The 50/30/20 rule is a simple and practical rule for anyone who wants an easy and effective way to budget. If you follow this rule, you will not only be able to spend your income as you please, but on the other hand, you will automatically accumulate money.
To use according to the specified expenditure. It is difficult to manage. So put your money in its place, That's why I recommend the 50/30/20 rule to use it correctly. You can read more about the 50/30/20 rule over the calculator.
Use our calculator to find out what you need from your income. You can estimate how to divide your wants and savings.
The 50/30/20 rule is not mandatory. This rule is just a cautionary assumption to help you manage your finances well. So even if you only have a small amount to save (1% or 2% of your income), the key is to get into the habit of saving regularly, no matter how much.
Over time, you will be able to gradually increase your savings. For example - 3% of income. Savings up to 4% gradually increase to 5%. Once you get into the habit of saving money regularly, not only will it become easier to save money, but you will notice that your savings will gradually increase.
What is the 50/30/20 rule?
In this little rule, your income is divided into (3) parts. This is 50% for necessity. 30% for wanting 20% for savings.
50% of income – for needs
50% of the income should be used only for necessities. A need is an unavoidable expense. It means the costs. For example –
- Household expenses
- Travel expenses
- Basic needs
If you have taken out a loan, the regular repayment amount is also included in your requirement.
30% of income – for want
It is not always easy to distinguish between wants and needs. Each other's needs and wants are not the same. But wanting means less important things to survive and work. Usually just to be happy
- Entertainment programs
- Hobby activities, etc.
- 20% of income – for savings
Savings means saving money in advance for your future income. Unexpected emergencies, When faced with health problems, it helps to handle finances calmly. If you have taken a loan, it will help you repay this loan as soon as possible.
What is included in the savings?
Accumulation of reserves for emergencies.
Saving for welfare (eg – marriage, retirement).
If you have a loan, you can also save to pay more than the scheduled regular repayments.
When you save money, it doesn't mean you have to save according to this rule. Even if you can't save according to this rule, saving as much as possible is better than not saving at all. You can read about how to save with a goal. If you have already thought about this collection, collect it first to be effective. Collect and use only the excess.