Budgeting is unquestionably one of the best ways to fine-tune your personal finances and save for “rainy” days. But let’s face it; budgeting properly is one of those things that are easier said than done. That’s where 50/30/20 savings rule comes into the picture.
What’s 50-30-20 savings rule? How can it help you take your budgeting, investing, and overall personal financesto the next level? Hint: read on.
What’s 50/30/20 Savings Rule?
It’s always an excellent idea to stay on top of your personal budget and make sure that your hard-earned money goes to the best use. That’s exactly what 50-30-20 savings rule is all about.It’s a proven approach to creating an effective budget as well as buildingwealth.
A 50-30-20 savings rule is a simple approach to financial success, and perhaps one of the best self-improvement habits you can cultivate. It simply means take 50% of your income and allocate it for traditional living expenses such as utility bills, mortgage payment, rent, etc. The next 30% goes to spending on whatever makes you happy (holiday, dining outs, etc.). Of more importance, however, is that the biggest chunk of the remaining 20% goes directly to your savings, investments, and contingency fund.
In other words, half of your after-tax income should go towards your “must haves;” 20% toward investment and long-term savings; and the remaining 30% toward your “wants or desires.”
Benefits of 50/30/20 Savings Rule
It Works for Everyone and Every Budget
As far as 50-30-20 savings rule is concerned, one size doesn’t fit all when it comes to budgeting. No matter thesize of your income, you can make sure that your money caters to these threeaspects of personal finances: savings, essentials, and lifestyle spending. With this rule handy, you can set your personal finance goals and plan what to save in the next one, two or more years. Otherwise put, the rule makes budgeting more personalized and precise.
More Financial Freedom
People who use 50/30/20 watch every dime that comes their way. They focus on both short-term and long-term saving goals. Of course, when you build a nest egg, you will have more financial freedom in your later years.
Get out of debt
If you are looking to get lenders off your back, 50/30/20 savings rule is your best shot.
We all dream of an early retirement. When you heed to the 50/30/20, retiring early is not just feasible but also budgeted for.
Wrestling between lifestyle choices is a way of making savings. That’s where 50/30/20 comes in especially handy. It can help you live a wholesome life and make decent savings and investments.