Cheap 101: The 50-30-20 Rule

The basic rule is to divide up after-tax income and allocate it to spend: 50% on needs, 30% on wants, and socking away 20% to savings. It’s a simple plan designed to help people reach their financial goals. The rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must-have or must-do. The remaining half should be split up between 20% savings and debt repayment and 30% to everything else that you might want. If your already on a tight budget you may have to change the numbers a bit.

For some people saving 20% of their paycheck would be impossible. For others their wants are what they live for and they may throw caution to the wind when it comes to what their needs are. However, sticking to some type of budget is always better than just spending everything without a clear goal in mind. A goal for retirement, a goal for a house, a goal for a new car, etc..

PRODUCT REVIEW: The bestselling author and former financial advisor Rachel Richards achieves the impossible with Money Honey: A Simple 7-Step Guide for Getting Your Financial Shit Together by bringing humor and sass to the dreaded subject of personal finance. Rachel is a business owner and investor who talks straight about achieving financial freedom.

Cheap 101 is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a way for websites to earn advertising revenues by advertising and linking to Amazon.com

Share