How to Save Money with the 50/30/20 Budget Rule | OkCarz

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Calculating How Much You Should Save and Spend Every Month

Are you struggling to save some cash every month? Wondering if you are spending too much on unnecessary wants? With the 50/30/20 budget rule, you can calculate how much you should save and spend every month based on your income! Here’s how to use it.

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What is the 50/30/20 Budget Rule?

The 50/30/20 budget rule divides your earnings into needs, wants, and savings or debts. With this rule, you should spend no more than 50% of your monthly income on living expenses like rent, food, and utilities. 30% is to be allocated for wants that are not essential for living. This includes game consoles, toys, jewelry, decorations, etc. Basically, if you can live without that item, it’s considered a want. Finally, you should be paying yourself the remaining 20%. Consider building your savings or applying the extra cash to outstanding debts.

How to Determine Your Budget with the 50/30/20 Rule

Person calculating their finances

Calculating your budget with the 50/30/20 rule is very easy to do. To show you just how easy it is, let’s run an example calculation for someone earning $2,500 a month.

Necessities: $2,500 x 0.5 = $1,250

Wants: $2,500 x 0.3 = $750

Savings/Debts: $2,500 x 0.2 = $500

By applying the 50/30/20 rule, you will know if you are staying in your budget for all three areas. If not, it’s time to reconsider your monthly spending so you can start saving money.

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Looking for more financial advice? Follow the OkCarz blog for more tips and tricks about managing your finances and everything automotive!

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