Learn how to budget your income efficiently with the 50-30-20 rule strategy. Divide your income, 50% allocated to “needs”, 30% for “wants” and 20% in “savings”.
The 50-30-20 Budgeting Strategy
Created by Senator Elizabeth Warren, the basic rule is to divide up after-tax income, spend 50% of it on needs, 30% on wants, and put away 20% in savings. Here, we profile this easy-to-follow budgeting plan.
50% Of Your Income: Your Needs
Needs are the things you must pay for, like rent or a mortgage. They are the things that you need to live. Needs do not include extras.
- Rent or Mortgage
- Basic Utilities
- Insurance: Auto, Home, and Life Insurance
- Debt Payments
- Child Care
Spending about half of what you earn on needs would be best. If you are spending more, you can cut down on wants or try to live with a smaller home and car.
30% Of Your Income: Your Wants
Wants are things you spend money on that are not essential. This includes dinner, a movie, that new handbag, concert tickets, vacations, streaming services, or optional upgrades.
20% Of Your Income: Your Savings
Save 20% of the money you make. Please put it in a bank account and a retirement fund. Save three months’ worth of money for emergencies. Then think about other goals like making more money.
The savings bucket can also include debt repayment. If you have money left over, you should use it to repay the debt and save your money.
If you use the leftover money to consolidate payday loans into an affordable monthly payment plan. Use the money to make monthly payments on your consolidated payday loans. That will help you save money on interest. A smart money manager will use 50% of their income to fulfill their needs, like debt payments or savings, to clear debts.
The 50-30-20 rule is a great strategy for budgeting your income efficiently. By allocating 50% of your income to “needs,” 30% to “wants,” and 20% to “savings,” you will be able to make the most out of your money. This simple rule can help you stay on track with your finances and reach your financial goals. If you need help getting started, contact us for a quote. We would be happy to assist you in creating a budget that works for you.
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