Everyone knows that having a realistic budget in place is a good idea, but have you created your own budget? Budgeting is the important first step to taking control of your finances! An easy budgeting rule to follow is the 50/30/20 rule. This budgeting method splits your income into three “buckets” and is a great way to enjoy your lifestyle while still making your financial health a priority.
You must first calculate your monthly take-home pay, and then you will separate your expenses into the following categories:
50% For Your Needs
Your needs “bucket” will be your monthly musts. This is the money you need to pay recurring bills such as rent/mortgage, utilities, car payment, groceries, etc. Any payment that could negatively impact your credit score if missed is considered a NEED. Needs are bills and expenses that are a must for daily life.
30% For Your Wants
30% of your budget will cover your wants, AKA your lifestyle spending. Anything you can live without and don’t necessarily need to pay for falls into the “wants bucket.” You don’t need the daily trip to Starbucks, or the Netflix account – but giving yourself an allocated dollar amount for wants allows you to enjoy yourself while still reaching your financial goals.
20% For Savings & Debt
Start paying off the past while investing in your future by allocating 20% of your monthly funds towards paying down debt and saving. Paying down loans and credit cards and saving for retirement, investments, and emergency funds is an important part of your budget.
Budgeting can be intimidating; however, this 50/30/20 rule can help you get started with creating a budget and reaching your financial goals. Having a budget allows you to track where your money is going, create a timeline for repaying your debt, and save for the future.
If you’re interested in free financial wellness and counseling services, learn more about our Financial Wellness program and contact us to schedule an appointment.