The 50/30/20 is one of the best-known ways to manage your finances. It does not matter how much money you earn. You can easily apply this rule to your life and start a much-needed financial discipline.
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50/30/20 budgeting rule
The basic thumb rule is to divide your post-tax income into three categories — 50% for needs, 30% for wants, and 20% for savings.
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50% for needs
Simply put, 50% of your income should go towards your needs. Your needs are the basic expenses that you absolutely require for your living. Do note that financial responsibilities will also be counted as your basic needs.
Around 30% of your post-tax income should go towards your wants. It represents expenses that are considered luxuries. From dining out to going out for movies to your Netflix subscription every month to yearly vacation — all will be covered in this category.
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20% for savings
The 20% of your post-tax income should be kept aside for savings and investments.
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How to use the 50/30/20 rule in your life
First, calculate your monthly income and then categorise your spending into needs, wants, and savings. The spending threshold for each category should be 50%, 30%, and 20% respectively.
Introduction: My name is Edwin Metz, I am a fair, energetic, helpful, brave, outstanding, nice, helpful person who loves writing and wants to share my knowledge and understanding with you.
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