We all know the struggle of meeting our financial goals every month. It can seem nearly impossible. Did you know most of us don’t even have an emergency fund set up?
That means if any family emergency happens, there’s nothing you can do, and nobody wants that.
50 30 20 Budget
But how are we supposed to build up our savings account when half the time we’re just trying to make ends meet and stop our bank account from going under a zero balance.
What if I told you there was a completely free and easy way to get your finances back on track, pay off your credit card debt, and have extra money left over?
Do you know what it is? It’s the 50/30/20 budget. This popular budgeting rule has saved many from their debt and helped them improve their financial health.
Most budgeting methods can be over complicated and hard to follow, causing you not to keep up with them and may make your savings goals seem even farther away. But that’s not the case with the 50/30/20 rule.
After today, you’ll know all about this budget plan and how to use it. It’s so easy anyone can do it to strengthen your finances.
Another saving method that works wonders is the cash envelope method to learn more check out:
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How It Works
The 50/ 30 20 rule is the budgeting strategy where you spend:
- 50 percent of your monthly income or take-home pay after taxes on your essentials, must-haves, and utility bills such as health insurance and phone bills
- 30 percent on things you want and like, this could be new shoes, a videogame or a night out.
- Then you can spend the last 20 percent on student loans, debt repayment, retirement accounts, savings, etc…
This looks different for each person using this budgeting method since everyone’s wants and needs are entirely different. For example, some people may put their gym memberships in the essential expenses, while others may put this in their wants category.
Just remember to be realistic with your financial situation and what the most significant monthly expenses you have are. This will help determine your financial plan.
The most straightforward way to get started with this budgeting method is to figure out your household income after taxes every month. You can look through your checking account if you’re unsure about the exact amount, if you have access to your pay stubs, that’s even better.
After you find out how much your monthly net income is, take 50 percent of that and this money will only be used for bills and things you can’t live without, such as car payments.
If you add all your must-have expenses and bills up and you don’t make enough to cover them, see what you can cut. Like we said before, you have to be realistic with your cost of living. If that means you need to put your Netflix subscription in the wants category and not the needs, that’s what you need to do.
The remaining 50 percent is then split up into 30 and 20 percent part of this budget. The 30 percent is the amount of money you spend on your unnecessary expenses.
To figure out what goes in this category you can start going through your past transactions. This category can add up fast, so be cautious not to exceed your limit.
The last 20 percent is to build up your retirement savings and/or any other savings. But, you can also add up all your loans and debt, as well.
More than likely you won’t be able to put all of your debts and loans in this category. The best way to deal with this is to start paying off the most important ones first by setting up a payment plan and paying the minimum or more (if you can) payments required.
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How To Stick With It
Make Changes When Needed
Your finances can change regularly. How much you were spending in one category may be higher or lower than the previous month. This can be caused by switching your phone company or eating out less, whatever it may be; if your finances are changing, so should your budget and where you put your money.
Keep Track Of Your Spending
Knowing where your money is going is always a good thing, especially if you’re working with a budget. By knowing what you and your family are spending your money on, you can determine if you need to make changes.
If you’re spending too much in one category, such as food and clothes you can make changes. Once you’re able to see it in front of you n paper – it makes it more clear and you can make the necessary changes going forward.
This can help you cut down what you put in the 30 percent category.
You can use a budget tracker or monthly budget worksheet to track how much you spend in each of your spending categories.
We’ve made it super simple for you with this free printable <— click here to print:
FAQ: 50 30 20 Budget
Q: What does the 50 20 30 rule mean?
Answer: The 50 20 30 rule is a type of budget. This type of budget is used to split up your monthly income into three categories: wants, needs, and savings/debt and help you get your finances in a better place.
Q: How does the 50 20 30 rule distribute your income?
Answer: For this budget, the 50 20 30 rule distributes your income by you taking 50 percent of your income after taxes and spend that on your needs, such as bills, 20 percent on savings/debt, and 30 percent on your wants. Don’t forget to keep track of your budget in a budget planner or calendar.
Q: Is the 50 30 20 rule weekly or monthly?
Answer: A common question asked: is the 50 30 20 rule weekly or monthly. The answer is that it’s monthly. This is because it’s easier to split your monthly checks up than it is to do weekly. Plus, more people get paid every other week instead of weekly.
Q: Which budget rule is best?
Answer: For which budget rule is the best? Many say the 50 30 20 rule works the best for them this is because it’s so easy to follow.
Q: Why is the 50 20 30 rule easy for people to follow?
Answer: The 50 20 30 rule is easy to follow because all you need to do to get started is calculate your monthly income after taxes and divide that into 50, 20, and 30 percent, 50 for needs, 30 for wants, and 20 for savings/debt.
Have you ever used the 50/30/20 budgeting system before? How did it work for you?
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