The 50-20-30 Rule: Discover This Simple Method to Better Manage Your Budget

If some households perceive difficulties in making savings, it is not due to a lack of income, but as a result of poor management. With the 50 – 20 – 30 rule, you then have the opportunity to make significant savings. Being able to actually work, this method has now become very popular.

Simple Method To Better Manage Your Budget
Photo credit : Yan Krukau

How does the 50, 20, 30 rule work?

The 50,20,30 rule works in a very simple way. Indeed, it is simply intended to properly distribute your expenses. To this end, 50% of your income must be dedicated to fixed expenses that must be paid. These include taxes, maintenance, monthly loan payments, rent, energy, etc.

For the 20% of your salary, you have to allocate it to your savings. To ensure that you don’t get tempted to spend them, the ideal is to have them automatically transferred to your savings account every month. In short, to apply this rule, for every 10 dollars you spend, you need to save 2 dollars.

Finally, for the remaining 30% of your income, they must finance your ancillary expenses. Apart from dining, clothing or other hobbies, they can quite recover your gym subscription fees, Netflix subscription, internet.

How can this rule be applied to achieve significant savings?

On paper, saving money from the 50 – 20 – 30 rule may seem simple enough. But in practice, this is not the case at all. For example, not all households can afford to replenish their fixed costs with half of their income. It is therefore important to know that with this method, the application of these ratios is not mandatory, as everything could depend on your real situation.

The goal is to know your real monthly expenses and set limits to save as much money as possible. Indeed, it is very important to know how to reduce unnecessary expenses. Moreover, you can indeed apply different methods and tricks in order to limit your fixed costs. With this in mind, you can use a personal finance management software or application. This will help you manage your expenses better.

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