How the 50/20/30 Rule Can Help You Budget

How the 50/20/30 Rule Can Help You Budget

When using a monthly budget (which you should, if you don't already) it can be hard to know how much of your money to put where. That's where 50/20/30 budgeting comes in. With this rule, the first 50% of your take-home pay goes toward necessities, such as rent or mortgage payments, utilities, loan payments, and tuition. Some people include food, clothing, and transportation in this bucket; others consider those to be lifestyle choices -- the way you categorize them is up to you. The next 20% of your take-home pay should go toward financial goals, including paying down credit-card debt, saving for retirement, building an emergency fund, or saving up for a vacation. According to this rule the last 30% of your income is devoted to lifestyle choices, typically expenses that can vary by month and over which you have some control. These can include shopping, entertainment, gym fees, hobbies, and pet expenses, plus food, clothing, and transportation if you didn't include them in your necessities.

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