority gets overlooked. Here’s how to put the 1/3 rule into practice with your own finances.
What’s the 1/3 rule?
The 1/3 rule is a simple way to think about dividing the money you have left after paying your bills. You split that leftover amount into three parts: 1/3 for saving, 1/3 for spending and 1/3 for investing. It’s not a strict formula, but more of a flexible guideline to help you balance your financial goals without feeling overwhelmed.
For example, the savings portion might go toward building an emergency fund or saving up for a short-term goal like a vacation or a new laptop. The investing portion usually includes long-term goals such as contributing to a retirement account like a 401(k) or IRA, or investing in a brokerage account for future growth. The spending portion covers everyday expenses or fun purchases.
Depending on your situation, you might adjust the percentages. If you’re focusing on paying down debt, you might reduce the investing portion temporarily. Or if you already have a solid emergency fund, you could increase investing and spending. The key is to find a balance that fits your priorities and cash flow.
Accounts to use with the 1/3 rule
To put the 1/3 rule into action, pairing each bucket with the right account or product also makes a big difference:
Savings
A high-yield savings account is ideal for building your emergency fund or saving for short-term goals. Plus, you’d earn higher interest than with traditional savings accounts.
Marcus by Goldman Sachs High Yield Online Savings
Goldman Sachs Bank USA is a Member FDIC.
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Annual Percentage Yield (APY)
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Minimum balance
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Monthly fee
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Maximum transactions
At this time, there is no limit to the number of withdrawals or transfers you can make from your online savings account
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Excessive transactions fee
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Overdraft fee
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Offer checking account?
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Offer ATM card?
Pros
- Strong APY
- No minimum balance or deposit
- No monthly fees
- No limit on withdrawals or transfers
- Easy-to-use mobile banking app
- Offers no-fee personal loans
Cons
- Higher APYs offered elsewhere
- No option to add a checking account
- No ATM access
The EverBank Performance Savings offers one of the most competitive APYs to maximize your earnings and it also has no minimum balance requirements or monthly fees.
EverBank Performance℠ Savings
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Annual Percentage Yield (APY)
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Minimum balance
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Monthly fee
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Maximum transactions
You may conduct up to 20 external transfers per day, subject to a maximum of 10 transfers that pull deposit funds from a linked external account into your accounts at EverBank and a maximum of 10 transfers that send deposit funds from your accounts at EverBank to a linked external account, and up to 50 total external transfers per month.
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Excessive transactions fee
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Overdraft fees
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Offer checking account?
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Offer ATM card?
Pros
- Strong APY
- No minimum balance required
- No monthly fees
- Free ATM card and no ATM fees
Cons
- No physical branch locations
Spending
When it comes to spending, it’s important to have a clear idea of where your money is going so you can accurately allocate funds toward your spending bucket. Expense tracker apps can be a big help here.
For those who prefer zero-based budgeting, You Need a Budget (YNAB) helps assign every dollar a job, syncs with your bank and credit accounts and offers tools to set saving and debt goals. Monarch also offers a clear overview by linking all your accounts, categorizing spending, tracking net worth and letting you set and monitor financial goals.
You Need a Budget (YNAB)
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Cost
34-day free trial then $109 per year ($9.08 per month) or $14.99 per month (college students who provide proof of enrollment get 12 months free)
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Standout features
Instead of using traditional budgeting buckets, users allocate every dollar they earn to something (known as the “zero-based budgeting system” where no dollar is unaccounted for). Every dollar is assigned a “job,” whether it’s to go toward bills, savings, investments, etc.
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Categorizes your expenses
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Links to accounts
Yes, bank and credit cards
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Availability
Offered in both the App Store (for iOS) and on Google Play (for Android)
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Security features
Encrypted data, accredited data centers, third-party audits and more
Pros
- Offers a 34-day free trial, and college students get 12 months free
- Designed to help you get out of debt
- YNAB website claims average user saves $600 in their first two months and $6,000 in their first year
- Syncs to your bank accounts and credit cards
- Users can set goals, customize spending categories
- Offers educational resources, such as budgeting advice and free, live workshops
- Personal customer support
- Security features include encrypted data, accredited data centers, third-party audits and more
Cons
- Costs $109 per year or $14.99 per month
- Customer reviews note that it takes longer to set up than other apps
Monarch
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Cost
$8.33/month (billed $99.99 annually); $14.99/month (billed monthly) – get 50% off your first year with code CNBC50
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Free trial
7-day free trial is available before subscribing
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Standout features
Net worth tracker, investment portfolio tracking, goal creation and progress tracking, budgeting and expense tracking
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Categorizes your expenses
Yes, but users can modify
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Links to accounts
Yes, bank and credit cards, as well as IRAs, 401(k)s, mortgages and loans
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Availability
Offered in both the App Store (for iOS) and on Google Play (for Android); web version also offered
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Security features
Utilizes industry-leading security practices, according to Monarch’s website
Pros
- Easy-to-navigate money-tracking dashboard, including a net-worth tracker
- Easily syncs to your bank, credit cards and other financial accounts
- Users can add collaborators for free
- Seven-day free trial
Cons
- Subscription is pricier than competitors
- Recommendations in the “advice” tab are generic
Investing
If you’re focused solely on your employer’s 401(k), it’s important not to miss out on the employer match if it’s offered. That’s essentially free money that helps your savings grow faster. If you’re also looking to invest beyond your 401(k), like an IRA or brokerage account, trusted platforms like Fidelity and Charles Schwab offer low-cost, user-friendly options with a wide range of investment choices and helpful tools to build a diversified portfolio aligned with your long-term goals.
Fidelity Investments
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go® account, but minimum $10 balance for robo-advisor to start investing
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Fees
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go® has no advisory fees for balances under $25,000 (0.35% per year for balances of $25,000 and over and this includes access to unlimited 1-on-1 coaching calls from a Fidelity advisor)
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Bonus
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Investment vehicles
Robo-advisor: Fidelity Go® IRA: Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA®
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Investment options
Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares
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Educational resources
Extensive tools and industry-leading, in-depth research from 20-plus independent providers
Pros
- No commission fees for stock, ETF, options trades
- No transaction fees for over 3,400 mutual funds
- Limited-time special offers
- Abundant educational tools and resources
- 24/7 customer service
- Over 100 brick-and-mortar branches across the U.S. for face-to-face support
Cons
- Fidelity Go® has a 0.35% advisory fee per year for balances of $25,000 and over
- Some of Fidelity’s mutual funds require reaching specific thresholds
- Reports of platform outages during heavy trading days
Charles Schwab
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit
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Fees
Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract
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Bonus
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Investment vehicles
Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™, Schwab Organization Account and Schwab Trading Powered by Ameritrade™
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Investment options
Stocks, bonds, mutual funds, CDs and ETFs
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Educational resources
Extensive retirement planning tools
Pros
- $0 minimum deposit for active investing
- No commission fees for stock and ETF trades and no transaction fees for over 4,000 mutual funds
- Offers extensive retirement planning tools
- Users can get on-demand advice from a professional advisor/Schwab expert
- Robo-advisor Schwab Intelligent Portfolios® available as a no-fee automated service option (with Premium version available for a fee)
- Award-winning thinkorswim® trading platforms and all their cutting-edge tools are now available at Schwab.
- 24/7 customer support access by phone or chat
- Charles Schwab offers over 300 brick-and-mortar branches across the U.S. for in-person support
Cons
- Specific transactions may require commission fee
- Robo-advisor Schwab Intelligent Portfolios Premium charges a one-time planning fee of $300, then a $30 per month advisory fee. For that price, you get unlimited 1:1 guidance from a CFP, interactive planning tools, plus a personalized roadmap for reaching your goals
How the 1/3 rule looks in practice
Let’s say you have $900 left each month after paying your essential bills. Using the 1/3 rule, you’d divide that money into three equal parts:
- $300 goes toward savings, such as building an emergency fund or saving for a short-term goal like a vacation
- $300 is for everyday spending — groceries, dining out or small treats
- $300 is for investing, like contributing to your 401(k), IRA or a brokerage account for long-term growth
Now imagine a different situation: You’re focused on paying off credit card debt and don’t have much in savings yet. Instead of investing the full 1/3, you might allocate:
- $400 to pay down debt aggressively,
- $300 to build a small emergency fund and
- $200 for spending on essentials
This way, the 1/3 rule is flexible enough to help you prioritize what matters most while keeping your finances balanced.
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