Ever caught yourself wondering if you should buy that new LV purse you have been eyeing? Or perhaps you’ve been eyeing a new sports car, watch, or whatever it may be. Maybe you are simply wondering if you should just go ahead and upgrade your Xfinity plan so you can watch all the games at your own house without having to book it to your buddies. Well, luckily for us, Senator Elizabeth Warren has come up with a simple equation for us to follow.
If you live by this rule, you are sure to see success and financial growth in the future. The hard part is having a strong enough self control to actually abide by the parameters of this rule. So here it is, 50/20/20, the percents represent the amount of your income you should spend on given costs.
50=Needs. Needs are your most important financial obligations. Without needs, your life would change for the worse. Needs are required for survival. Mortgage payments, car payments, groceries, insurance, health car, minimum debt payments, and insurance. Without needs, your life as you know it would be in jeopardy.
30-Wants. I believe the word itself is self explanatory, WANTS. So if you are going to alter this 50/20/30 rule a little, take money from you wants account and distribute it elsewhere(needs, savings). Wants are the least important, as you do not need these things, you just want them. Without them you may be sacrificing some enjoyment or luxuries but at least you wouldn’t be sacrificing a day without food or electricity.
20-Savings. Self explanatory like the rest. Savings are your rainy day funds, college education funds, and investments. Allocate 20% of your income to savings. Whether this be a savings account, stocks, CODs, bonds, start ups, whatever it may be these are your savings. These are the ONLY funds that will be able to change your future for the better. Without savings it is hard to move forward and advance in life.
Follow these rules. Discipline yourself. Take out your calculator and multiply your income(e.g. 40,000 annually) by .5, .3, and .2. So if you make 40,000 a year(after taxes) you have 1,666 a month to allocate on needs, 1,000 per month on wants, and 666 per month on savings. I understand life is life and shit happens. If you can’t achieve the 50/20/30 rule immediately at least WORK TOWARDS being able to abide by the equation. It is ok if you are living paycheck to paycheck. Just try to put yourself in a position to achieve this goal so you can set yourself up for success.
Comments, ideas, experiences? Feel free to voice you opinion below!