What does The 50/30/20 Budgeting Rule Means

If you are someone that loves saving and budgeting then you might have come across the Saving rules that are called the 50/30/20 Budgeting Rule. You might have an understanding of what this rule means or you might not have an understanding of what the rule means. But do not panic because in this article today I am going to explain to you What The 50/30/20 Budgeting Rule Mean.

What does The 50/30/20 Budgeting Rule Means

So that when next you are looking to save you already know one of the most important rules when it comes to saving and you can just start saving money based on this recipe already. On this article, we are going to analyze all the figures in this rule so that you know what each one stands for and how you are going to be using it to help you save easily. So let’s go ahead and jump in.

What does The 50/30/20 Budgeting Rule Mean

When it comes to savings they are different budgeting rules that a person can make use of to save money easily and successfully. That being said the most common budgeting rule that most people and expert advise to use is the 50/30/20 budgeting rule which is one of the best budgeting rules that people advise anyone looking to save money should use.

If you have been alive for the past few years you will know that the inflation in almost all countries of the world has been on a steady rise and the cost of living is up. If you already have a job or any means of a source of income now is the most important time to start saving. Because so many people have ended up lasting their jobs because of inflation and they did not have money saved.

What is the 50/30/20 Budgeting Rule?

So now we have established the fact that it is a good time to start saving which is where the budgeting rule 50/30/20 comes in. It is one of the best ways to start saving money and it is also very easy that anyone can understand how to utilize this budgeting. The most important thing is that in this rule is that your earnings do not matter whether small or great you can simply apply it to start saving today.

The 50% Stands for Needs

As you can see from the 50/30/20 budgeting rule your income which is the money or salary you are earning needs to be split into three different parts. The first part of that your income is 50% which means your income needs to be split into two. The first 50% of your income after you are splitting it into two is for your needs. There are various things that you need in your life for it to run smoothly.

So it is this 50% that you want to allocate to all your basic life needs such as electricity bills, paying rent, utility bills, and every other form of payment that you need to take care of. All of these expenses should be taken from the first 50% of your salary or monthly earning. This morning can also be used to pay for loan installment credit card bills and every other form of debt you need to clear.

The 30% is for your Wants

Wants and needs are two basic and different things the 50% is for what you needed to do as soon as possible of which I have listed setting examples for you above. So moving forward we have 30% which is for those things that you want after you have cleared all the things that you need with the first 50% divide your remaining 50% into 30% and 20%.

After dividing the remaining 50% into 30% and 20% the 30% from the money should go to your Wants. Your wants have basically balled the things that you need to spend money on that are not essential. These are things that are not really that important but you do them because you can afford them. See example going out for dinner. Going to the cinema, buying spot tickets, and other. This should not exceed the  30% budgeted for it.

Finally, the last 20% is for Saving

It is because of these savings that this whole budgeting rule was made. This gives you the opportunity to remove money for all the necessary things you need to do in life so that what is remaining can be saved. The rule does not allow you to spend everything on your wants and need it budget money that should be saved which is the remaining 20%.

After you have removed the 50% for your needs such as paying for your bills and others and also removed 30% 4 wants like going for visitation, the last 20% should be saved. This morning should never go for any other bottles rather than to your savings account or any other place we use in saving your money. Which is one of the reasons why the 50/30/20 rule of budgeting is very much used.

What does The 50/30/20 Budgeting Rule Means FAQs

What does the 50 20 30 rule represent when budgeting your money?

This represents a way for you to budget your money so that you can easily start serving. Firstly you need to divide your monthly income into two equal halves. Then take the first half which is 50% for your needs. Now split the remaining 50% into two. 30% of that 50% should go for your wants. After doing that then the remaining 20% should go to your savings.

Is the 50 30 20 rule a good idea?

The answer to this question is yes the 50 30 20 rule is a very good idea for people that finds it difficult to save money. This is because it makes it easy to save money after removing all the necessary things that you need to do with the money the one that is left should be saved. This is why this rule is so very common I’ve been used all over the world today.

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