Author: Michael Austin / Source: Dumb Little Man
Thinking about ways to better manage your finances? The 50/20/30 rule is one of the most popular techniques that you can try. It’s simple and easy to follow. You only need to categorize your spending into three categories.
50% of Your Income – Essentials
To start with, allocate 50% of your monthly income to your necessities, like your mortgage, utility bills, transportation, grocery, and more.
This percentage might sound too big, but once you list down all your fixed monthly expenses, everything will certainly make sense.It is important to smartly differentiate between your ‘needs’ and your ‘wants’. This way, you can properly allocate your money.
20% – Savings, Investments, Financial Goals
Many people find saving money a challenge but with this rule, it shouldn’t be.
20% of your income should go toward your financial goals. This includes your savings, investments, and debt-reduction payments.
Saving money is very important. You might feel like you’re too young to be saving up for your retirement but time flies so fast and before you know it, you haven’t saved enough for your future. There is also no best time to start investing but ‘now’. Learn about the different ways to grow your money, aside from just keeping it in your bank. The right investments can give you great returns.
Try to reduce your existing debts, such as your credit card and cash advance payments. Setting aside at least 20% of your monthly income for this purpose ensures that you have a good credit rating, making you more qualified for future loans in case you will need one.
30% – Flexible Spending/Your Wants
The remaining 30% of your monthly income should go…
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