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How to Budget your Money: 50/20/30 Rule

May 20, 2014 | Financial Services

Essential Expenses—are what you need to maintain the fundamentals of your life.

No more than 50 percent of your take-home pay should go toward your essential expenses. These expenses fall under the categories below:

  • housing
  • transportation
  • utilities
  • groceries

Financial Priorities—include your retirement contributions, savings contributions, and debt payments.

Your money should go towards the essential expenses first. Then, 20 percent of your take home pay goes make your contributions to your financial priorities before you do any other spending.

Lifestyle Choices—are personal or leisure choices.

Only 30 percent of your take home pay should go to this category:

  • cable
  • internet
  • phone plans
  • charity
  • entertainment/hobbies
  • shopping
  • personal care

The good thing about the 50/20/30 rule is that it’s flexible. For example, if you end up using less than 50 percent of your net pay on the essentials, you can either apply what is left over to your financial priorities or to your lifestyle choices spending category.

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 rule will benefit you. You can also utilize Mint.com, where you can set a budget, track your spending, and so much more for FREE!!

For more information check out:

http://www.learnvest.com/knowledge-center/your-ultimate-budget-guideline-the-502030-rule/?utm_source=outbrain&utm_medium=blog&utm_campaign=high&utm_content=budget

Written by Joel Manzer

Once an active writer on financial issues, Joel is a blogger, social media maven and autism dad, Joel now runs autisable.com one of the largest living with autism sites in the world.

The information provided is for informational purposes only and is not a substitute for professional financial advice. You should consult a credit counseling professional concerning the information provided and what should work best in your financial situation. And any action on your part in response to the information provided is at your discretion.

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