Does budgeting seem too complicated? Do you constantly feel like you're still overspending or never have enough money. The 50/20/30 budget can make things so much easier for you. Not only can it help ensure that you're not overspending, but it can help you get out of debt. Let's take a closer look at what the 50/20/30 budget is and why you should have one.
What Is the 50/20/30 Budget?
The 50/20/30 budget is where your essentials (housing, groceries, electric, etc) take up less than 50% of your income. Then 20% is reserved for savings and/or debt. The last 30% is personal income that can be spent on the things you want. Some people choose to exchange the 20 and 30% so that they are paying more towards their debt or putting more into savings. If this would be better for you at this time in your life, feel free to do that.
Why You Need This Budget
First of all, this budget is simple. You know that your essentials need to equal 50% or less of your income. If your essentials are taking up much more than that, you'll know that you need to make adjustments. The same goes for other parts of your budget. It you're spending 80% of your income on frivolous items, you'll know that you could actually afford to buy a home or spend money on something more important.
Another reason why you need this budget is that you'll easily know how much needs to be paid towards debt or put into savings. For example, if you bring home $1,000 a week, you'll know that you need to put $200 a week towards debt or into savings. Remember, it's good to have an emergency account, but you really need to get out of debt. Try putting 15% towards debt and 5% towards savings.
Last, but not least, you're allowing yourself some spending money. Paying yourself is so, so important for sticking to a budget. The reason many people never stick to their budget is all their money is going to bills, savings, and debt. This can make it feel as if you don't have anything to show for all your hard work. You need to have money that allows you to do something fun.
Is the 50/20/30 budget right for you? Chances are it is. It makes budgeting so much easier, yet it allows you to cover all your expenses and have money for fun. Give it a try and see how well it works for you.
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