We use cookies on our website to improve your online experience and to analyze visitors' navigation patterns. For more information about our use of cookies, please visit ourPrivacy Policy. To acknowledge our use of cookies, simply continue browsing or clickRecognize.
Try this method for an easy way to plan your expenses.
2 minutes reading
Map
- Understanding your expenses can help you plan for the future.
- The 50-30-20 rule organizes expenses into needs, wants and goals.
Creating a budget can help you make confident decisions and enjoy peace of mind. However, a detailed budget can be complex to manage.
The 50-30-20 rule divides expenses into just three categories. It also provides recommendations on how much money to spend on each. With some basic information, you can get started on the path to financial wellness.
Begin
Start by looking at your pay stub. If tax is withheld, subtract this amount from your total income. Do not deduct other amounts that may be withheld or automatically deducted, such as health insurance or retirement premiums. They become part of your budget.
The 50-30-20 rule recommends spending 50% of your money on needs, 30% on wants, and 20% on savings. The category of savings also includes the money you need to achieve your future goals. Let's take a closer look at each category.
Need: 50%
About half of your budget should go to needs. These are costs that must be paid no matter what, such as:
- Energy bills
- Rent or mortgage payments
- healthcare
- Groceries
If you can honestly say, “I can't live without it,” you have identified a need. Minimum required payments on a credit card or loan also fall into this category.
Desires: 30%
You subscribe to a streaming service to watch your favorite show, not because you need the subscription to live. Wishes are things you like and choose to spend money on, such as:
- Subscriptions
- Supplies for hobbies
- Restaurant meals
- Holidays
Savings: 20%
The remaining 20% of your budget should go toward the future. You can put money into an emergency fund, contribute to a retirement account, or save for a down payment on a home. Paying off debts above the minimum payment amount also falls into this category.
In summary
Opportunities to save for the future at UNFCU includesavings accountInshares.
The 50-30-20 rule is just one way to consider organizing your budget. Contact a professional financial planner to find the perfect solution for your situation.
