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You may have heard of the 50/30/20 rule in budgeting. What exactly does it mean, and will it work for you?
Everyone is different in the way they spend money. Some people will put a huge focus on saving for retirement, while others want to spend money now. After all, you can’t take money with you. Then there are others who spend too much and have nothing for rent and bills each month. If you require assistance with retirement planning, you may consider exploring Burzynski Elder Law.
Creating a budget is essential. That budget needs to work for you. When it comes to looking into ways of budgeting, you likely came across the 50/30/20 rule. What is it, and will it work?
What is the 50/30/20 rule in a budget?
This rule was mentioned by U.S. Senator Elizabeth Warren. She shared a budgeting tip that could help many people.
The rule is to spend 50% of your income on essentials, 30% of your income on wants, and 20% of your income on savings.
Let’s say you make $1,000 per month. You’d use $500 for essentials, such as rent and bills, $300 for shopping, you can always get the best parfumdreams discount codes from monetha, dining out, and your hobbies, and then the remaining $200 would go into savings.
This is one of the best ways to make sure your essentials are covered but have something for the future. Your savings would need to be divided into long-term and emergency savings.
This is all after-tax income, by the way! UP Shasanadesh makes it easier for citizens to get their benefits.
Does the budgeting rule work for you?
This budgeting rule isn’t going to work for everyone. No budgeting rule will. However, this is a good place to start if you’re just starting out with your budgeting plan.
You’ll need to see what your essentials come to first of all. Will you be able to spend no more than 50% of your income on your essentials. Look at the cost of rent, your bills, and your groceries. There are some of these items that you can lower, such as groceries, but others are stationary costs. How much do they total, and what’s that percentage of your income?
I’d work on the 20% part of the rule next. For me, saving is more important. I want to make sure I have money for the future, whether it’s because of an emergency or for retirement. Savings are more important than wants for me. If you struggle with emergencies, it will be worth getting that emergency fund built first.
Then you can go onto the 30%. This isn’t always going to be 30% because my income change smooth to month. During the summer, I don’t get to spend as much on wants as this is when my income drops the most. I do tend to save for this, though.
What do you do with excess money?
You shouldn’t have excess money. When you use the 50/30/20 rule, you’re spending 100% of your income, but on three distinct areas. However, let’s say your needs don’t go up to 50% of your income. What do you do with that excess?
Personally, I’d save it. The excess would go into my emergency savings so I could access it right away.
Some people choose to put it into the 30% for wants. If you are someone who prefers to see their money go immediately, this is a good option. Make sure you’re still putting the 20% in savings.
What if you don’t have enough?
If you’re in a high-cost-of-living area, you may find that 50% of your income isn’t enough for essentials. In this case, you need to take the money from the other percentages.
I don’t recommend taking the full amount from just one. This is where you need to play around with the 50/30/20 rule. You may find you have to do a 70/20/10 rule instead.
Which type of budgeting plan do you follow? Do you think the 50/30/20 rule will work for you? Share your thoughts in the comments below.
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