WVU blog

Last edited on 10-27-2015

The Law Of 10 Cents

The Law of 10 Cents states that you take 10 cents for every dollar you earn and put it away, in a retirement account such as a 401(k) and/or in a savings account.


When you get paid, you pay everyone else. The grocer, the retailers, the dry cleaners, the mortgage, the phone company, the gas and electric companies, and various insurance companies.

Have you ever asked: What about ME?!?

After all, you’re the one who is working. Shouldn’t you have something reserved just for you? It’s frustrating when you come to the end of the year, look at your W2 form, and ask “where’d it all go?”

The Law of 10 Cents gives you something to show for all your work.

Ten cents on the dollar may not seem like a whole lot. But think of what you’ve gained by squirreling away a little nest-egg:

1. The security of knowing you have extra cash should a true emergency arise.

2. Knowing you can live on less than your full income.

3. Once you start putting money away, it becomes an automatic habit. Over the years, you’ll save tens of thousands of dollars. Maybe more!

Most people understand the value in the Law of 10 Cents immediately. However, it’s not that they don’t want to start saving; they simply think that they can’t do it.

Big mistake.

Anyone who wants to do this can. Every excuse you can think of is a real concern, but none of them can hold you back if you don’t want them to do so. Excuses can be anything from “We need every penny we earn,” “I’m a single parent” and “My husband/wife would never agree” to “We have kids and can’t put anything away right now.” You might have your own favorite reason that is keeping you from putting money away now. Yet, if you wait until everything else is paid, you’ll never have money left over to be put away. The best way to make this happen is to take ten cents off every dollar BEFORE YOU DO ANYTHING ELSE. Hence the phrase ‘pay yourself first.’

Here’s how to make it happen:

1. Have the money taken directly off the top of your paycheck. Or,

2. As soon as you deposit your paycheck, put aside what’s yours in a separate account at the credit union.

3. If you’re not comfortable and don’t believe you can really live on 90 percent of your current income, do it as a trial for six months, or begin with a 5 percent or 3 percent and challenge yourself to increase it each month. During that time (and as long as you are motivated) you will find a way to make it happen.

If you truly can’t save 10 percent, perhaps because you’re aggressively paying off high-interest credit card or other debt, start with a lower percentage, perhaps 5 percent or even as little as 3 percent with the goal of eventually working up to 10 cents for every dollar earned.

Make the commitment to try it and stick with it, putting the money in a share account and/or 401(k) plan, starting with your upcoming paycheck.