Dec '24 • General discussion
50/30/20 Rule of Personal Budgeting
The 50/30/20 rule is a simple and effective budgeting framework that helps individuals allocate their after-tax income into three categories:
1. 50% - Needs: Essentials you must pay for to live and work, such as rent/mortgage, utilities, groceries, transportation, and insurance.
2. 30% - Wants: Non-essential expenses that bring joy, like dining out, entertainment, shopping, and hobbies.
3. 20% - Savings/Investments: Money set aside for financial goals, debt repayment, emergency funds, or retirement savings.
Example:
Imagine you earn $4,000 per month (after taxes):
1. 50% - Needs ($2,000):
• Rent: $1,200
• Utilities: $200
• Groceries: $400
• Transportation (gas/public transport): $200
2. 30% - Wants ($1,200):
• Dining out: $300
• Subscriptions (Netflix, gym): $100
• Shopping: $400
• Travel fund or entertainment: $400
3. 20% - Savings/Investments ($800):
• Emergency fund: $300
• Retirement account (RRSP/401k): $300
• Debt repayment: $200
This rule helps balance spending on essentials, enjoying life, and preparing for the future. It’s flexible and can be adjusted to suit individual financial goals!
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50/30/20 Rule of Personal Budgeting
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