Budgeting can be very scary and overwhelming for a lot of people believe me you are not alone. Thanks to Senator Elizabeth Warren and her daughter Amelia Warren Tyagi for their book All Your Worth: The Ultimate Lifetime Money Plan. This book made the 50/20/30 rule for budgeting your money a very popular method.
Explaining the 50/20/30 rule and much more in the book. Their book has sold millions of copies since it was release in 2012.
What is it
The 50/20/30 rule is a way to budget your money by separating it into 3 sections after taxes are taking out. 50% of your check after taxes should go to your needs. 20% of it should go towards your saving and finally 30% should go to wants.
By needs I mean bills, important necessary bills. Some Examples of NEEDS are:
- Utility bills
- Health Insurance
- House note/Rent
- Car payments & insurance
- Things like that
However Netflix, cable, etc those things are wants not needs. A Need is something that you cant really live without. You need lights, a car, food, etc. Those are all NEEDS.
Put 20% of your money away. Split it up put some in your saving account, some towards retirement and etc.
A little tip try and have at least 6 months worth of your bill money saved up. You never know when something will happen and you always want to be prepared no matter what..
This is where your wants come in. This is more for your entertainment purposes.
- Going out
This is a quick example. After taxes you have $2,500 for the month go ahead and take 50% out for your needs (House note/rent, utilities, etc). So you are left with $1250 for your wants and saving. You take 30% out of the $1,250 for your wants (going out, Netflix, etc) which gives you $875 to spend. Finally you are left with 20% which is $375 to go towards saving.
That’s just one example everyone’s story is different. Maybe you have high rent, see if you can find somewhere cheaper. Maybe instead of 30% going towards your wants make it 20% and add that other 10% to your needs. Play with it adjust it to see what works for you. What works for soe may not work for others.