You don’t need to earn six figures to build real wealth, you just need a solid system. After spending over a decade in investment banking, I’ve had a front-row seat to how the wealthiest 1% manage their money. The great news? Their strategies are surprisingly simple and scalable.
One of the key methods I’ve noticed is the 15-65-20 rule, a straightforward money management formula that balances savings, spending, and investment. This approach is perfect for anyone wondering how to manage your money smarter and build lasting financial security, no matter your income level. Ready to learn how the top 1% make their money work for them? Let’s dive in.
15%, Pay Yourself First
When it comes to how to manage your money like the top 1%, the first step is to pay yourself before anything else. Setting aside 15% of your income for savings and investments is the foundation of financial security.
Why Save 15% of Your Income?
- Peace of Mind:
Start by building an emergency fund covering at least one month of essential expenses. Over time, aim to save 3 to 6 months’ worth to protect yourself from unexpected financial hits. - Wealth Building:
Thanks to compound interest, the earlier you start saving, the more your money grows, it’s about time working for you, not just the amount you invest.
Example: The Power of Compound Growth
- Janet invests $10,000 at age 30 and it grows to $32,000 by age 50.
- Mike invests $20,000 at age 40, but it only grows to about $28,000 by age 50.
The takeaway? Starting early, even with less money, beats trying to catch up later.
Where to Save & Invest That 15%
Mastering how to manage your money isn’t just about saving, it’s about where you put that money to work. Here’s how the top 1% handle their 15% savings and investments:
- Start with Workplace Retirement Plans:
Contribute to your 401(k), UK pension scheme, or similar employer-sponsored plans. Always max out the employer match, it’s essentially free money that boosts your savings instantly. - Use Tax-Advantaged Accounts:
These accounts help your investments grow faster by minimizing taxes. Some popular options include:- US: Roth IRA, contributions grow tax-free and withdrawals in retirement are tax-free.
- UK: Stocks & Shares ISA, enjoy tax-free growth on investments within this account.
- Keep It Simple with Passive Index Funds:
Instead of chasing individual stocks, focus on broad market ETFs (exchange-traded funds) with low fees and high diversification. This “set it and forget it” strategy has been a winning formula for many wealthy investors.
65%, Cover Your Essentials (But Keep Them In Check)
A crucial part of learning how to manage your money like the top 1% is keeping your core lifestyle expenses within 65% of your income. This means covering your essentials, but not letting them spiral out of control.
What Falls Under Essentials?
- Rent or mortgage payments
- Utilities and groceries
- Transportation costs (gas, public transit, car payments)
- Basic insurance and medical expenses
Why This Part Is Tricky
- Lifestyle creep sneaks up fast, suddenly that “necessary” new car or bigger apartment blows your budget.
- As your income grows, expenses often grow right along with it, unless you actively stop them.
- Housing and transportation are usually the biggest spending categories, so these areas deserve extra attention.
Optimization Tips
- Shop around for cheaper utilities, internet, and insurance to cut recurring costs.
- Consider creative solutions like house hacking or renting out space on Airbnb to offset rent.
- Use public transportation instead of owning a car whenever possible to save big.
- Regularly audit your spending and don’t be afraid to renegotiate big bills like rent or insurance.
20%, Spend Guilt-Free on Joy and Fulfillment
Learning how to manage your money like the top 1% isn’t just about saving and cutting costs, it’s also about making room for joy. Burning out on a strict budget is real, and that’s why dedicating 20% of your income to fun and fulfillment is essential for long-term success.
What to Use This For:
- Vacations, fine dining, and hobbies that recharge you
- New clothes, gadgets, or tech upgrades
- Fun experiences and self-care routines that keep your spirits high
Why This Matters:
- It helps prevent “frugal fatigue” and resentment toward your budget.
- Sticking to your money plan becomes easier when you know you can enjoy life along the way.
- You get to enjoy your wealth while you build it, creating balance and motivation.
Reframe This 20%:
Think of this portion not as an indulgence but as an investment in your happiness. Happier people tend to be more productive, disciplined, and motivated, all qualities that help build wealth.
Recap: The 15-65-20 Rule in Action
| Category | % of Income | Purpose |
| Pay Yourself First | 15% | Building your emergency fund and investing for the future |
| Core Essentials | 65% | Covering rent, food, transportation, and bills |
| Enjoyment & Fun | 20% | Spending guilt-free on lifestyle and personal happiness |
This simple formula makes mastering how to manage your money approachable, balanced, and effective, no matter your income level.
Final Thoughts: Master Your Money, No Matter Your Income
- It’s not about making more, it’s about managing better with what you have.
- Automate your savings and simplify your investments to stay consistent without stress.
- Set clear limits and intentionally allocate your money to avoid overspending.
- Don’t forget to make space for fun, enjoying life now doesn’t have to sabotage your future.
Frequently Asked Questions:
What is the 15-65-20 rule in money management?
It’s a budgeting method: 15% for saving/investing, 65% for needs and living expenses, and 20% for wants or lifestyle spending.
How does the 15-65-20 rule help build wealth like the top 1%?
It prioritizes consistent saving and smart spending, allowing long-term wealth growth without sacrificing essentials or enjoyment.
Is the 15-65-20 rule better than the 50-30-20 rule?
Yes, for high earners or ambitious savers, it boosts savings and investment potential while still covering needs and wants.
