50-30-20: Foolproof Budget to Help Anyone Gain Financial Freedom (By: Jasmine York)

By: Jasmine York, contributing writer (@jasminethewriter)

Making a budget can be tricky, especially when someone’s not sure about the percentage of their income they should be spending on what. By following the 50-30-20 rule – which can be applied to any budget – one can easily see how to comfortably live within their means or determine if they need to decrease their spending – or increase their income. Learn more about the foolproof 50-30-20 rule below.

According to the 50-30-20 rule, one’s “must-have expenses” should not exceed more than 50 % of their monthly income. This includes all the bills connected to housing and transportation such as rent or mortgage, utilities, gas, food, insurance, child care, phone, etc.

Cable and internet, in this system classify as “pleasures” along with other items, which aren’t necessarily obligations like clothing, entertainment, eating out, and vacations, etc. These expenses are not to exceed 30% of your income and should allow one to comfortably enjoy the rewards of the income their working so hard to earn. And the final 20% (minimum) of one’s income should be reserved for savings or debt (if there is debt).

By using this formula (or sticking closely to it), people are able to free themselves up from living paycheck to paycheck or calculate how much more money they need to earn to “afford” certain luxuries that are eating away at their income and offsetting their financial peace.