A simple idea with many benefits
50% of your income for covering your needs.
Half of your income should be dedicated to covering essential expenses. These typically include living costs such as utility bills, groceries, health expenses, transportation, debt payments, and childcare or educational expenses. Needs differ from wants and include any critical expense you can’t avoid.
The next 30% is reserved for what brings you joy and fulfillment. This category covers hobbies, vacations, dining out, entertainment subscriptions, or any other discretionary spending that adds pleasure to your life.
Your savings
Finally, 20% of your income should be set aside for savings. This category is crucial and should be followed strictly! Distribute this amount among emergency funds, retirement planning, and a "piggy bank" for future expenses, like your children's education or significant life events.
A smart and engaging tool to help you stay on track with savings is Money Box, a practical and interactive way to manage your funds effectively.
Strategic money management
The 50-30-20 rule offers a straightforward strategy that eliminates the need to divide your expenses into numerous smaller categories. Instead, it focuses on three broad areas, making it ideal for those who find it challenging to monitor daily purchases or manage overly complex budgets.
This approach emphasizes building a sustainable financial routine, allowing you to cover essential needs, enjoy life’s pleasures, and prepare for the future. It’s especially useful for beginners in saving, offering clear guidance to achieve financial goals.
However, even if you’re not new to saving but still find it challenging to stay on board with the goals you originally set, the 50-30-20 rule may be the tool that helps you and makes a difference. In any case, you can adjust the percentages to suit your own needs. For example, if you live in a city with a high cost of living, you may need to allocate a larger portion of your income to your needs, whereas if you have a relatively high income, it might be easier for you to dedicate a higher percentage of your income to savings.
The key is to remember that you can always add your own creative touch and personalize this strategy.