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50/30/20 Rule: The basics of Budgeting



The 50/30/20 Rule splits expenses into just three categories and organizes spending into need, wants and goals. If you're looking for a stress-free way to manage your money, the rule is a great place to start. It's easy to remember and works for almost any income level.


50% - Needs:

Half of your income should go to essentials - expenses you can't avoid. These include;

  • Rent or mortgage
  • Utilities (electricity, water, internet)
  • Groceries
  • Health Insurance and medications
  • Transportation (car payments, gas, public transit)


30% - Wants

Things that make life enjoyable, but aren't strictly necessary:

  • Dining out
  • Subscriptions (Netflix & Spotify)
  • Travel and Vacations
  • Shopping ( clothes, gadgets)
  • Hobbies and entertainment


20% - Savings and Debt Repayment

Secures your future and reduces financial stress:

  • Emergency fund
  • Retirement savings (401k)
  • Paying off credit card debts or loans
  • Investing



This rule isn't one-size-fits-all, but it's a great starting point especially for beginners looking to gain control over their finances. The 50/30/20 rule offers a straightforward framework to take control of your finances without feeling overwhelmed. By diving your income into needs, wants and savings, you can create a balanced budget that supports both your present lifestyle and future goals. While everyone's financial situation is different, this rule can serve as a solid foundation for smarter money management. The key is to stay consistent, make adjustments when needed and keep your financial priorities in focus



 

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