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When you keep a budget, one of the biggest balances is how much money you bring home versus how much you pay in monthly expenses. Many of us try to keep a budget and end up not sticking to it because it becomes too difficult and restrictive for us. The 50/30/20 Budget is a concept that gained popularity recently due to its simplicity and ease to follow. The basic rule is to divide your after-tax income into three parts. Below is a breakdown on how to allocate your monthly budget effectively.
Fifty percent to Essentials – The biggest part of your 50/30/20 Budget should go toward essentials. This includes housing, food, transportation, bills & utilities, etc. These are the basic things that you need to survive.
Thirty percent to wants – Allocate the middle portion of your budget to wants. Anything that isn’t a bill or necessity can be classified as a want. Examples of wants are things such as dining out, shopping, gym memberships, streaming services, etc. While these things are nice to have, they are not necessities.
Twenty percent to savings – Dedicate the last portion of your budget to savings. This can be used for building up an emergency fund, loan repayment, retirement fund, or any type of saving you want to do.
Read the full article on the 50/30/20 Budget on Investopedia.com.
At American 1 we have certified financial coaches that can help you set a budget tailored to you – for free! They can help you learn healthy financial skills to set you on the path to financial freedom with a free financial coaching appointment!