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How to Set Up a 50/20/30 Budget

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How to Set Up a 50/20/30 Budget
There are lots of different budgeting methods you can try to determine the best way to manage your money. But while budgeting guides might mention those methods or provide broad categories on which to focus, they don’t always make it easy to see how your budget will actually look.

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The 50/20/30 budgeting method

The 50/20/30 budgeting method

With the 50/20/30 budgeting method:

  • 50% of your monthly spending goes toward essentials - your home, your food, etc.
  • 20% of your monthly spending ...

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Debt payments

Debt payments may look confusing when you add it to the savings column. But the easiest way to build up a savings balance is not to have your money go toward debt. Once your debt is paid of...

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Reducing your essentials

Play around with your monthly budget to see where you can reduce your monthly spending:

  • You could contact your internet company to get a discount.
  • You can clip coupons and ...

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SIMILAR ARTICLES & IDEAS:

The Golden Rules of Personal Finance

  • Spend less money than you earn
  • Always plan for the future: you should always look forward beyond the current month
  • Make your mon...

A Monthly Budget For Your Money

No matter how little or how much money you earn, creating a monthly budget is one of the most important aspects of managing your finances. What gets measured gets managed.

...

The Envelope System

The Envelope system is a way to track your variable expenses like food, entertainment, and drinks.

This method, preferably used weekly, allocates a certain amount in each category in labeled envelopes (food, drinks, movies, etc.). Once the envelope is empty, you are done spending in that category.

How to Create a Good Budget

The principles that make a good budget, something you can stick to:

  • Being Realistic: Being too strict is a recipe for failure.
  • Making Adjustments: A budget is not set in stone, but a fluid thing.
  • A Team Sport: If you live with a partner or spouse, you have to agree mutually on how to budget the financials.
  • Expect the Unexpected: Keep an emergency fund, ideally 3-6 months of necessary expenses.
  • Budgeting the Expected: Certain upcoming expenses need to be budgeted in advance, like property tax, holiday shopping, etc.

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The 50-20-30 rule

It is a budget rule to help people reach their financial goals. It states that:

  • You should spend up to 50% of your after-tax income on needs and obligations that you must-have or must-...

Needs, wants and savings

  • Needs: these are those bills that you absolutely must pay and are the things necessary for survival (rent or mortgage payments, car payments, groceries, insurance, health care, minimum debt payment, and utilities).
  • Wants: these include all the things you spend money on that are not absolutely essential (dinner and movies out, vacations, electronic gadgets, etc.)
  • Savings: 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.