The 50/30/20 is a new method of budgeting that can help you keep your spending in alignment with your savings goals. Budgets should be about more than just paying your bills on time—the right budget can help you determine how much you should be spending, and on what.
The 50/30/20 rule can serve as a great tool to help you diversify your financial profile, reach dynamic savings goals, and foster overall financial health.
Here’s how it works:
50%: The essentials
Needs are those bills that are essential — what you absolutely must pay for in order to maintain your lifestyle or your survival. These include rent or mortgage payments, car payments, groceries, insurance, health care, minimum debt payment, and utilities.
30%: The non-essentials
These are the things that you want, but are not truly essential to your life. These can include restaurants and movies, vacations, tickets to events, gym memberships, designer clothing, electronic accessories — in short, all those little extras you spend money on that make life more enjoyable and entertaining.
Finally, try to allocate 20% of your net income to savings and investments. This includes adding money to an emergency fund in a bank savings account, making IRA contributions to a mutual fund account, and investing in the stock market. You should have at least three months of emergency savings on hand in case you lose your job or an unforeseen event occurs. After that, focus on retirement and meeting other financial goals down the road.
Unique Accounting Systems is here to help you on your budgeting journey. We specialize in remote accounting and tax preparation matters, where we interact with you through virtual meetings that are efficient, less time consuming and targeted to meet your specific accounting and financial needs. For more information on our services and how they can work for you, give us a call today.