Everyone sees budgeting as difficult as hell. But if you can continue this budgeting practice for a couple of months ahead, you will see how easy is to continue. Also, you will see how comfortable is to manage your personal finance.

An individual should maintain a monthly budgeting plan. A budget planner can balance your income. There are outgoing funnels and we should pour the matching percentages to each one of the outgoing funnels. That is how we should balance our finance.

The 50/20/30 rule is all about the way we have to separate our spending. This is a concept which showed positive results all over the world. Using this can retain your financial sustainability as you have some numbers to balance in your life.

What is this 50/20/30 rule of budgeting?.

Basically, this is about directing your income to essential spending categories. The dividend ratio is 5:2:3 which means the first 50% is for needs, then 20% for savings and investments, and the final remaining 30% for wants.

We should have to clarify the difference between the two terms’ needs and wants. Most of you may have an idea like, that these 2 represent the same meaning. But there is a clear difference. Would like to show you the next half of this discussion.

Below I have shown you, how we can divide our monthly income into the 3 most important categories. Hope you would understand.

Needs (50%).

Going forward in this discussion, we have to discuss spending 50% of our income on needs. Needs are the most important and must do spends in our lives. Let me show you some examples.

Needs are the things that are necessary for, will say survival. Yeah, that is correct. You need these needs for survival. And you will have to spend 50% of your income on that.

* Rent or mortgage payments.

* car payments.

* expenditure on groceries.

* Insurance premium.

* health care payments.

* minimum utility bill payments.

* minimum debt payments.

Above can definitely consider as the spent on survival. So they are needed. Remember your first 50% should be on these payments which are the most essential.

Wants (30%).

Well, let’s come to wants. Wants are also our sends but not as important as needs. This category represents what we want as humans but not for survival. We can say it like this,

Wants are the things we can focus on spending money, on but are not so important as needs. They do not decide our lives. Wants, only we can have if we want to. If we do not want we can cut down those expenses. You also can create a priority list because they do not decide our living style as I said above.

See the below examples, you will get it for sure my dear,

* Dinner and lunch outs.

* Watching movies by going out.

* New clothes, ornaments, and fashion.

* vacations.

* Tickets to sports events.

* Parties and entertainment.

* HBO and movie charges.

Likewise, I can list so many wants and those are inside the category of 30%. You can postpone these if they are not really necessary. Like, such as Watching sports on TV instead of buying tickets to the ground, using your old technical device for another couple of months instead of running behind the latest technology, work out at home instead of going to a gym.

There are so many I can give you here. But the final decision is up to you. Right, now we know where the 30% should go. Do not forget we have another 20% remaining. So let’s go.

Savings and Invests (20%).

I have discussed in previous sessions, how important these savings are. Believe me, it can help you a lot, sometimes even to save your life. We never know about the future, what if you want money in a medical emergency but you do not have the capacity at that point to fill that gap. Savings will help you.

How to save $10,000 within 6 months will help you to focus on the objective of saving money.

Why investing is so important?. Investing is an effective method to put your money to work and thereby you can build your wealth. So I think no need to explain” why investing is important” further.

Involve in stock investing or real estate or even in Crypto. No matter category, Use a portion of that 20% on investing. I can list some benefits of saving and investing.

* Happy retirement.

* Chances to develop your wealth.

* Ability to use savings in an emergency.

* Use the benefits to achieve your life goals.

* Interests can receive by saving money in high-yield savings accounts.

Likewise can list the benefits of saving money as well as investing money. So as the rule says the remaining 20% is for savings and investing.

Let’s do some math on the 50/20/30 rule.

Assumptions to make :

* You have a day job or any other permanent income.

* Your monthly salary or income is $4000.

* You are involved with the 50/20/30 rule for budgeting.

Needs :

Total earnings of each month      =  $4000.

50% of total for needs                   =  $4000 x 50/100

Amount for needs                          =  $2000.

Wants :

Total earnings of month                 = $4000.

30% of total for wants                     = $4000 x 30/100

Amount for wants                            = $1200.

Savings   :

Total earning of month                    = $4000.

20% of total for savings                    = $4000 x 20/100

Amount for savings                           = $800.

So finally, as according to 50/20/30 rule,

Total monthly income  = Needs + Wants + Savings

$4000                              = $2000 + $1200 + $800.

Conclusion.

So that is it. Really simple to understand and follow. Here, I have to say something. 50/20/30 rule is not compulsory to follow in your lives. It is a rule, but only for better personal budgeting. If you do have any other methods to follow, I recommend following them. You should follow any budgeting concept or rule by seeing what they give you back.

There are many ideas, thoughts, and even objections to this 50/20/30 rule. If you have any feel free t use our comment section so we can discuss the matter with acts. I think most of the middle age people would love to read some budgeting tips for the age of 25-35.

I also like it, if you can share this discussion on your social accounts, so another person can gain the benefit of this tiny knowledge.

So that is what we have to tell you about the 50/20/30 rule of budgeting. Most of the advice is to follow your own method to handle your personal finance. It is better if you can apply that plan on monthly basis. So happy budgeting.

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