With so much spending advice online, it can be tough to sort through it all to get to the good stuff. That’s why we’ve done the work for you. Recently, we came across a budget hack that made a lot of sense to us. This savings trick is referred to as the “50/30/20” rule, and we’re telling you how to put it to use today.
The 50/30/20 rule is super easy to follow. It states that you should spend 50% of your income on necessities, 30% on savings, and the remaining 20% on whatever you like. Let’s break this down a bit further.
According to the 50/30/20 rule, 50% of your income should go towards your needs. This includes basic things like rent, bills, gas, and food. Putting this limit on your income allows you to evaluate your lifestyle better. If you know you can only spend 50% of your income on necessities, you’ll make smarter purchases and allocate accordingly.
The 50/30/20 rule states that 30% of your income should go to savings. This may seem like a lot if you’re not used to saving, but it’s a good habit to get into. Having a small “rainy day fund” for emergencies should be a savings goal, and a 30% savings commitment with each paycheck will help you get there faster.
With 50% of your income going to your needs and 30% going to savings, you’ll be left with 20% to do with what you please. This is your spending money, and it can go towards things like going out to eat or drink, entertainment, home decor, clothes, travel, or anything else your heart desires. Your bills will be paid and you’ll be building a savings fund, so you’ll be open to spending more freely without any guilt.