How to manage your money better with the 50/20/30 budget rule
Do you struggle to manage your money? Find out what the 50/20/30 budget rule is, and how it can help you.
Many people find it difficult to learn how to manage their money as adults. The process can be complicated due to the amount of financial jargon it involves. In order to make informed financial decisions, you should develop a basic understanding of money management.
What is the 50/20/30 budget rule?
Understanding how to handle your money correctly can teach you how to budget, save, and invest in the future. Learning financial literacy can also emphasize the importance of credit and debt and how to use them each wisely. Overall, knowing how to manage your money can help you reach your financial goals and build financial security.
The good news is simple options exist for managing your money that don’t involve heavy financial research. One of these options is the 50/20/30 budget rule.
So what is the 50/20/30 budget rule? It’s a simple system to determine how much income you should spend and how much you should save. The idea is that you split your budget, and spend 50% on things you need, 30% on things you want, and save the final 20%. Let’s look at it in a little more detail.
What will 50% of my budget go towards?
According to the 50/20/30 budget rule, 50% of your income should go towards the needs in your life. ‘Needs’ are bills you absolutely must pay, including:
- And Insurance
Sit down with your bills and determine how much of your income you spend on your needs. If you are spending more than 50%, you may need to cut back on some of the less necessary things to make your budget more manageable.
Put 30% of your income towards these things
30% of your income should be spent on the ‘wants’ in your life. ‘Wants’ are things you enjoy spending money on, but are not absolutely essential. Examples include eating out, clothes shopping, streaming services, event tickets, vacations, or fancy gym memberships.
If you look at your overall spending habits and notice that more than 30% of your income goes towards the ‘wants’ instead of the ‘needs,’ consider cutting back. Instead of dining out often, you can start meal planning to save money. Instead of working out in a gym, start exercising at home for free.
There are plenty of simple ways to reduce unnecessary spending if you want to manage your money better!
Spend 20% of your income on this
Last but not least, you should try to save 20% of your income. This rule can include creating an emergency fund or investing – you could even create a mutual fund. A person should have enough money in their savings account to cover three months’ worth of living expenses in case of an emergency, such as losing their job.
If you need to catch up on payments, you can use this percent of your income to pay off outstanding debts, like credit card bills. The amount you contribute to a savings account can, however, be affected by your income and other living expenses. More than half of Americans live paycheck to paycheck, which means this budgeting rule may not be accessible to them.
Is the 50/30/20 system right for me?
The 50/30/20 budgeting system can be a helpful tool for some people, but this greatly depends on personal circumstances. As mentioned above, if you lack any disposable income, you may not be a good candidate for this rule.
This system can also depend on other factors, like where you live and how much the basic necessities cost in your area. Maybe you can’t budget 50/30/20 exactly, but doing a proportionate amount for your income and circumstances could help you manage your money better!
Apply for online title loans if you need extra money
It can be devastating if you don’t have enough money in your savings when an emergency strikes. Unexpected expenses can cause stress in a person’s life, and asking family or friends for help can be uncomfortable. People who struggle with finances can apply for a car title loan if they need extra money!
You don’t need a perfect credit score to qualify for an online title loan. The application and approval process can be flexible for people from various financial backgrounds. You can begin your application online with a smartphone or computer!