The Golden Rule of Budgeting: 50/30/20

The 50/30/20 rule is a popular budgeting guideline that helps individuals allocate their income effectively. The rule suggests dividing your after-tax income into three categories: 50% for needs, 30% for wants, and 20% for savings and debt repayment. The “needs” category includes essential expenses such as housing, utilities, groceries, transportation, and healthcare. The “wants” category covers discretionary spending like dining out, entertainment, vacations, and shopping. Lastly, the “savings and debt repayment” category focuses on building an emergency fund, saving for retirement, paying off debts, and investing. By following the 50/30/20 rule, individuals can achieve a balanced financial plan, ensuring that their basic necessities are met, enjoying some discretionary spending, and making progress towards long-term financial goals.

• Pro-tip: Make the savings automatic so you don’t have to think about (or lessen ;)) the amount you save. Schedule a 20% withdrawal on each payday to a higher interest savings account. (Note: checking accounts pay lower rates on capital than savings accounts do. When opening savings account, do some research on which banks are providing the best rates or offers.)