50\/20\/30 Budget Rule\nSenator Elizabeth Warren popularized the so-called “50\/20\/30 budget rule” in her book, All Your Worth: The Ultimate Lifetime Money Plan.\u00a0\n\n- The 50-20-30 (or 50-30-20) budget rule is an intuitive and simple plan to help people reach their financial goals.\n
- The rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must-have or must-do.\n
- The remaining half should be split up between 20% savings and debt repayment and 30% to everything else that you might want.\n
- The rule is a template that is intended to help individuals manage their money and save for emergencies and retirement.\n\n
50%: Needs\nNeeds are those bills that you absolutely must pay and are the things necessary for survival. These include rent or\u00a0mortgage\u00a0payments, car payments, groceries, insurance, health care,\u00a0minimum debt payment, and utilities. These are your “must-haves.” The “needs” category does not include items that are extras, such as HBO, Netflix, Starbucks, and dining out.\n
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Half of your after-tax income should be all that you need to cover your needs and obligations. If you are spending more than that on your needs, you will have to either cut down on wants or try to downsize your lifestyle, perhaps to a smaller home or more modest car. Maybe carpooling or taking public transportation to work is a solution, or cooking at home more often.\n
30%: Wants\nWants are all the things you spend money on that are not absolutely essential. This includes dinner and movies out, that new handbag, tickets to sporting events, vacations, the latest electronic gadget, and ultra-high-speed Internet. Anything in the “wants” bucket is optional if you boil it down. You can work out at home instead of going to the gym, cook instead of eating out, or watch sports on TV instead of getting tickets to the game.\n
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This category also includes those upgrade decisions you make, such as choosing a costlier steak instead of a less expensive hamburger, buying a Mercedes instead of a more economical Honda, or choosing between watching television using an antenna for free or spending money to watch cable TV. Basically, wants are all those little extras you spend money on that make life more enjoyable and entertaining.\n
20%: Savings\nFinally, try to allocate 20% of your net income to savings and investments. This includes adding money to an emergency fund in a bank savings account, making\u00a0IRA contributions\u00a0to a\u00a0mutual fund\u00a0account, and investing in the stock market. You should have at least three months of emergency savings on hand in case you lose your job or an unforeseen event occurs. After that, focus on retirement and meeting other financial goals down the road.\n
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source: investopedia\nAlways bring a list when you go to the store.\n
One of the easiest ways to go over budget when you\u2019re at the grocery store is to walk up and down every single aisle without a plan.\u00a0 I\u2019m personally guilty of going into a grocery store not knowing what I needed and walking out wondering\u00a0what on earth happened. I ended up spending WAY TOO MUCH money because I didn\u2019t have a plan in place.\n
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To keep this from happening, always be sure you have a list with you when you go to the grocery store.\u00a0 Even better, only go down the aisles that you truly need to go down and skip the rest. Skipping the extra aisles will help you stick to your list and only grab what you need.\n
Make a meal plan so you aren\u2019t tempted to go out to eat.\n
By far one of the biggest budget busters is food. Every month people overspend on food by hundreds of dollars. If you want to stick to your budget each month, then create a meal plan before the week begins. Be sure to cook simple meals that you\u2019ll actually enjoy so you won\u2019t want to run by and pick up food on your way home from work.\n
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- The 50-20-30 (or 50-30-20) budget rule is an intuitive and simple plan to help people reach their financial goals.\n
- The rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must-have or must-do.\n
- The remaining half should be split up between 20% savings and debt repayment and 30% to everything else that you might want.\n
- The rule is a template that is intended to help individuals manage their money and save for emergencies and retirement.\n\n
50%: Needs\n
Needs are those bills that you absolutely must pay and are the things necessary for survival. These include rent or\u00a0mortgage\u00a0payments, car payments, groceries, insurance, health care,\u00a0minimum debt payment, and utilities. These are your “must-haves.” The “needs” category does not include items that are extras, such as HBO, Netflix, Starbucks, and dining out.\n
\nHalf of your after-tax income should be all that you need to cover your needs and obligations. If you are spending more than that on your needs, you will have to either cut down on wants or try to downsize your lifestyle, perhaps to a smaller home or more modest car. Maybe carpooling or taking public transportation to work is a solution, or cooking at home more often.\n
30%: Wants\n
Wants are all the things you spend money on that are not absolutely essential. This includes dinner and movies out, that new handbag, tickets to sporting events, vacations, the latest electronic gadget, and ultra-high-speed Internet. Anything in the “wants” bucket is optional if you boil it down. You can work out at home instead of going to the gym, cook instead of eating out, or watch sports on TV instead of getting tickets to the game.\n
\nThis category also includes those upgrade decisions you make, such as choosing a costlier steak instead of a less expensive hamburger, buying a Mercedes instead of a more economical Honda, or choosing between watching television using an antenna for free or spending money to watch cable TV. Basically, wants are all those little extras you spend money on that make life more enjoyable and entertaining.\n
20%: Savings\n
Finally, try to allocate 20% of your net income to savings and investments. This includes adding money to an emergency fund in a bank savings account, making\u00a0IRA contributions\u00a0to a\u00a0mutual fund\u00a0account, and investing in the stock market. You should have at least three months of emergency savings on hand in case you lose your job or an unforeseen event occurs. After that, focus on retirement and meeting other financial goals down the road.\n
\nsource: investopedia\n
Always bring a list when you go to the store.\n
One of the easiest ways to go over budget when you\u2019re at the grocery store is to walk up and down every single aisle without a plan.\u00a0 I\u2019m personally guilty of going into a grocery store not knowing what I needed and walking out wondering\u00a0what on earth happened. I ended up spending WAY TOO MUCH money because I didn\u2019t have a plan in place.\n
To keep this from happening, always be sure you have a list with you when you go to the grocery store.\u00a0 Even better, only go down the aisles that you truly need to go down and skip the rest. Skipping the extra aisles will help you stick to your list and only grab what you need.\n
Make a meal plan so you aren\u2019t tempted to go out to eat.\n
By far one of the biggest budget busters is food. Every month people overspend on food by hundreds of dollars. If you want to stick to your budget each month, then create a meal plan before the week begins. Be sure to cook simple meals that you\u2019ll actually enjoy so you won\u2019t want to run by and pick up food on your way home from work.\n
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