A budget. It’s not magic, but it represents more financial freedom and a life with much less stress. We all know we "should" be following a budget, but not many do. Budgeting is not just about saving money, it is about taking control of your spending and determining exactly where your money is going.
As the world continues to grapple with the financial uncertainties caused by a year of pandemic economic disruptions, budgeting has become top of mind for many. While phone applications have become commonplace for some, there is no shame in using a handwritten budget. Enter: the 50/30/20 budget rule. This is a simple, easy-to-implement rule that leaves you with guaranteed savings of your net paycheck at the end of the day so long as you adhere to it:
What is the 50/30/20/ rule?
The 50/30/20 rule budget can be a great tool for people who don't have the patience for tracking their spending in detailed categories. This rule is best for people who want to make savings a priority—genuinely setting aside money into an IRA or retirement account in addition to a savings account every month—and have minimal debt.
If rent, transportation, utilities, groceries, and loan payments exceed 50% of your net paycheck then you may need to either negotiate a raise or reduce your “necessary” payments by auditing your spending. This could include downsizing or watching your energy usage. This rule is adaptable to your location since it operates on a percent of your income so you can stick to this same budgeting technique even if you moved across the country. More importantly, it allows you to spend 30% of your income "guilt-free." If you already know where 70% of your income is going (needs and savings) then you can use the rest to enrich your life.
To utilize this simple concept here is a sample template you can use at home: Click Here
According to Forbes Magazine, nearly 60% of all U.S. households still don’t have a budget, and 11 million adults don’t monitor their overall spending and don’t know how much they spend on food, housing, and entertainment. The 50/30/20 rule is an excellent tool to use to begin to organize your spending. For more useful tools and helpful strategies for your long-term planning, please reach out to DWM!