20 Budget Rule

Nov 18, 2020

Close up of a couple looking at their finances

Calculating How Much You Should Save and Spend Every Month

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

What is the 50/30/20 Budget Rule?

The 50/30/20 budget rule divides your earnings into needs,rnwants, and savings or debts. With this rule, you should spend no more than 50{e443ec709150c73baf180d3d8e0a41d703fa022f47b2bb5516b57735b7c7f19e}rnof your monthly income on living expenses like rent, food, and utilities. 30{e443ec709150c73baf180d3d8e0a41d703fa022f47b2bb5516b57735b7c7f19e} isrnto be allocated for wants that are not essential for living. This includes gamernconsoles, toys, jewelry, decorations, etc. Basically, if you can live withoutrnthat item, it’s considered a want. Finally, you should be paying yourself thernremaining 20{e443ec709150c73baf180d3d8e0a41d703fa022f47b2bb5516b57735b7c7f19e}. Consider building your savings or applying the extra cash tornoutstanding 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 easyrnto do. To show you just how easy it is, let’s run an example calculation forrnsomeone 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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