Better: Budgeting with the 50/30/20 Rule

Better: The 50/30/20 Rule covers the necessities, wants, and savings, including debts. Within this plan, you will be budgeting to live within your means. This is after-tax income, which is then split into these three categories: needs and any minimum debt payments within the 50%, then 20% goes to building up your emergency fund and paying off debt, followed by the remaining 30% to wants. 

Let’s say your gross income is $65k, and after deductions, retirement contributions, taxes, and the like, you are left with an after-tax income of $46,150.00, which results in $3,845.83 per month.

Follow four steps to accomplish the 50/30/20 Rule as follows:

Step 1: Insert net pay to your bank in Income.

Step 2: Insert Savings as 20% of the first figure.

Step 3: Insert “needs” like housing, transportation, groceries, and insurance for a total of 50% of the first figure.

Step 4: Insert “wants” as lifestyle for 30% of the first figure.

CTA:

If you have created a budget in the past but have not successfully maintained it, follow these four steps in the 50/30/20 Rule to step up the accountability for what you spent from the 80/20 Rule. This rule will allow you to break the categories down further and build one that ensures you are accurately deciphering between needs and wants.

Sources:

https://www.nerdwallet.com/article/finance/nerdwallet-budget-calculator

https://www.thebalance.com/the-50-30-20-rule-of-thumb-453922