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% savings. Here, we profile this easy-to-follow budgeting plan.
50% Of Your Income: Your Needs
Needs are the things you have to pay for, like rent or a mortgage payment. 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
It would be best if you spent about half of what you earn on needs. 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 and 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 in return is saving your money.
I’m a licensed financial professional. I’ve sold annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.
My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you.