20%: Savings - Deepstash
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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MORE IDEAS FROM What Is the 50/20/30 Budget Rule?

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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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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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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RELATED IDEA

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-do.
  • The remaining half should be split up between 20% savings and debt repayment and 30% to everything else that you might want.

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The 50/15/5 rule for multiple financial goals
  • 50% of your income goes toward essential expenses: rent, bills, minimum debt payments.
  • 15% percent goes to retirement savings. They also suggest you increase this by 1% each year.
  • 5% goes toward unexpected monthly expenses or building an emergency fund.

What you do with the rest of the money it’s up to you.

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Budgeting is simply balancing your expenses with your income.

It's a plan for the coordination of resources and expenditures. When you budget your money, there’s a desired outcome. And being able to track your spending should ultimately move you in the right direction towards meeting your financial goals.

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