Budgeting is the basis of building your finances because it helps you decide where your money goes each month. It gives you more control of your finances, which is the first step towards meeting your financial goals. An excellent budgeting tool that can work for most people is the 50/20/30 budget rule.
The 50/20/30 rule recommends allocating 50% of the money towards your needs, 30% to your wants, and saving 20%. The 20% is the money you will use to accomplish your future financial goals.
How To Apply the 50/20/30 Budget Rule
Here’s how to allocate money to your needs, wants, and savings:
1. Essential Expenses
Essential expenses are made up of what you need to maintain the fundamentals of your life. Your money should go towards the vital expenses first, but no more than 50 percent of your take-home pay. These expenses fall under the following categories:
- Housing
- Transportation
- Utilities
- Groceries
2. Financial Priorities
Your savings are priorities because they secure your financial future. They include your retirement contributions, savings contributions, and debt payments. According to the 50/20/30 rule, savings should come second after allocating money for your basic needs.
3. Lifestyle Choices
Lifestyle choice expenses are your wants. They are personal or leisure choices. Only 30 percent of your take-home pay should go to this category. Items that fall under this category include:
- Cable
- Internet
- Phone plans
- Charity
- Entertainment/hobbies
- Shopping
- Personal care
The good thing about the 50/20/30 budget rule is that it’s flexible. For example, suppose you end up using less than 50 percent of your net pay on the essentials. In that case, you can apply what is left over to your financial priorities or lifestyle choices spending category.
Get Minute Loan Center To Help
Budgeting is critical to mastering your finances. Check out these free budget spreadsheets or create your own spreadsheet to track your spending and see how the 50/20/30 budget rule will benefit you. You can also utilize Mint.com to set a budget, track your spending, and so much more for FREE!!
Still, if you’re having problems meeting your needs and other obligations like making debt payments, you can apply for a loan. Minute Loan Center has generous personal loans and favorable loan terms to help you bridge the gap between your income and your needs. Reach out for more information, and we will help you apply for a loan.
Kevin brings over 15 years of experience in marketing, with a specialized expertise in growing online businesses. As the Director of Marketing at a leading FINtech company, he employs innovative strategies to enhance brand visibility and customer engagement. Kevin’s passion lies at the intersection of technology and finance, where he pioneers solutions that not only meet but exceed consumer expectations. His commitment to leveraging his expertise ensures impactful results and the building of lasting relationships in the digital landscape.
