Why Should You Implement the 50/30/20 Rule in 2023?
Budgeting is a hard task for most people unless they’ve been budgeting long enough to master exactly what works for them. It isn’t something you can just adapt to overnight; in fact, it could take months, if not years, to perfect. The process of learning to a budget can be very daunting, especially if it is taking you longer than expected to find the right budgeting method that suits you. Unfortunately, for some people, finding the right technique seems impossible. However, if you keep testing different methods, you are bound to find one eventually. The 50/30/20 rule, developed by Senator Elizabeth Warren in her 2005 book, is an approach that many individuals find beneficial. Unlike many other budgeting methods, this technique provides a clear, straightforward separation between all of your finances, offering you the easiest route when starting out. So, should you implement this rule in your 2023 plan?
What Exactly Is The 50/30/20 Rule?
The 50/30/20 rule is a popular budgeting method used globally by those who want a simpler way to manage their finances. Originally published in Warren’s 2005 book, the method has since been growing and adapting to different modern changes, however, the principle has always remained. The 50/30/20 rule separates your finances into three sections, all creating different amounts for different expenses according to their importance.
Sub-Section 1: 50%
Firstly, the larger chunk of the method equals 50%. This 50% accounts for your essential payments, like your rent, general food shopping trips, and debts, which have a significant priority when it comes to spending. This means that you have a guaranteed sum of money saved separately for expenses like this in order to avoid any further debt. Overspending can seriously impact an individual’s financial health and security; thankfully, if you find yourself in a position with nowhere else to turn, here at BingoLoans, we can help. Learn more about payday loans
Sub-Section 2: 30%
Secondly, the middle section of the model accounts for 30%. This section of 30% is to be spent on the things that we want. These are the items or experiences that do not qualify as “high” as your rent or bills but are still important to you. Commonly, these are meals out with friends, haircuts, shopping sprees, and just general activities
that you might fancy partaking in.
Sub-Section 3: 20%
Finally, the remaining 20% of your money should be separated and saved. This will help you grow your savings or your emergency fund in order to create a financial foundation to fall back on when needed in the future. After all, you never really know what is around the corner, and we find that most of the time, financial strains tend to happen when we least expect it. So, this 20% will give you the support you need.
Apply The 50/30/20 Rule
Once you’ve mastered all of the subsections, you can start incorporating your own finances into each one. This will allow you to begin your budgeting journey with this method. So perhaps as your paycheck arrives towards the end of the month, you could immediately separate the sum into multiple categories, therefore eliminating the temptation to stray from the technique. After a few months of trialling the method, you may find it doesn’t perfectly suit your income. As we’ve mentioned before, this is normal, and there are thousands of different techniques you could move onto.