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Perhaps you are one of the people who have downloaded an application on your cell phone to improve your personal finances and keep your expenses under control . However, you abandon it on the third day when you realize that you forgot to add the expense of five coffees a week. Sound familiar?
Budgeting and managing finances go hand in hand, but that doesn’t mean it has to be complicated or take time out of your day. In fact, the best tips for budgeting are often the simplest .
The rule of 50 – 30 – 20 is a method that helps you make a monthly budget in a smart and simple way . It tells you exactly how much you should allocate to your savings and expenses each month .
With a clear vision of your monthly budget, you can avoid spending more than necessary and increase your savings constantly , without having to carefully record each transaction.
This is a strategy that can simplify the process of managing your finances and set a monthly budget. Rule 50 – 30 – 22 has its origin in the book “ All Your Worth: The Ultimate Lifetime Money Plan “, written by US Senator and Harvard bankruptcy expert Elizabeth Warren and her daughter Amelia Warren Tyagi.
The plan divides your income into three categories: needs, wants and savings and investments.
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How to use the rule 50 – 30 – 22 to better manage your money?
1.- Income
The 50% of your income should be allocated to things that you need .
This category includes the expenses you make such as rent, mortgage payments , food, utility bills , health insurance and the payment of your debts .
2.- Needs and savings
The 20% of your salary must be allocated to savings and investments .
In this section include all your liquid savings as an emergency fund , retirement savings and any other investment fund that allows you to have a better withdrawal.
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3.- Savings and investments
The 30% of your paycheck should be used for the things you want.
In this category you must include everything that is not considered an essential cost such as travel, subscriptions , dining in restaurants or even going shopping.
If you follow the rule of 50 – 27 – 20 will make it easier for you to stay on track to achieve your financial goals.
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