Here’s How the 50/30/20 Rule Can Help You Budget

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Budgeting is a really hard thing to master. That said, all of us will need to tackle the skill at one time or another.

If you’re still looking for a method that works for you, consider the 50/30/20 rule to get you going.

The rule was first popularized by Senator Elizabeth Warren and her daughter Amelia in their 2006 book All Your Worth, and, while no strategy works for every single person, experts agree their rule is a great starting point for most.

The duo calls it the “balanced money formula,” and they agree that sticking to this rule of thumb should keep your finances healthy.

“It’s the right place for most people most of the time, and it is a good place to aim for in your lifetime money plan.”

If you want to follow the rule, you’ll need to budget 50% of your take-home pay for necessities (housing, utilities, loan payments, food, and tuition; perhaps also clothes and transportation).

The next 20% of your take-home pay should go toward savings or retirement goals, or paying down debt, building an emergency fund or saving for a vacation.

Your last 30% is for your wants, or lifestyle choices – shopping, entertainment, gym fees, pet expenses, and the like.

There you go. Simple, right?

It’s a new year, and if one of your goals is to get yourself on sound financial footing, the Warrens and their tips for working toward financial freedom could be just the ticket you need to hop on the train!

What’s your favorite financial tip? Share it with us in the comments!