Do You Know How To Budget?
S A U N A I E Presents the 50 30 20 RULE
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\nS E G M E N T S: 50 30 20 RULE
\nFun Fact: Senator Elizabeth Warren popularized the so-called "50/20/30 budget rule" (sometimes labeled "50-30-20") in her book, All Your Worth: The Ultimate Lifetime Money Plan. The basic rule is to divide up after-tax income and allocate it to spend: 50% on needs, 30% on wants, and putting away 20% for savings. Referencing over 20 years of research, Warren and Tyagi conclude that you don\u2019t need a complicated budget to get your finances in check. All you need to do is balance your money across your needs, wants and savings goals by using the 50/30/20 rule.
\n50%: Needs
\nNeeds are those bills that you absolutely must pay and are the things necessary for survival. These include rent or mortgage payments, car payments, groceries, insurance, health care, minimum debt payment, and utilities. These are your "must-haves." The "needs" category does not include items that are extras, such as HBO, Netflix, Starbucks, and dining out.
\n30% ON WANTS
\nWants are all the things you spend money on that are not absolutely essential. This includes dinner, going to the movies, that new handbag, tickets to sporting events, vacations, the latest electronics, and ultra-high-speed Internet. Anything in the "wants" bucket is optional if you boil it down. You can work out at home instead of going to the gym, cook instead of eating out, or watch sports on TV instead of getting tickets to the game.
\n20%: Savings
\nFinally, try to allocate 20% of your net income to savings and investments. This includes adding money to an emergency fund in a bank savings account, making IRA contributions to a mutual fund account, and investing in the stock market. You should have at least three months of emergency savings on hand in case you lose your job or an unforeseen event occurs. After that, focus on retirement and meeting other financial goals down the road.
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