What is the 50-30-20 rule for saving money? If you are having trouble distributing the salary and following the monthly budget, you should look for a way to help you manage your money in proportion to the monthly salary. Among these methods is following the 50-30-20 rule for dividing the monthly salary, which is considered effective in managing the budget and creating a surplus that contributes to Increase savings and reduce financial pressures, by dividing monthly income into three parts designated for basics, variable expenses, and future savings and investment plans. This is what we will explain in detail on the website. Trianvo.
Read also: How to design attractive marketing advertisements?
What is the 50-30-20 rule for saving money?
The 20-30-20 rule helps individuals manage their monthly budget by setting an actual framework for financial obligations and monthly expenses. In addition to allocating a portion of the salary to achieve their future financial goals. Whether it is savings or investment, the budget deficit or the amount of monthly expenses exceeding what is specified for them.
How do you divide the monthly salary? What is the 50-30-20 rule for saving money?
Once the salary is received, the monthly salary is divided into three parts according to the 50-30-20 rule, which is calculated as follows:
- Allocate 50 percent of the salary to basic fixed expenses that meet monthly needs.
- Such as electricity and water bills, education expenses, health care expenses, transportation expenses, communications expenses, etc.
- The size of these expenses varies from one person to another depending on several criteria such as the standard of living, the number of dependents, and monthly income.
- Allocating 30% of the salary to variable expenses can be expressed as luxuries that contribute to raising the standard of living and well-being.
- Such as shopping, leisure activities, trips and gifts. The distribution of items for the variable expenses section may vary from month to month, depending on the priority and goal to be achieved.
- Allocate at least 20 percent of salary to future financial plans such as increasing savings, accelerating debt payments, pursuing an investment plan, or saving for emergencies.
To give a ground example assume there is a person who earns a monthly salary of 10,000, and he wants to manage his monthly budget by following the 50-30-20 rule for dividing the salary.
Steps to the 50-30-20 rule to save money
We will mention in the following lines the steps of the 50-30-20 rule for saving money:
- The first step: Deduct an amount of 5000 to cover basic expenses such as monthly installments, housing expenses, utility bills, transportation expenses, etc.
- The second step: deduct an amount of 3000 to cover variable expenses such as shopping, travel, recreational activities, etc.
- Step Three: Deduct at least $2,000 for saving, investing, or early repayment of debt.
Read also: What is a feasibility study and its importance in business?
The 50-30-20 rule for saving money
Dividing the monthly salary correctly within the specified budget gives you a comfortable financial life away from the financial pressures resulting from poor salary management and gives you the ability to face unexpected financial crises. No matter how different the method of distributing the monthly salary is. You must commit to applying the relevant instructions and steps that will help you achieve impressive results and reap the benefits of sticking to the monthly budget.
How do we apply the 50-30-20 rule to save money by dividing the monthly salary?
Once the salary is received, the monthly salary is divided into three parts according to the 50-30-20 rule, which is calculated as follows:
- Allocate 50 percent of the salary to basic fixed expenses that meet monthly needs.
- Such as electricity and water bills, education expenses, health care expenses, transportation expenses, communications expenses, etc.
- The size of these expenses varies from one person to another depending on several criteria such as the standard of living, the number of dependents, and monthly income.
- Allocating 30% of the salary to variable expenses can be expressed as luxuries that contribute to raising the standard of living and well-being.
- Such as shopping, leisure activities, trips and gifts. The distribution of items for the variable expenses section may vary from month to month, depending on the priority and goal to be achieved.
- Allocate at least 20 percent of salary to future financial plans such as increasing savings, accelerating debt payments, pursuing an investment plan, or saving for emergencies.
