Following the basic 50/30/20 budget rule means allocating 50% of your after-tax income to necessities, 30% to desires, and 20% to savings and debt reduction. Applying this rule to your budget calculations yields the following results:
Consider your net monthly income first. You'll divide this total into three equal halves.
Calculate 50% of post-tax income. All of your basic living costs including rent or mortgage, food, transportation, and insurance are covered by this sum.
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Take 30% of your net income and divide it by 3. Dining out, going to the movies, paying for a hobby, and buying things that aren't necessities all fall under this category.
Figure out what 20% of your net income is. This sum will be used for both savings and debt cancellation. There are several reasons to save money, such as for emergencies, retirement, and other purposes.
The 50/30/20 approach may work well as a general rule of thumb, but keep in mind that everyone's financial situation is unique. You may need to change the percentages to better reflect your situation,
for as if you have more stringent savings targets or more expensive mandatory outlays. Finding a budget that fits your needs and helps you reach your goals is the most critical step.