Budgeting doesn’t have to be complicated—the 50/30/20 rule offers a straightforward framework to allocate your income wisely. Here’s how it works:
- 50% Needs: Essential expenses like rent, groceries, utilities, transportation, and minimum debt payments. These are non-negotiables for daily living.
- 30% Wants: Discretionary spending, such as dining out, entertainment, travel, and hobbies. This category allows for flexibility and enjoyment.
- 20% Savings & Debt Repayment: Prioritize building an emergency fund, contributing to retirement accounts (like a 401(k) or IRA), and paying off high-interest debt faster.
This method ensures you cover necessities, enjoy life, and secure your financial future without micromanaging every dollar. Adjust the percentages based on your goals—for example, if you’re aggressively paying off debt, you might temporarily shift to a 60/20/20 split.