(MoneyHippo.com) – The 50-30-20 rule is a simple budgeting framework that helps you allocate your income into three categories: needs, wants, and savings. The rule suggests dividing your income into the following percentages:
- 50% for needs: This category includes essential expenses that you must pay, such as rent or mortgage, utilities, groceries, transportation, and other bills. These are expenses that you can’t do without and should be your top priority.
- 30% for wants: This category includes expenses that are not essential but are things you desire, such as dining out, entertainment, travel, and other non-essential items. These are expenses that you can live without, but make your life more enjoyable.
- 20% for savings: This category includes money you set aside for your financial goals, such as building an emergency fund, paying off debt, or investing in your retirement. It is important to prioritize saving to ensure you have a solid financial foundation and are prepared for unexpected expenses.
Following the 50-30-20 rule can help you balance your finances and make sure you are putting enough money towards your essential expenses, while also allowing for some flexibility for non-essential items and saving for your future.
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