What Is the 50/20/30 Budget Rule? - Deepstash
What Is the 50/20/30 Budget Rule?

What Is the 50/20/30 Budget Rule?

Curated from: investopedia.com

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What is 50/20/30?

What is 50/20/30?

  • The 50-20-30 (or 50-30-20) budget rule is an intuitive and simple plan to help people reach their financial goals.
  • The rule is a template that is intended to help individuals manage their money and save for emergencies and retirement.

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50%: Needs

50%: Needs

Needs are those bills that you absolutely must pay and are the things necessary for survival. These include rent or mortgage payments, car payments, groceries, insurance, health care, minimum debt payment , and utilities. These are your "must-haves." The "needs" category does not include items that are extras, such as HBO, Netflix, Starbucks, and dining out.

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30%: Wants

30%: Wants

Wants are all the things you spend money on that are not absolutely essential. This includes dinner and movies out, that new handbag, tickets to sporting events, vacations, the latest electronic gadget, and ultra-high-speed Internet. Anything in the "wants" bucket is optional if you boil it down. You can work out at home instead of going to the gym, cook instead of eating out, or watch sports on TV instead of getting tickets to the game.

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20%: Savings

20%: Savings

Finally, try to allocate 20% of your net income to savings and investments. This includes adding money to an emergency fund in a bank savings account, making IRA contributions to a mutual fund account, and investing in the stock market. You should have at least three months of emergency savings on hand in case you lose your job or an unforeseen event occurs. After that, focus on retirement and meeting other financial goals down the road. Savings can also include debt repayment .

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