Are you looking for a new budget plan or ways to save your money? Have you heard about the 50/30/20 plan but aren’t sure what it is? Allow us to explain this new budgeting approach that more people are adopting to help their financial situation!
Budgeting is hard. It may seem easy to just plan all your expenses but sticking to it month after month can be a real challenge. The 50/30/20 budget plan wants to help people by simplifying matters while also helping you save money.
In the 50/30/20 budgeting rule, there are three categories for your expenses. There are your needs, which should account for 50 percent of your income, your wants, which should be 30 percent of your monthly income and finally your savings, which are the remaining 20 percent.
It’s actually quite simple, and many people who have followed this plan have claimed it has helped them save money for the future without sacrificing too much in the present.
How Do I Use the 50/30/20 Budget?
The first step in using this budget is to calculate your after-tax income. If you have a job with a steady paycheck, this is easy, just see your paystubs. If you have deductions besides state tax, local tax, income tax, Medicare and social security is taken out of your income, add them back in.
Next, go over your expenses for past months and decide what your needs are. Keep in mind that these are your absolute necessities and should make up no more than 50 percent of your budget. Things like groceries, utilities, mortgage payments or rent fall into this category.
Next is your wants. These don’t include extravagant shopping trips but should be more focused on niceties of life like your cellphone plan, cosmetic repairs to your car and other things of that nature.
Finally, the last 20 percent should go into your savings or towards debt repayments so you can begin to get out from under debt and build your savings.
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