Are you following the 50:20:30 Rule? Well it’s time to put on your thinking caps for an enhanced living!
- July 19, 2021
- Posted by: axiom_admin
We work hard, so as to enhance our living! Until a few decades ago, the thought of future never came in to the picture. But today the situation is such that, one not only needs thinks about his/her current living but also the future prospects. This unknown fact, has actually forced many to think about making accommodative strategies and work out plans, so that they can lead a comfortable living.
This kind of thinking and thought process has only facilitated the 50:20:30 Rule. It may sound weird at first, but this kind of strategy can be called as the utmost need and necessity of the hour. Also, when it comes to budgeting there is no accepted way of spending or saving. But, by using this strategy you will be in a position to understand your family needs and act accordingly to it for an enhanced saving.
What is the 50:20:30 rule?
The 50:20:30 rule is a simple strategy, that is mainly intended to enhance your savings and reap better financial benefits! This rule will provide an easier and simpler journey into the complicated world of finance.
1. Your Necessities First! (50 %)
You may think, why one needs to spend fifty percent of their income on their basic necessities? But as you read the other two categories, you will be in a better position to figure that out. Basically our necessities include essentials like food, water, shelter, clothing and all the fundamentals which you will need to lead a life with a respectable standard of living. This can further be clearly categorized into four expenses:
2. Next Your Savings (20 %)
You cannot spend your entire income on buying or on other expenditure. Also to safeguard yourself in times of emergency and urgency, you need to have some decent amount, where you can lead a comfortable living. That’s why its suggested that you need to save at least twenty percent of your income. Our savings play an important role in deciding or planning your future prospects. You can categorize your savings in the following ways:
- Retirement savings
- Paying off loans and debts
- Health Insurance
- Children Needs
3. Personal Expenditure( 30%)
You work hard so as to enjoy a better life. Make this as a reality by allocating thirty percent of your income towards other expenditure. This type of expenditure can be termed as the necessary expense that enhances your living and lifestyle. Though this is considered completely optional by some financial experts, in the modern life and society, it has become compulsory. The only reason this category occupies a bigger portion than the savings is because of the things that come under it.
- Cable plans,
- Internet and phone plans
- Lunch/Dinner with friends
- Gym Membership etc. All these are things, that human can live without, but opts not to as a part of modern civilization.
Is the proposition same for all?
Be it saving or spending one has the liberty to spend it accordingly. Moreover the entire 30% need not to be spent entirely, you can adjust it accordingly. The unspent money from this category can go into the other two, i.e., savings and necessities. Many people prefer to add the unspent amount to the savings part, as it is easier to pay off loans and other financial commitments.
Can one start it immediately?
Kick starting this strategy is impossible or extremely hard. But once the habit is established and by following an apt lifestyle, this rule will become more easy to follow. Another advantage of this rule is that, anyone can follow it at any point of time!
However these propositions cannot be the same for everyone. Secondly the economy also varies accordingly to the times and situations. But by incorporating this formula one can assess their and make optimum use of their income.
Plan your financial ability well advance of the time and ensure that you step into the unknown future with confidence and positivity!