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What Is The 50-20-30 Budget Rule?
Learn how to follow the 50-30-20 budgeting strategy.
A budget helps you to monitor income and expenditure. There are many budgeting techniques that you can follow, but one of the most popular is the 50-30-20.
Saving a few extra Peso a month
What exactly is the 50-20-30 budget rule?
According to Investopedia, it was popularized by U.S. Senator Elizabeth Warren in her book, All Your Worth: The Ultimate Lifetime Money Plan.
The basic rule of this money management technique is to divide your paycheck after taxes into three categories. So, here it goes:
50% of your income should go to essential needs.
These are non-discretionary such as bills payment, rentals, groceries, transportation, medicine, etc.
20% of your income should go to savings and payments.
This percentage of your income is for your savings accounts, retirement contributions, loans, credit card payments, etc.
30% of your income should go to your discretionary expenses or for everything else.
These expenses are not essential to your survival, such as memberships, entertainment, designer clothing, subscriptions, etc.
Budget = Spending Plan
A budget isn't an exercise of deprivation but a tool to increase awareness of what's happening with your money. Budgets should evolve as goals are reached and desired change in lifestyle.
The right budget doesn't keep you from spending but tells you how to save and spend your money to maximize enjoyment.
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ABOUT THE BLOGGER
Hi, I'm Ralph Gregore Masalihit!
An RFP Graduate (Registered Financial Planner Institute - Philippines).
A Personal Finance Advocate. An I.T. by Profession. An Investor. Business Minded. An Introvert. A Photography Enthusiast. A Travel and Personal Finance Blogger (Lakbay Diwa and Kuripot Pinoy).
Currently, I'm working my way toward time and financial freedom.